Did the U.S. government retaliate against a telecom giant for refusing to cooperate with the National Security Agency's controversial call records database program?
Former Qwest CEO Joseph Nacchio made that allegation in court documents as part of the appeal of his conviction on insider trading charges. As part of his defense, he claimed that he expected the company's earnings in 2001 to be higher because he was depending on multibillion dollar contracts with the NSA.
But after he declined a NSA request to hand over Qwest customers' calling records at a Feb. 27, 2001 meeting, the company was denied contracts with NSA and other federal agencies, Nacchio alleges.
Verizon, AT&T and Bellsouth all reportedly complied with the NSA's request for phone records months before Sept. 11, covering nearly 500 billion telephone calls in 2005 and almost 2 trillion calls since late 2001, according to the TeleGeography research group. But Nacchio refused to turn over records without proper legal orders because he felt that would violate federal privacy laws, according to court documents released this week.
The controversial program, which was revealed by USA Today in 2006, has never been confirmed or denied by the NSA. Yet the Bush administration has implicitly acknowledged its existence by urging Congress to approve legal immunity for those telecom companies currently facing litigation for their apparent participation. Verizon and AT&T face several lawsuits related to their alleged cooperation in the program.
The heavily redacted court documents reveal Nacchio's "classified defense," which he was not allowed to present during his trial. They also detail Nacchio's description of the 2001 meeting he attended along with James Payne, who was Qwest's government liaison, to discuss a contract to modernize the agency's IT management.
"Although Mr. Nacchio is allowed to tell the jury that he and James Payne went into that meeting expecting to talk about the "Groundbreaker" project and came out of the meeting with optimism about the prospect for 2001 revenue from NSA, the Court has prohibited Mr. Nacchio from eliciting testimony regarding what also occurred at that meeting. [REDACTED] The Court has also refused to allow Mr. Nacchio to demonstrate that the agency retaliated for this refusal by denying the Groundbreaker and perhaps other work to Qwest."
According to an interview with Payne detailed in the documents, the agency repeatedly asked Qwest to comply with the program. "Nacchio said it was a legal issue and that they could not do something their general counsel told them not to do."
Nacchio implied that the company's refusal to comply may have cost it contracts with other government agencies. "There was a feeling that the NSA acted as agents for other government agencies and if Qwest frustrated the NSA, they would also frustrate other agencies."
Nacchio and his lawyer, Herbert Stern, failed to return calls.
Asked about his claims, the NSA issued a statement: "It would inappropriate to comment on matters of litigation; therefore, we have no information to provide."
Nacchio was convicted of violating securities laws and inflating the price of the Qwest stock by exaggerating financial forecasts and concealing the Denver-based carrier's woes.