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Remember Joseph Nacchio?

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Yahoo just announced that it will shortly be releasing the docket from its 2008 effort to challenge a Protect America Act order.

In a report on the release, WaPo notes that the government threatened Yahoo with a $250,000 day fine for not complying with the Protect America Act order (appreciate the irony of that law’s name!).

The U.S. government threatened to fine Yahoo $250,000 a day in 2008 if it failed to comply with a broad demand to hand over user data that the company believed was unconstitutional, according to court documents unsealed Thursday that illuminate how federal officials forced American tech companies to participate in the NSA’s controversial PRISM program.

Umph. That kind of fine would add up quickly.

Which got me thinking about Joseph Nacchio, the Qwest CEO who claims the real source of his insider trading scandal arose from government retaliation when he refused to do something — in January 2001, before NineElevenChangedEverything — that he considered illegal.

According to Nacchio, his troubles can be traced back to a meeting at the NSA’s Fort Meade, Md., headquarters on Feb. 27, 2001. The agency asked that Qwest participate in a surveillance program, but Nacchio considered the proposed action to be illegal.

Nacchio was unable to explain the exact nature of the request, which remains classified. However, contrary to news reports, he said discussions with the NSA at the February 2001 meeting didn’t involve turning over telephone records.

“I found that request to be peculiar. I didn’t think it was legal. I asked for legal justification. We never got it, and therefore we never did it,” said Nacchio, who completed his prison sentence in September. “That was the moment things turned down for me.”

The former AT&T (T) executive resigned from his post at Qwest in 2002 after the Securities and Exchange Commission launched an insider-trading investigation. In 2007, he was charged with 42 counts of insider trading.

Nacchio was ultimately convicted on 19 counts for selling stock between April and May 2001, leading to the forfeiture of $44.6 million and a $19 million fine. He was sentenced to six years in jail, but his time was reduced to 70 months.

Obviously, the size of Yahoo’s fine — for a congressionally authorized, even if unconstitutional program — lends far more credibility to the claim that the government retaliated by setting Nacchio up for an insider trading prosecution. (See also this post which tracks some interesting discrepancies in the stories, which is one of a number of reasons I believe the NSA IG report on the illegal dragnet is itself incorrect.)

It also makes me wonder about two other companies — an Internet company, and what is probably something like Cisco — that refused to cooperate with the illegal dragnet.

There really isn’t a lot of rule of law surrounding the government’s spying.

Olympic Fact-Checking of the NSA

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One of the disclosures from yesterday’s WSJ blockbuster that shocked a lot of people was that the NSA and FBI collected all the email and phone communications from Salt Lake City around the time of the 2002 Olympics.

For the 2002 Winter Olympics in Salt Lake City, officials say, the Federal Bureau of Investigation and NSA arranged with Qwest Communications International Inc. to use intercept equipment for a period of less than six months around the time of the event. It monitored the content of all email and text communications in the Salt Lake City area.

At first I wasn’t all that interested. After all, the relationship was discussed in the 2009 Draft NSA IG Report.

But now I am. (Thanks to David Waldman for convincing me to look back at the IG Report.)

Compare what the WSJ reported with what the IG Report says:

2002: In early 2002, NSA SSO personnel met with the Senior Vice President of Government Systems and other employees from COMPANY E. Under the authority of the PSP, NSA asked COMPANY E to provide call detail records (CDR) in support of security for the 2002 Olympics in Salt Lake City. On 11 February 2002, the company’s CEO agreed to cooperate with NSA. On 19 February 2002, COMPANY E submitted a written proposal that discussed methods it could use to regularly replicate call record information stored in a COMPANY E facility and potentially forward the same information to NSA. Discussions with COMPANY E continued in 2003. However, the COMPANY E General Counsel ultimately decided not to support NSA.

It goes on to say that Michael Hayden sent two letters to Company E, which I have always presumed was Qwest.

There are a number of discrepancies here:

  • WSJ says both FBI and NSA were involved; NSA IG (which, of course, was reporting exclusively on NSA’s role) described only NSA involvement
  • NSA IG said NSA discussed only call records with (presumably) Qwest; WSJ says call and Internet content were also involved
  • NSA IG dates discussions to February 11; the Olympics started on February 8 and went through February 24
  • NSA IG says discussions continued into 2003, which would be longer than the 6 month period the WSJ discussed

Now, several things may be going on here. It may be that FBI initiated this production, and after it started NSA tried to institutionalize it (effectively using the Olympics as an excuse to get Qwest involved in ongoing production like AT&T and Verizon were). It could be Company E is not Qwest at all (though that would raise questions about why NSA IG ignored Qwest’s reported involvement altogether). It may be that NSA IG is incorrect–there are other examples where their details don’t make sense, and my inclination is to suspect they’re spinning the Qwest negotiations. It may be that NSA IG is obscuring the start date of this — 6 months prior to the Olympics would be August 2001, before 9/11 purportedly authorized this larger collection (remember: WSJ reported that this production from AT&T started in the 1990s). It may be that WSJ’s sources are unclear about how this was done and in what time frame.

And consider that neither of these stories jive with Joseph Nacchio’s story. He says he was approached about doing warrantless surveillance on February 27, 2001. That time frame would make utmost sense to plan for the Olympics. But if it were true, it would also make Nacchio’s other claims — that the company and then he was prosecuted for not cooperating — more interesting. (Note, too, that the NSA IG Report doesn’t acknowledge that Nacchio was replaced as CEO during the period when, it claims, NSA was still discussing cooperation.)

None of it makes sense. But the apparent acknowledgment to WSJ that this did go on — and at a greater level of intrusiveness and earlier than the NSA IG lets on — sure merits new attention on Nacchio’s claims the government punished him for not cooperating in February 2001. It also merits new attention to the IG Reports produced in 2009; to what degree is the entire report a whitewash of much earlier, much more problematic domestic surveillance NSA didn’t want to disclose (ultimately, because they ordered this report) to Congress?

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Yahoo, the Law-Abiding Free Email Provider

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[NSA presentation, PRISM collection dates, via Washington Post]The FISA Court has officially agreed to declassify that Yahoo was the company that challenged a Protect Amendment Act order in 2007.

Once this PRISM slide was published, it was always pretty likely that Yahoo — or maybe Google — was the company in question. Yahoo started complying around the time the FISC decision was reached; Google joined in after the FISCR decision was unsealed.

Which leaves … Microsoft, which started cooperating before the law and then the FISA Court forced it to (though collection may not have begun until after PAA passed and, as Rayne has pointed out, Microsoft’s code was being exploited by the government for entirely different purposes in precisely that timeframe).

Now might be a good time to review what happened with the 7 companies the government asked to participate in an illegal wiretap program based solely on the President’s say-so. Per the 2009 NSA Draft IG Report, the companies are:

  • Telecoms A, B, and C (probably AT&T, Verizon, and — definitely– MCI, respectively, since they were the 3 telecoms working onsite at FBI’s direct access office under another program). These companies were approached by people from NSA’s Special Source Operations unit as soon as the program was approved, and they agreed to participate “voluntarily.” In 2003, MCI got cold feet and demanded a letter from John Ashcroft stating that the request was lawful, in which he “directed” them to comply with NSA’s requests.
  • Telecom E (Qwest). It was approached by SSO personnel in 2002, purportedly for collections related to the Olympics. After some discussion, Qwest’s General Counsel decided to not support the operation.
  • Internet Provider D (probably Microsoft). This company was approached by “NSA legal and operational personnel” (not SSO) in September 2002. In response, this company provided “minimal” support, spanning roughly from October 9, 2002 through just after September 11, 2003. No person at this company was ever cleared to store letters from the NSA.
  • Internet Provider F (probably Yahoo). This company was approached in October 2002 by NSA legal and operational personnel. In response to NSA’s request, Internet Provider F asked for a letter from Attorney General Ashcroft certifying the legality of the program. While in December 2002, NSA’s Commercial Technologies Group through Internet Provider F was participating, NSA’s GC says they did not because of corporate liability concerns.
  • Private Sector Company G. This company was approached in April 2003 by NSA legal and operational personnel. This company’s GC said he or she wanted to consult outside counsel. NSA chose to drop the request. I have no idea what company this would be (CISCO?); any thoughts?

Here’s what these companies provided:

Screen shot 2013-06-29 at 3.33.46 PM

This table tells us a great deal about the program–and also the legal problems behind it.

Internet provider D — the one of two that cooperated — only did so for 7 months in 2003, and only provided Internet content (probably primarily Hotmail emails), not metadata.

Which left the government to get the other Internet data off of AT&T and Verizon’s switches (we know C is MCI because February 2005 is when Verizon bought it, which explains why it started handing over Internet content and metadata then). As the IG Report explains,

A, B, and C provided access to the content of Al Qaeda and Al Qaeda-affiliate email from communication links they owned and operated.

[snip]

The last category of private sector assistance was access to Internet Protocol (IP) metadata associated with communications of al Qaeda (and affiliates) from data links owned or operated by COMPANIES A, B, and C.

In other words, Microsoft and Yahoo, the biggest free email providers, were not crazy about providing content (though one, probably Microsoft, did for a period). And they were completely unwilling to provide IP metadata.

So the government just went to AT&T and Verizon’s switches and took it there.

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Did Nacchio Lie, or Just Misunderstand?

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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. Read more →

Nacchio’s Hearing–before the Judges Who Gave Him Bail–Set for Next Week

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I said yesterday that the lawsuits against the telecoms were the only means left for us to find out how the government spied on Americans. I forgot about Joseph Nacchio, whose appeal will be heard by the same folks who decided his appeal addressed a "substantial issue."

The same three appellate judges who ruled that Joe Nacchio could remain free pending an appeal of his conviction of insider trading will hear his case next week, the 10th Circuit Court of Appeals announced Monday.

That could favor the former Qwest CEO because the judges already decided when they granted Nacchio’s request to stay out of prison that there was "a substantial question of law or fact" that could lead to a reversal of his April conviction.

"Nacchio has to be very happy," said Jay Brown, a University of Denver law professor who has followed the case.

The judges already have drawn some conclusions about the case and are sympathetic to Nacchio, Brown added.

But Marcy Glenn, head of the appellate practice group for the Holland & Hart law firm, didn’t think one should read too much into the fact that the panel is the same.

"The earlier decision was an interim decision, and it was made before there were any briefings on the merits of the case," Glenn said. "I would expect (the three-judge panel) to be absolutely open to all arguments at this point."

Oral arguments are scheduled for 2 p.m., Dec. 18. The case is being heard on an expedited basis, though no deadline for a decision has been set and the panel may issue its ruling at any time.

Jeralyn Merritt live-blogged a good deal of Nacchio’s trial, so hopefully she’ll give us her expert opinion on this appeal.