Did Nacchio Lie, or Just Misunderstand?

The Rocky Mountain News has a good summary of the issues the Tenth Circuit will consider this week in Joseph Nacchio’s appeal. It’s worth reading the whole thing to get an idea of all the issues. But I’m most interested in the representation the RMN makes of the government’s claim regarding Nacchio’s claim that he lost business because he refused to wiretap Americans.

The judge should have let Nacchio present his classified, national security defense. Previous filings indicate Nottingham ruled the defense was irrelevant.

Defense argument

The CEO was optimistic about Qwest in early 2001 because he knew the company was in line to receive top-secret government contracts. Redacted court documents suggest Nacchio planned to argue that Qwest didn’t get the contracts because he refused to participate in a phone spying program.

Prosecution argument

Nacchio’s version of events was "a lie," said First Assistant U.S. Attorney Cliff Stricklin, lead prosecutor on the case, while speaking at a Denver luncheon in October. He said prosecutors were ready to discredit the defense if Nacchio presented it.

Now compare that to what a government source told the NYT for last night’s article.

A government official said the N.S.A. intended to single out only foreigners on Qwest’s network, and added that the agency believed Joseph Nacchio, then the chief executive of Qwest, and other company officials misunderstood the agency’s proposal. Bob Toevs, a Qwest spokesman, said the company did not comment on matters of national security.

One source is saying Nacchio’s lying, the other is saying Nacchio just misunderstood the ask.

Of course, these sources aren’t exactly commenting on the same thing. I presume Stricklin is claiming Nacchio is lying about his expectation that Qwest would get lots of NSA business. Whereas, given the NYT report that Nacchio was asked to give the government access to the local Qwest network (and therefore to traffic that was undoubtedly in the US), the anonymous government source is likely addressing that issue–saying that Nacchio misunderstood which circuits the government was after.

Furthermore, it’s not like the distinction matters for the case. Nacchio can’t very well call "that guy who was an anonymous source for James Risen" to testify that he was asked to do something, even if he misunderstood what that ask was for.

But I am struck by the seeming admission, on the part of a government source, that Nacchio was indeed asked to do something, but there was just a big misunderstanding about what he was asked to do. Because that kind of misunderstanding (real or imaginary) is the kind of thing that might make a government contractor lose business.

  1. sojourner says:

    Something that I have to wonder: Instead of AT&T arising out of its anti-trust ashes, could we have seen a Qwest behemoth in its place (if Nacchio had not “misunderstood”? Meaning — did the government reward the company that provided the “best” services so that the government would only have to worry about dealing with one company instead of multiple companies?

    One would also think (or at least hope!) that when “requests” get to the level we are talking about that there is fairly substantive discussion — and particularly enough that there would be no misunderstanding between the parties. The government would have to be fairly direct about what it wanted, or else Mr. Nacchio did not misunderstand anything.

  2. emptywheel says:


    Two thoughts about talks with CEOs. I think they content of them is actually not as substantive as it is with the tech guys. After all, the techguys need to prepare for Big Brother to open an office in your building. Whereas the talks with the CEOs probably pertains to the rationale for the whole thing.

    That said, Nacchio was moved to be chair of the telecom advisory group. So I gotta believe they expected him to know a few things about the technical and policy side of things. That was my first thought when they said he misunderstood. If that’s the guy in charge (however briefly) of your telecom advisory group, what’s that say about the group?

    • sojourner says:

      Yes, and the thought that the higher-ups don’t know the actual workings at times is scary. Where I work, there is a major disconnect at times between what is promised and what we can actually deliver.

  3. BooRadley says:

    emptywheel, I’m wondering where the rest of corporate America is, especially Silicon valley. The telecoms (and their suppliers) are the new “railroads.” They could engage in mutual blackmail leverage their cozy relationship with the NSA and the Federal government to outflank Google, Oracle, MS, and whomever else they please.

  4. MadDog says:

    Even if Nacchio gets to bring up his argument, he’ll have a hard time proving that there was a quid pro quo.

    And for our legal eagles here, tell me how Nacchio’s “retaliation” argument can ever really undermine the Government’s basic case on Naccio’s cleaning out the company’s till?

    • nolo says:

      “. . .tell me how Nacchio’s “retaliation” argument can ever really undermine the Government’s basic case on Naccio’s cleaning out the company’s till?”

      good question, maddog –

      my answer may well go astray of the
      topic for this thread, so if you
      don’t care about the merits of
      the case, bail out now. just
      scroll on by. . .

      still here? okay:

      this case, in the tenth circuit, will
      likely clarify a fair amount of the
      insider-trading jurisprudence.

      [n.b.: by repeating these claims, i do
      not mean to suggest that i buy them.]

      nacchio claims he was the first person
      ever convicted of being wrong about his
      own company’s “soft information” — his
      company’s predictions about future growth.

      his claim amounts to this: my predictions
      were “reasonable when made” (and those are
      magic words in the SEC’s rules), because i
      truly reasonably believed that my company,
      qwest, would win a very large govt. contract.
      qwest’s predictions — he says — assumed that
      the govt. would not “punish him” for honoring, and
      obeying, the constitutional law (as developed
      in the AT&T cases of the 1970s). . .

      that is — he asked that the govt. show
      probable cause, or get a warrant, to have
      access to all the data he was being asked
      help drive — actually build a superhighway
      to — but the govt. not only declined that
      request (he sez); they “punished” him for
      having the simple temerity to ask.

      and, how did the govt. do this? it cancelled
      some very large contracts.

      remember, however, at least based on all
      that i’ve read on this case, nacchio actually
      liquidated some of his investment in qwest
      at some pretty high prices, after he knew
      that — for whatever reason — the govt.
      would not come through with the contract(s).

      and he did not disclose the change in
      the admittedly “soft” information — to
      the investing public — before he sold.

      then qwest shares tanked, it missed
      wall street’s and its internal expectations,
      and mr. nacchio ended up being indicted
      for among other things, insider trading.

      [a funny side note: while at my office one
      day, during negotiations with the SEC to
      get a large public offering declared effective
      for a client, i received — in error — and by
      overnight courier, no less, SIX large containers of
      nachhio’s banker’s documents from the sec’y
      of one of the lawyers representing nacchio
      at the SEC — his firm was ALSO representing the
      underwriters on my deal, and their wires got
      crossed — so i got the nacchio documents, and
      the SEC got my final diligence back-up materials.

      anyway, i read NONE of it, re-sealed it all,
      and sent it back to the law-firm — from there,
      i assume the firm sent it on to the SEC. odd.]

      so — is it “odd” that the govt. now wants
      prison time for “soft” information gone bad?

      or is nacchio trying to avoid the natural con-
      sequences of preferring himself over the rest
      of the public shareholders? you can decide.

      or the tenth circuit will.

      p e a c e

  5. nolo says:

    sorry — i didn’t mean for that off-topic
    one to run so long — but i do want to
    add to the substance here. . .

    this past summer, when jeralyn
    merrit at talkleft.com was writing on
    the nacchio appeals developments & pro-
    cess, i was regularly chilled by how
    much the teleco industry had to GAIN
    by selling all of us out — by handing
    over our contitutional right to privacy.
    this is a right every innocent citizen
    once enjoyed — privacy in our electronic
    papers, virtual-travels and communiques. . .

    if they play paddy-cake with the govt.,
    they garner literally billions of high-
    margin revenue. and perhaps, just perhaps,
    we never find out. forget nacchio — he’s
    likely deserving of jail time for his trades,
    but remember the lesson: this administration
    punishes those who question it — and this
    administration rewards those who play along.

    think here of blackwater, first kuwaiti, KBR — and,
    the mother of all “players-along” — halliburton.

    i need to go lie down now.

    this really, really saddens me.
    we are sold out by our own infra-
    structure constructors. . .

    p e a c e

  6. bmaz says:

    I believe nolo has laid out the landscape pretty well; so I won’t go over that. I will chip in my opinion that Nacchio and his legal/tech team knew exactly what the government was asking. The mere fact that the government would make such an asinine claim as “they just didn’t understand us” is just about proof positive they have big problems in relation to their real request.