In court papers filed during his 2007 insider trading trial, former Qwest CEO Joseph Nacchio claimed that Denver-based Qwest was denied lucrative NSA contracts he believed to be worth $50-$100 million, after Nacchio refused to involve Qwest in a secret NSA program that he thought would be illegal.
Subsequent reporting at the time revealed that it was a domestic wiretapping program in which the NSA wanted to snoop on Qwest’s vast telephone network without court orders.
President George W. Bush’s administration has said that warrantless wiretapping only began after 9/11, as part of the NSA’s Terrorist Surveillance Program.
Sources familiar with the request to Qwest, quoted anonymously in the New York Times in 2007, “say the arrangement could have permitted neighborhood-by-neighborhood surveillance of phone traffic without a court order, which alarmed them.”
Nacchio claimed that the NSA retaliated for his refusal by leaving Qwest out of a $2 billion NSA infrastructure program called Groundbreaker, which was split among numerous contractors, including Verizon.
Verizon, it was recently revealed, was required by court order to give the NSA telephone records from millions of its customer as part of a sweeping surveillance program.
Nacchio revealed these details in court papers in an attempt to show that he didn’t dump Qwest stock in 2001 because he knew the company was going to post poor performance results in the future. Rather, he suspected the company would benefit from participating in Groundbreaker, which he discussed with NSA personnel in Washington D.C. on Feb. 27, 2001.
“[O]ne purpose of bringing Messrs. Nacchio and [Qwest Senior Vice President James] Payne into the February 27, 2001 meeting was to [redacted] and stated that Qwest was subsequently denied any agency work as a direct result of Mr. Nacchio’s refusal,” the document reads.
In an interview with prosecutors, a portion of which was included in the court filing, Payne said NSA officials would bring up the secret program frequently and that they “expressed disappointment” that Qwest wouldn’t participate.
“Nacchio said it was a legal issue and that they could not do something their general counsel told them not to do,” Payne said. “Nacchio projected that he might do it if he could find a way to do it legally.”
“There was a feeling also,” he continued,” that the NSA acted as agents for other governmental agencies and if Qwest frustrated the NSA, they would also frustrate other agencies.
Ultimately, this argument wasn’t allowed in open court because the judge didn’t feel there was enough of a connection between the refusal to join the NSA program and Qwest not winning the Groundbreaker contract. Nacchio’s allegations didn’t come to light until the documents were unsealed six months after he was convicted in April 2007.
He was found guilty on 19 counts of insider trading and sentenced to six years. He was also fined $19 million and ordered to forfeit $52 million he made on his stock trade.
Nacchio’s lawyer, Herbert Stern, did not immediately return a phone call seeking comment.