Documents: Qwest was targeted
'Classified info' was not allowed at ex-CEO's trial
By Sara Burnett and Jeff Smith
Rocky Mountain News
Thursday, October 11, 2007
The National Security Agency and other government agencies
retaliated against Qwest because the Denver telco refused to go
along with a phone spying program, documents released Wednesday
suggest. The documents indicate that likely would have been at
the heart of former CEO Joe Nacchio's so-called "classified
information" defense at his insider trading trial, had he been
allowed to present it.
The secret contracts -- worth hundreds of millions of dollars --
made Nacchio optimistic about Qwest's future, even as his staff
was warning him the company might not make its numbers,
Nacchio's defense attorneys have maintained. But Nacchio didn't
present that argument at trial.
The documents suggest U.S. District Judge Edward Nottingham
refused to allow Nacchio to present the argument about
retaliation. Nottingham also said Nacchio would have to take
the stand to raise the classified defense.
Prosecutors have said they were prepared to poke holes in
Nacchio's classified defense.
Nacchio was convicted last spring on 19 counts of insider
trading for $52 million of stock sales in April and May 2001,
and sentenced to six years in prison. He's free pending appeal.
The partially redacted documents were filed under seal before,
during and after Nacchio's trial. They were released Wednesday.
Nacchio planned to demonstrate at trial that he had a meeting on
Feb. 27, 2001, at NSA headquarters at Fort Meade, Md., to
discuss a $100 million project. According to the documents,
another topic also was discussed at that meeting, one with which
Nacchio refused to comply.
The topic itself is redacted each time it appears in the
hundreds of pages of documents, but there is mention of Nacchio
believing the request was both inappropriate and illegal, and
repeatedly refusing to go along with it.
The NSA contract was awarded in July 2001 to companies other
USA Today reported in May 2006 that Qwest, unlike AT&T
and Verizon, balked at helping the NSA track phone calling
patterns that may have indicated terrorist organizational
activities. Nacchio's attorney, Herbert Stern, confirmed that
Nacchio refused to turn over customer telephone records because
he didn't think the NSA program had legal standing.
In the documents, Nacchio also asserts Qwest was in line to
build a $2 billion private government network called GovNet and
do other government business, including a network between the
U.S. and South America.
The documents maintain that Nacchio met with top government
officials, including President Bush, Vice President Dick Cheney
and then-National Security Adviser Condoleeza Rice in 2000 and
early 2001 to discuss how to protect the government's
They portray U.S. government officials, even before the Sept. 11
terrorist attacks, worried about a "Pearl Harbor" type of attack
on the Internet. As early as 1997, a three-star general talked
to Nacchio about using Qwest's new fiber-optic network for
government purposes, according to the defense.
One key meeting with a government official was held at Qwest
founder Phil Anschutz's ranch near Greeley, with former Chief
Financial Officer Robin Szeliga prevented from attending
presumably because she lacked security clearance.
Nacchio was on a Bush-appointed national security
telecommunications advisory panel. In March 2001,
then-counter-terrorism adviser Richard Clarke asked the panel if
it would be possible to build a private network for the
government to protect it from cyberwarfare.
Nacchio piped up: "I already built this network twice" for other
government agencies. The defense asserts Nacchio believed Qwest
would be asked to build the network and that it could do so in
But the contract didn't materialize.
Government's response to Nacchio's appeal brief is due Nov. 9.
Nacchio could choose to file a reply to the government's brief
by Nov. 20. Oral arguments at the 10th Circuit Court of Appeals
are scheduled for Dec. 18 in Denver. In the meantime, Nacchio
is free pending appeal.
APPELLATE COURT OPTIONS
• Uphold conviction (Nacchio could appeal to Supreme
• Uphold conviction, reduce six-year sentence. (Nacchio
could appeal to Supreme Court).
• Overturn conviction because evidence was insufficient
• Order new trial based on errors made by U.S. District
Judge Edward Nottingham.
EXCERPTS FROM NACCHIO'S APPELLATE BRIEF
• "The indictment, trial and conviction of Joseph P.
Nacchio took place in an atmosphere of prejudgment and vitriol."
• "Many shareholders lost paper fortunes, employees lost
jobs as the company downsized, and all demanded someone to
• "After years of investigation, prosecutors apparently
concluded that they could not prove any crime based on the
accounting restatement, and settled on insider trading."
• "This is an unprecedented prosecution. The
extraordinary charges here are based on the claim that Nacchio
knew, eight months or more in advance, that Qwest might not make
its year-end 2001 financial projections."
• "The prosecution yoked an unprecedented theory to
plainly insufficient facts, and hoped, in a bitter and
vindictive atmosphere, that it would be enough to win a
conviction from a Denver jury. It was."