Qwest Punished by NSA for Non-Cooperation

nightcats writes "According to a story from the Rocky Mountain news, Qwest has received retaliatory action from the NSA for refusing to cooperate in the Bush administration's domestic data-mining activity (i.e., spying on Americans). 'The [just-released government] documents indicate that likely would have been at the heart of former CEO Joe Nacchio's so-called "classified information" defense at his insider trading trial, had he been allowed to present it. The secret contracts - worth hundreds of millions of dollars - made Nacchio optimistic about Qwest's future, even as his staff was warning him the company might not make its numbers, Nacchio's defense attorneys have maintained. But Nacchio didn't present that argument at trial. '"

Comments

Nonsense

[DerekLyons]

The linked article does not support the sensationalist nonsense presented in the summary.

Re:Nonsense

[clodney]

I admit the summary is inflammatory, but strip away the hyperbole and the implication is there.

Nacchio is claiming that he expected to receive classified government contracts that would have prevented the revenue shortfall, and that therefore he was not guilty of insider trading because he believed the revenue forecasts to be accurate.

Nacchio is clearly not a disinterested party to this, so his assertions have to be examined carefully, but it is at least plausible that after Qwest declined to give the NSA access to their network, NSA decided to give the contract to someone else in retaliation.

I haven't followed the story closely enough to pretend to have an informed opinion on the merits of the argument. Of course, this is /., so I guess that doesn't matter here.

Re:Nonsense

[Anonymous Coward]

Did you bother reading the PDF court filings which are listed on the article page?

It appears that (if Nacchio was telling the truth) the NSA offered projects worth a significant amount of money to Qwest -- then, when Nacchio refused a separate NSA request on the grounds that the request was illegal, the NSA withdrew the other projects.

If this isn't punishing Qwest for non-cooperation, what is?

Re:Nonsense

[gstoddart]

The National Security Agency and other government agencies retaliated against Qwest because the Denver telco refused to go along with a phone spying program, documents released Wednesday suggest.

Well, the opening paragraph of the linked article indicates that they thought it did mean that.

Although, I don't think it's the domestic spying program that's been in the news. The article seems to infer that he had refused to participate in some unnamed program (which predated 9/11) which he said would be "was both inappropriate and illegal".

I think the summary seems valid (as it's largely direct quotes from the article).

It seems to be the article which is drawing the conclusion that there was some secret/illegal program (possibly a precursor to the current one) involving the phone system, and that Nacchio's refusal to go along with it.

If I understand it, they're saying that had he been able to cite these secret contracts with the government as to why he thought they'd do well (but couldn't release the info to shareholders) he might have had a defense against his insider trading clauses -- because he would have been prohibited by law from divulging them.

Now, as to how much you can attribute the actions of the NSA et all to retaliation for not participating in the now infamous domestic spying program -- that seems like speculation in the article. It seems like the summary is merely conflating "a" phone spying program with "the" phone spying program. The poster of the article doesn't seem to have so much sensationalized, as slightly mis-interpreted.

Cheers

Re:Nonsense

[complexmath]

Nacchio is clearly not a disinterested party to this, so his assertions have to be examined carefully, but it is at least plausible that after Qwest declined to give the NSA access to their network, NSA decided to give the contract to someone else in retaliation.

This was my interpretation as well. Basically, the government was using lucrative contracts as an incentive for cooperation with various other less palatable projects. When Qwest declined to cooperate with those, the government pulled their other contracts and gave them to someone else who was presumably more willing to cooperate. Given this, I think a case could be made for the mis-estimation of future income by Qwest. Depending on where they were in negotiations, etc, it's reasonable to assume that there was grounds for considering these contracts as valid future revenue.

Re:Nonsense

[gstoddart]

No, both the article and summary make the mistake of treating an implication as a fact.

No, the summary correctly says "According to a story from the Rocky Mountain news ...". The poster of the article adroitly sidesteps any personal claim that any of this is actually fact.

Now, as to how much of the things implied in the actual article can actually be considered fact, that's an entirely different matter. Some of the argument seems a little specious and vague to me. They're conclusions drawn by someone who has read a document I've never seen. It's not even really clear on who drew the conclusions.

I'm defending neither the article, nor its conclusions. But, I will say that I don't think that the person who posted the summary made it any more sensationalist than the actual article was, give or take a slight mis-interpretation of which (alleged) illegal spying program was at issue here. The summary merely treats it as fact that the Rocky Mountain news did, in fact, make assertions which are in line with the summary. Having RTFA, I can only determine that the poster didn't draw his own sensationalist conclusion, he slightly botched someone else's sensational conclusions.

All other aspects about the truthiness of the article are outside of the scope of anything I've said or plan to say, since it's all hearsay by the time we read it. :-P

Cheers

Re:Nonsense

[mabhatter654]

It is a fact that he had meetings discussing contracts with the NSA, the details are redacted but the meeting is there. The fact that the judge won't allow the redacted information in the trial is somewhat disturbing as they prove he didn't have intent to defraud investors. Along the same line, the nature of such contracts means that investor notification may not be entirely possible or even legal. If he said he would probably make numbers dependent on pending government work he should be in the clear. Numbers are just that, numbers, they have risk.. greater when working for secret agencies as Quest is an order of magnitude smaller than Verizon or AT&T.

Re:Nonsense

[mabhatter654]

but that retaliation messed up his numbers while he was telling investors big deals were almost done... oops now it went south, the check wasn't in the mail... and he can't talk about it because it's secret. Now he's charged with a crime for not talking about it when the stock did poorly without those contracts. One could almost argue that the prosecutor had cherry picked that time frame knowing he couldn't use the facts to defend himself.

Re:Nonsense

[visualight]

However, the article does support the allegations made in the summary. Also, when you're talking about physics, or genetic defects then of course correlation is not causation.
But when you're talking about people correlation is often causation. Especially when you're talking about people who've already demonstrated a lack of ethics. In this case I have no doubt that retaliation was the motive for pulling the contracts.

While story !=summary, it's onerous

[postbigbang]

If you RTFA, the implications are there. Play ball with the NSA, and life could go better with you. Cross-connect your new fiber infrastructure with the NSA and get nice secret benefits. Don't do it, and watch yourself go down, hard, at the hands of the non-secret branches of government.

Good conspiracy stuff. Kennebunkport and B-52s, anyone?

Re:While story !=summary, it's onerous

[paganizer]

I'm pretty sure I can't switch to Qwest. but I'm going to try to find SOME way to give them money; this sort of behavior deserves it.

huh?

[jdc180]

'The [just-released government] documents indicate that likely would have been at the heart of former CEO Joe Nacchio's so-called "classified information" defense at his insider trading trial, had he been allowed to present it. The secret contracts - worth hundreds of millions of dollars - made Nacchio optimistic about Qwest's future, even as his staff was warning him the company might not make its numbers, Nacchio's defense attorneys have maintained. But Nacchio didn't present that argument at trial. '"

What? That didn't make any sense in the summary, or in TFA. I didn't bring my bad grammar decoder ring to work today, can someone translate?

Re:huh?

[tonyreadsnews]

because the NSA stripped out the impo

Re:huh?

[gstoddart]

What? That didn't make any sense in the summary, or in TFA. I didn't bring my bad grammar decoder ring to work today, can someone translate?

The assertion is that when he was CEO he had been told by the government he would be getting big, huge contracts. He used that as a basis to express positive earnings potential. When he declined to participate in a program he felt would have been illegal, they pulled those contracts.

They seem to be implying that, had he been allowed to at is insider trading trial, he would have referenced said contracts in his defense. But, he was prevented, possibly by the government or the judge. They refer to a heavily redacted document to support the belief that he wasn't doing anything illegal, but legitimately had a reason to believe the company had good things coming in the future, and therefore wasn't doing illegal insider trading. (ie. There really was a secret program he was being courted to help with, after he refused, they hung him out to dry).

Another implication, is that before 9/11, the White House was looking at implementing a program involving phones, and the NSA, and that the individual in question felt that it would have been illegal. By inference, this is related to the now well-known but not acknowledged (but still illegal) domestic spying program. There's little evidence offered to support this link.

At least, that's my best understanding of it.

Cheers

Don't like a story? Don't comment.

[Futurepower(R)]

Please don't read or comment on articles in which you have no interest.

Wait, WHEN did this happen?

[BobMcD]

I obviously need to do some research:

Nacchio planned to demonstrate at trial that he had a meeting on Feb. 27, 2001, at NSA headquarters at Fort Meade, Md., to discuss a $100 million project. According to the documents, another topic also was discussed at that meeting, one with which Nacchio refused to comply. The NSA wanted to begin its wiretapping program PRIOR to the "unforeseeable" events of September 11th, 2001???

Either I'm out of touch, or this is a tad bit of a smoking gun...

Next up for me is trying to determine when the guys who went along got their start. Either way it doesn't look good.

Interesting stuff.

Not so fast...

[Penguinisto]

When it comes to Qwest, you may wish to take the information with a block of salt. They've been known to twist things rather heavily before in order to get their way (for a big instance - a quick Google search for "Qwest UTOPIA Utah" should cough up their antics in trying to kill off a muni-funded fiber broadband project just to keep their profits high).

IMHO, Qwest's motives are suspect, and this article with its sensationalist flavor reads almost like it came from Qwest's PR office.

As is usual with opinions, YMMV.

/P

What makes you think that this "War on Terror"

[einhverfr]

began on 2001-09-11?

If you do some research, you will see that a lot of these programs had been ramped up considerably under Clinton (including both extraordinary rendition, and the attacks on free speech). There was also an increasing amount of information that Eschelon was underway at that time. Unfortunately this is not a matter of who is in office, but rather who is informing whoever is in office.

This means: career military top brass, it means career intelligence services (CIA, NSA, etc), and to a lesser extent it means private think tanks.

Re:What makes you think that this "War on Terror"

[einhverfr]

"Antiterrorism and Effective Death Penalty Act" signed into law by Clinton in 1998. Some law experts have pointed to attempts to use this act to punish acts of pure speech, such as United States v. Al-Hussayen (2004). In that case, the prosecution alleged that merely providing a hyperlink and advocacy of the policies of Hamas constituted material support/expert advice under that 1998 law.

Also see the European Parliament's report on ECHELON, from July of 2001. Note that the investigation that lead to the report began in the year 2000.

The tools of this "war on terror" were being deployed well in advance of 9/11. If we are to give the government the benefit of the doubt, one would suggest it started with the 1993 bombings of US embessies, and a genuine fear that it would escallate. To be more cynical, one might think that it is about certain government agecies trying to maintain their own value after the fall of Communism. Human nature being what it is, both positions are probably true at the same time.

Re:Printy link

[Gr8Apes]

Based on government regulations and supposed required bidding processes, it should have been impossible for the NSA to make conditional a set of contracts based on another set of contracts or requests. If that truly was done, there should be heads rolling at the NSA procurement division.

In short, gov contracts are either competitively bid, or they are single sourced. In the former case, if you're the low bidder and will deliver the products, then you "win". They can't give it to someone else without negating one or the other of those two acceptance criteria. In the latter, the fact that it was single-sourced requires documentation as to why the open bid process could not be done. That documentation alone would negate giving the contract to someone else.

Do remember the government is not in the business of scratching backs. (good grief, I almost said that with a straight face...)

The timeline doesn't match up!

[taskiss]

From the article:

The documents maintain that Nacchio met with top government officials, including President Bush, Vice President Dick Cheney and then-National Security Adviser Condoleeza Rice in 2000 and early 2001 to discuss how to protect the government's communications network.

Bysh wasn't naugurated until Jan 20, 2001.
http://www.whitehouse.gov/news/inaugural-address.html