Nacchio affects spy probe
His court filings point to government surveillance months before
By Andy Vuong
Sunday, October 21, 2007
Recent revelations about former Qwest chief executive Joe
Nacchio's classified-information defense, which went unheard
during his insider-trading trial, are feeding the furor over the
government's warrantless-wiretapping program.
Nacchio alleges the National Security Agency asked Qwest to
participate in a program the phone company thought was illegal
more than six months before the Sept. 11, 2001, terrorist
attacks, according to court documents unsealed at the request of
The Denver Post.
Nacchio also maintains that when he refused to participate, the
government retaliated by not awarding lucrative contracts to
Previously sealed transcripts released at the same time as the
court documents indicate the government was prepared to counter
Though specifics about the wiretapping program were redacted
from the court documents, Nacchio's attorney Herbert Stern said
in May 2006 that Nacchio rejected requests from the government
for customers' phone records in fall 2001.
The recently unsealed documents push that time frame back to
February 2001 and indicate the NSA may have also sought to
monitor customers' Internet traffic and fax transmissions.
Nacchio's claims could affect President Bush's controversial
efforts to grant legal immunity to large telecommunications
companies such as AT&T, which has been sued in connection with
the surveillance program.
"The Nacchio materials suggesting that the NSA had sought telco
cooperation even before 9/11 undermines the primary argument for
letting the phone companies off the hook, which is the claim
that they were simply acting in good faith to help the president
fight the terrorists after 9/11," said Kevin Bankston, a staff
attorney for the Electronic Frontier Foundation, a
"The fact that these materials suggest that cooperation with the
program was tied to the award of certain government contracts
also contradicts their (phone companies') claims that they were
simply acting in good faith to help fight the terrorists when it
appears that they may have been motivated by financial concerns
instead," Bankston said.
Up to this point, discussions on Capitol Hill over telecom
immunity have focused on government surveillance efforts spurred
by the Sept. 11 terrorist attacks.
"This is, sooner or later, going to be the stuff of
congressional hearings because a new starting point has been
established for this controversy. A new starting point
seven months before 9/11," said Ron Suskind, author of "The One
Percent Doctrine," which reported examples of how companies
worked with the government in its fight against terrorism after
"The idea that deals were getting cut between the government and
telecom companies in secret in the early part of 2001 creates a
whole new discussion as to intent, motivation and goals of the
government," Suskind said.
Last week, Rep. John Conyers Jr., D-Mich., chairman of the House
Judiciary Committee, asked federal intelligence officials for
more information about Nacchio's allegations.
"The extent to which this is true could shed light on the
efficacy of this program and raise questions about the reasons
behind its implementation," Conyers wrote on his blog.
For his part, Nacchio wanted to introduce the claims to show he
didn't sell Qwest stock illegally in early 2001. The
government alleged Nacchio dumped Qwest stock because he had
inside information that the Denver company's financial health was
deteriorating. He was convicted on 19 counts of insider
trading in April after a month-long trial and sentenced to six
years in prison.
He remains free on $2 million bond pending his appeal, which,
among other charges, is challenging rulings U.S. District Judge
Edward Nottingham made related to the classified-information
Nacchio has maintained he was upbeat about Qwest because he had
top-secret information that the company would receive hundreds
of millions in government contracts. But Nacchio
didn't call any witnesses to back up that contention after
Nottingham denied his requests to present evidence
about the alleged retaliation.
Nacchio's connections to top-secret agencies date back to late
1997, according to court documents filed in 2000 and early 2001
and unsealed this month.
The first meeting Nacchio had with officials from a clandestine
agency -- including a three-star lieutenant general -- was at
Qwest's offices in Denver. The
officials sought to use Qwest's fiber-optic communications
network for government purposes.
The agency issued a request for information after the meeting
and "quickly concluded that only Qwest had the capability to
fulfill the contract requirements." It eventually wanted
Qwest to extend its European network to the
Qwest's work was "sufficiently important to (blacked out) that
the agency would constantly monitor Qwest's financial health,
particularly after the dot-com bubble burst." The agency
would call Qwest whenever its stock fluctuated, and even voiced
concerns to the company about a potential takeover bid by
Deutsche Telekom, Nacchio alleges in the court documents.
During 2000 and early 2001, Nacchio routinely met with
clandestine agencies to discuss how to protect the
government's systems from cyber-warfare.
In September 2000, an "Army customer" wanted help from Qwest.
On Feb. 27, 2001, Nacchio met with NSA officials in Fort Meade, Md.,
to discuss a contract called "Groundbreaker."
That contract wasn't classified, but Nacchio contends NSA
officials wanted Qwest to participate in another program.
Nacchio said "it was a legal issue and that they could not do
something their general counsel told them not to do. ...
Nacchio projected that he might do it if they could find a way
to do it legally," according to a recounting of the meeting by
James Payne, former head of Qwest's government division.
About the same time, AT&T was working on a project with the NSA
dubbed "Pioneer-Groundbreaker." According to allegations
in a lawsuit filed against AT&T and other large telecom
companies, "Pioneer-Groundbreaker" called for the construction
of a data center that would allow the NSA to tap into AT&T's
network and monitor phone calls, fax transmissions and Internet
The House Committee on Energy and Commerce this month launched
an investigation into the warrantless-wiretapping program.
In response to questions from the committee, Verizon said that
since 2005 it has provided customer information to federal
authorities in hundreds of emergency cases without court orders.
The company said the information it has provided includes call
records, IP addresses and credit card and bank account numbers.
Andy Vuong: 303-954-1209 or