The Association of U S West Retirees



Feds may be compelled to lift blinds
By Andy Vuong, Staff Writer
Denver Post
Wedneday, March 7, 2007

National-security issues could become a land mine for the government and turn into a central focus of the criminal insider-trading case against former Qwest chief executive Joe Nacchio, experts say.

The government may ultimately have to allow Nacchio, if he testifies, to reveal classified information or face the prospect of the judge dismissing the charges.

Legal experts expect Nacchio, who contends he needs to use top-secret information to defend himself, to take the stand.

"Things can get complicated at trial," said attorney John Cline, a leading expert on national-security-related defenses.

U.S. District Judge Edward Nottingham has already ruled that some classified information is relevant to Nacchio's defense.  How that information will be presented during trial is still being discussed.

The trial is set to begin March 19 in federal court in Denver.

At a pretrial hearing in January, when federal prosecutors complained about the difficulties of getting clandestine agencies to produce documents in a timely manner, Nottingham raised the point that the government could drop the case.

"There may be instances"

Federal rules state that "there may be instances where it is so critical that the government keep information classified that it would forgo prosecution of somebody," Nottingham told prosecutors.  "Now, I'm not suggesting that this is that kind of case.  But ... it's the agencies themselves who know what it is that is important to keep classified."

Nacchio's attorneys have said he was bullish on the company at the time because he believed Qwest was in line to receive hundreds of millions of dollars in contracts from top-secret government agencies.

That defense strategy has engulfed the case.

Nottingham has closed all or a portion of a half-dozen hearings since August to discuss classified information.

Another closed-door meeting is scheduled for Friday, and experts say such hearings may occur throughout the trial.  National-security issues have been used many times as part of a defense, but Nacchio's case is believed to be the first white-collar fraud case without international implications to use the strategy, Cline said.

Experts said national-security matters appear to be a valid part of Nacchio's defense. Before his ouster from Qwest in June 2002, Nacchio served on two federal advisory panels dealing with national-security issues:  the Network Reliability and Interoperability Council and the National Security Telecommunications Advisory Committee.

Feds "in a tough spot"

The former was formed by the Federal Communications Commission to bring together officials from the telecommunications industry to explore and recommend measures that would enhance network reliability. The latter advises the president on issues related to implementing national security and emergency-preparedness communications policy.

"The fact that it puts the government in a tough spot is not the defendant's fault," said former federal prosecutor John Vandevelde, a white-collar criminal defense attorney in Los Angeles.  "It's something the defendant's entitled to do, and the judge has already ruled to that effect."

Under guidelines set forth by the Classified Information Procedures Act of 1980, the government is allowed to propose substitutions for the classified information Nottingham has ruled is relevant to the case.

The substitutions can come in two forms:  an admission by the government of relevant facts that the classified information would prove or an unclassified summary of the information.

Nottingham has to decide whether the government's proposed substitutions, submitted to the court last week, would give Nacchio the same ability to make his defense as if he were introducing the actual classified information.

Cline, an attorney with Jones Day in San Francisco, expects Nottingham to rule on the issue before the trial starts and allow the substitutions.  But the ruling would probably be preliminary.

If Nacchio testifies, the matter could be revisited.

"If he testifies, he will probably want to explain his state of mind -- his thinking at the time -- and it's tough for a defendant to do that if he has to use what is in effect a script written by the government," Cline said.  "That's a difficulty on direct examination.

"It's even tougher on cross because if he provides his explanation and the government attacks him on cross and suggests that he's not credible -- that he didn't believe what he said he believed and so on -- the government may be opening the door to use of the classified information that the judge has previously precluded."

During the trial, if Nacchio's attorneys feel he or another witness should be allowed to disclose classified information, they can request another closed-door hearing to review the matter.

Delay in case possible

If the disclosure of classified information is ultimately allowed by Nottingham, the government can take the issue to an appellate court midtrial, possibly delaying the case.  The appeal would be handled on an expedited process.

The government can also simply choose to not allow the classified information to be disclosed.  If that happens, the judge can throw out the case, Cline said.

Even if Nacchio isn't allowed to disclose classified information, his testimony may reveal how companies win secret contracts from the government.

"There is a side of these often shrouded and somewhat secretive engagements during this era that do result in positive transaction or revenue outcome for the companies, though it tends to be hidden from public view," said Ron Suskind, author of "The One Percent Doctrine," which covered examples of how companies worked with the government behind closed doors in its fight against terrorism.

Nacchio's testimony "may well provide a window into how these conversations between government and large corporations are proceeding," Suskind said.  "That's why people are interested in what Joe has to say."

Staff writer Andy Vuong can be reached at 303-954-1209 or