HomeWas a Telecom CEO Sent to Prison because He Resisted NSA?EducationAtlas University
No items found.
Was a Telecom CEO Sent to Prison because He Resisted NSA?

Was a Telecom CEO Sent to Prison because He Resisted NSA?

2 Mins
June 10, 2013

Even before 9/11, the National Security Agency went to Qwest Communications and asked it to turn over Americans’ phone records without a warrant. Under the leadership of then-CEO Joseph P. Nacchio, and on the advice of lawyers, Qwest refused .

Nacchio recently left prison for a halfway house .

What’s the connection? Consider this Washington Post report from 2007 . Nacchio was convicted of insider trading -- of selling stock on the basis of inside information the public didn't have . The material nonpublic information the government said he illegally traded on was an internal analysis suggesting Qwest might not meet earnings expectations. But Nacchio argued before trial that he hadn’t sold the stock out of pessimism. And part of the defense he wanted to make was that he expected his company to do better than the analysis suggested because secret government contracts, not reflected in the analysis, would outweigh the bad news the analysis did reflect. Those contracts, of course, weren’t known to the public either. So the balance of nonpublic information Nacchio had may actually have been in favor of buying Qwest stock rather than selling it, which would have supported the view that he didn't trade because of his inside knowledge, but for some other reason.

Those government contracts, Nacchio’s lawyers suggested , were canceled because of Qwest’s refusal to help the NSA spy on Americans. So they didn’t help Qwest reach its targets. Nacchio’s lawyers told the Supreme Court the company did so anyway, but of course the better the company did at that time, the more ridiculous charges that Nacchio had sold stock on inside information would have looked.

The judge limited the evidence Nacchio could present on the issue of the government contracts, and ultimately Nacchio didn’t build his case on that issue ; I don’t (at least yet) understand why.

Was Nacchio selected for prosecution because he’d stood up to the NSA? It’s probably impossible to tell. But we’ve seen accusations before that the government targeted businessmen for political reasons. And according to Nacchio’s lawyers, his was the first case where an alleged insider trader was prosecuted when the only inside information involved was an internal risk assessment . We can’t be sure now, and perhaps we never will be. But there are grounds for suspicion. And even if the prosecutors were entirely unbiased in choosing Nacchio as their target, the role of the government contracts is a separate ground for concern.

Thanks to Walter Olson for starting me on this trail.

About the author:
Civil Liberty
Law / Rights / Governance