Classified evidence OK'd in Nacchio trial
By Jeff Smith
Rocky Mountain News
Thursday, December 7, 2006
Former Qwest CEO Joe Nacchio's attorneys say their client
believed the Denver telco would be awarded hundreds of
millions of dollars in government contracts in 2001 -- more
than enough to offset the warnings he was receiving about
the company's finances. Denver federal Judge Edward
Nottingham ruled to allow certain evidence about those
prospective classified contracts. This allows Nacchio's
defense to try to make its arguments at a trial that begins
Nottingham has rejected the admissibility of other
classified information as being vague or irrelevant.
Nottingham actually issued his order about the admissibility
of some of the classified government evidence in late
October, but it wasn't made available to the public until
The filing gives additional details of what could be key
aspects of Nacchio's defense. He faces 42 counts of insider
trading in connection with selling more than $100 million of
stock in the first five months of 2001.
A major issue in the trial will be Nacchio's "state of mind"
at the time he sold the stock. The defense is arguing
Nacchio acted in "good faith" when he sold his stock,
believing Qwest's financial condition was as good as
portrayed to the investing public. Prosecutors will need to
prove he acted willfully to defraud, according to
Jeff Dorschner, spokesman for the U.S. attorney's office in
Colorado, declined to comment Wednesday. Prosecutors
previously have questioned the relevance of the classified
information to the case.
The filings indicate the government in part had argued
unsuccessfully for certain classified facts to be
summarized, rather than argued in detail during the trial.
Filings also indicate that several of the government's key
witnesses, including former Chief Operating Officer Afshin
Mohebbi, are prepared to testify that Qwest's forecasts
already incorporated potential classified government
In the filings, Nacchio maintains Qwest was approached by
four "clandestine" agencies -- including the Department of
Defense and the National Security Council staff -- because
it had a new and "superior" fiber-optic network. The
prospective contracts weren't required to go through lengthy
appropriations or bidding.
In fact, Qwest once got a contract through a single phone
call, the filings indicate.
But because of the security clearance required, defense
attorneys argue that Nacchio couldn't share the information
with the same executives, such as Mohebbi, who were giving
him warnings about Qwest's financial prospects.
Nacchio maintains the information about prospective
classified government contracts also couldn't be included in
Qwest's revenue projections, news releases, regulatory
filings or public guidance.
The court filings indicate that Nacchio's attorneys may
argue that Qwest already had been awarded a $500 million
contract with the Department of Defense and certain agencies
were "actively considering" awarding Qwest "hundreds of
millions of dollars" of additional contracts in 2001.
Certain evidence about prospective classified government
contracts may be admitted at the March trial of former Qwest
CEO Joe Nacchio.
Why it's important:
Nacchio argues he was optimistic about Qwest's financial
condition despite dire warnings because he believed the
company would be getting lucrative contracts from federal
defense and national security agencies.