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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?

Read more →

The Guy Who Refused to Wiretap Illegally Is Off to Jail

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The full 10th Circuit just decided to send Joseph Nacchio off to jail after reinstating his insider trading conviction.

A federal appeals court reinstated the insider trading conviction of former Qwest CEO Joe Nacchio on Wednesday and said he could be ordered to begin serving a 6-year prison sentence.

A three-judge panel of the 10th U.S. Circuit Court of Appeals had overturned the conviction last year, ruling that the trial judge improperly barred testimony from a defense witness.

But on a 5-4 vote, the full 10th Circuit said Wednesday the trial court was ”well within its discretion” to keep the witness off the stand.

Now, it’s likely that Nacchio will appeal to SCOTUS. Which means the Roberts Court will probably be refusing cert for Nacchio at about the time they overrule Vaughn Walker’s impending decision that retroactive immunity for telecoms–you know, the guys who broke the law when they cooperated with Dick Cheney’s illegal wiretap program?–is illegal. 

Judge “Naughty” In Trouble with the Circuit Court

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Dakine passed on this Denver Post article focusing on the Circuit Court’s decision to have Nacchio’s case tried by a different judge.

Nottingham wrongly, according to the appellate court, excluded an expert witness the defense wanted to present. He didn’t even let the defense make arguments on the matter when it came up during the trial.

His demeanor during the trial and sentencing was full of cutting comments and, at sentencing, he included a lecture on morality and greed.

Though the appellate judges weren’t specific, they did say that the trial transcript led them to conclude that "it would be unreasonably difficult to expect this judge to retry the case with a fresh mind."

While the appeals court said it wasn’t implying bias by sending the retrial to another judge, they sure were saying something. And it wasn’t complimentary.

While the article suggests there is no relation between Nacchio’s trial and Nottingham’s other problems–the revelation he was surfing porn in his chambers, soliciting prostitutes, and stealing handicapped spots from disabled people–I do find it rather interesting that the Court has hired an investigator to look into those ethical allegations.

A former FBI agent has been hired to investigate Colorado’s top federal judge who was recently linked to an investigation into a Denver-based prostitution ring.

Former FBI agent David Brundage is working for the 10th Circuit Court of Appeals in its investigation of Judge Edward Nottingham for alleged judicial misconduct in two cases, ABC News has learned.

[snip]

When contacted by ABC News, Brundage declined to comment as did a spokesperson for the 10th Circuit Court.

It sure makes you wonder about the scope of the investigation for the Court. Does it go beyond stealing handicapped parking spots?

Update: spelling error fixed per brendanx.

Nacchio Gets a New Trial

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In news that may have repercussions for Bush’s attempt to hide all details of his warrantless wiretapping program, Joseph Nacchio just won a new trial (h/t scribe). Mind you, the reason his trial was overturned does not relate directly to his claim that the Administration retaliated against him because he refused to illegally wiretap Americans. Rather, the Appeals Court overturned his case because he was not allowed to make a case for his expert witness.

A federal appeals court ordered a new trial Monday for former Qwest CEO Joe Nacchio, saying the trial judge wrongly excluded expert testimony important to Nacchio’s defense in his insider trading case.

[snip]

Attorneys for Nacchio told the 10th U.S. Circuit Court of Appeals in December the case against him didn’t meet standards set by previous court rulings.

Nacchio’s attorney, Maureen Mahoney, also told the court that U.S. District Court Judge Edward Nottingham wrongly prevented a defense witness from testifying and that Nottingham’s instructions to the jury were inadequate.

[snip]

At the appeals hearing, the judges repeatedly asked Oestreicher why Nottingham denied Daniel Fischel from testifying in Nacchio’s defense. Prosecutors say the defense didn’t establish the reliability of Fischel’s opinions or disclose how he arrived at them.

Nacchio’s attorneys say Fischel, an expert on corporate law and markets, was a core part of his defense and could have explained to jurors what must be publicly disclosed and that Nacchio’s stock sales were to diversify his portfolio. Mahoney said a reasonable jury hearing testimony from Fischel would have acquitted Nacchio.

So the Appeals Court has not specifically said Nacchio should be able to tell us about being strong-armed to wiretap Americans (that’s not why they accepted his appeal). But given another trial–not to mention the House’s recent confirmation that different carriers responded to government requests differently (that is, AT&Treason happily wiretapped us, while Qwest resisted)–Nacchio might have the opportunity to explain why he thinks he was retaliated against because he believes in the Fourth Amendment.

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.