flap may benefit Nacchio
NSA rebuff might help in Qwest case
By Jeff Smith
Rocky Mountain News
Saturday, May 13, 2006
Joe Nacchio's attorney confirmed Friday that the former
chief executive of Qwest Communications refused to turn over
customer telephone records to the National Security Agency
because he didn't think the program had legal standing.
"When he learned that no such authority had been granted . .
. Mr. Nacchio concluded that these requests violated the
privacy requirements of the Telecommunications Act," said a
statement by Nacchio's attorney, Herbert Stern.
The statement was described as an effort to clear up the
"apparent confusion" about Nacchio's role in declining to
participate in the NSA program following the terrorist
attacks of Sept. 11, 2001, and "to negate misguided attempts
to relate Mr. Nacchio's conduct to present litigation."
A legal expert, however, said Stern's statement itself
appears to be evidence of using Nacchio's decision in 2001
to help his defense against 42 criminal counts of insider
trading and a slew of civil fraud lawsuits.
"It appears the strategy is in place," said Craig Silverman,
a former Denver prosecutor and now a private attorney and
"When you're defending your freedom and fortune, you'll use
anything and everything you can so, of course, he will try
to utilize this. Joe Nacchio came out looking good in that
story. . . . It puts him back on the side of the little guy
against an overreaching U.S. government."
Conversely, the favorable publicity may make it more
difficult for Nacchio to win a change of venue from Denver,
which legal experts already had regarded as a long shot.
reported Thursday that Qwest, first under Nacchio and then
under Dick Notebaert, was the only one of four phone
companies to balk at helping the NSA create a massive
database of telephone records. The NSA reportedly uses
those records to analyze calling patterns that may indicate
terrorist organizational activities.
Qwest may have declined to help the NSA in part to prevent
possible lawsuits: On Friday, two New Jersey lawyers sued
Verizon for $5 billion for turning over private phone
records. AT&T also already has been sued.
Long before the phone record story this week, Nacchio had
been floating a possible "national security" defense against
charges that he illegally sold $100 million of Qwest stock
in the first five months of 2001 while knowing the telco was
The defense goes something like this: Nacchio was
optimistic about Qwest's financial condition because his
secret work on a top presidential advisory panel led him to
believe the Denver telco was in line to land some major
The panel was President Bush's National Security
Telecommunications Advisory Committee, or NSTAC.
Bush didn't officially appoint Nacchio to the committee, as
vice chair, until July 9, 2001, but two sources familiar
with the situation said Nacchio was cleared to hear
classified information by about March 2001. An old NSTAC
Web site also lists Nacchio a member by at least April 2001.
That would still leave questions about Nacchio's defense for
January and February 2001.
The 30-member industry panel provides recommendations to the
president on national security and emergency-preparedness
issues, and hears from top government officials on the
matters. It meets annually in person and quarterly by
conference call, but members frequently discuss issues in
between those meetings.
At the annual NSTAC meeting in June 2001 in Washington,
Nacchio sat next to Richard Clarke, then the
counterterrorism adviser on the U.S. National Security
Council, sources said.
At first blush, this week's
USA Today report
would seem to contradict Nacchio's defense that he was
optimistic about getting federal contracts.
However, the timing could play to his advantage. His legal
team may try to argue that Qwest lost the federal business
Nacchio thought it would get because he took a stand against
But his attorneys still will need to fill in the gaps
between the insider-trading period ending in May 2001 and
the start of the NSA program in late 2001.
"Before the trial and during the trial, the defense is going
to accuse the prosecution of various forms of misconduct and
overzealousness, and it's easy to anticipate they will claim
retaliation by the U.S. government for Joe Nacchio standing
up to them on this NSA request," Silverman said.
"There's a lot of things at play," he added. "Nacchio used
to be part of George W. Bush's team, but now the Justice
Department is trying to take all of his money and freedom."
Nacchio's lawyers recently got security clearance to examine
the classified information Nacchio possessed, but it's
unclear how the strategy will play out.
"It's all wild speculation," said Donna Jaegers, a
telecommunications analyst with Janco Partners in Greenwood
Jaegers does have an anecdote of her own. She recalls
meeting with Nacchio -- perhaps after an NSTAC meeting --
when he was "ga-ga," as she put it, over the possibility of
Qwest getting contracts to provide services for the
government's private Internet network.
She said she remembers Nacchio talking about how everyone
was worried about the increasing number of debilitating
attacks on personal computers. But she said she can't
remember exactly when the conversation occurred, although
perhaps it was sometime in 2001.
Jeff Dorschner, spokesman with the U.S. attorney's office in
Colorado, declined to comment Friday. But prosecutors
previously have said they believe Nacchio's national
security defense is irrelevant to the case.
Federal Judge Edward Nottingham also would have to rule
whether any evidence is relevant and should be heard by a
Records show Qwest has landed at least a dozen major federal
contracts since the fall of 2001. At least two of those
contracts came before Nacchio was ousted from Qwest in June
2002, including a communications backbone services contract
with the Department of Defense.
Nacchio's next pre-trial hearing is scheduled for July 14,
and a trial date is expected to be set then.
• The statement issued
Friday by Herbert Stern, attorney for former Qwest CEO Joe
Nacchio, related to the National Security Agency request for
private telephone records:
In light of pending litigation, I have been reluctant to
issue any public statements. However, because of apparent
confusion concerning Joe Nacchio and his role in refusing to
make private telephone records of Qwest customers available
to the NSA immediately following the Patriot Act, and in
order to negate misguided attempts to relate Mr. Nacchio's
conduct to present litigation, the following are the facts.
In the Fall of 2001, at a time when there was no
investigation of Qwest or Mr. Nacchio by the Department of
Justice or the Securities and Exchange Commission, and while
Mr. Nacchio was Chairman and CEO of Qwest and was serving
pursuant to the President's appointment as the Chairman of
the National Security Telecommunications Advisory Committee,
Qwest was approached to permit the Government access to the
private telephone records of Qwest customers.
Mr. Nacchio made inquiry as to whether a warrant or other
legal process had been secured in support of that request.
When he learned that no such authority had been granted and
that there was a disinclination on the part of the
authorities to use any legal process, including the Special
Court which had been established to handle such matters, Mr.
Nacchio concluded that these requests violated the privacy
requirements of the Telecommunications Act.
Accordingly, Mr. Nacchio issued instructions to refuse to
comply with these requests. These requests continued
throughout Mr. Nacchio's tenure and until his departure in
June of 2002.