Qwest CEO's 'classified defense' raises question on NSA surveillance
Nick Juliano
Published: Friday October 12, 2007

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A former CEO who stood up to the Bush administration's demands that he assist in the warrantless surveillance of Americans suggests in court documents that the National Security Agency withdrew a lucrative contract in retaliation for his refusal.

Documents released as part of Qwest CEO Joe Nacchio's insider trading trail also seem to indicate that the NSA was discussing the secretive, possibly illegal, surveillance of Americans several months before the 9/11 attacks President Bush used to justify the program.

The heavily redacted legal filings reveal the "classified defense" Nacchio was unable to present during his trial, and they outline a Feb. 27, 2001, meeting between the Qwest CEO and NSA officials to discuss a $100 million infrastructure project, and another topic. Discussion of the second topic was blacked-out in released court documents, but observers believe the NSA could've been discussing its program to compile a database of tens of millions of Americans' phone records.

According to one of the documents, Nacchio traveled to NSA headquarters in Ft. Meade, Md., to discuss the agency's "Groundbreaker" project, which the NSA said was aimed at modernizing its technology infrastructure.

Another lawsuit against AT&T alleging its cooperation in the domestic call monitoring has linked the Groundbreaker program to a secret surveillance equipment a former AT&T employee said the NSA installed in the company's headquarters.

In the Qwest documents, Nacchio's lawyer says the company "was denied significant work," including the "Groundbreaker" contract after the CEO objected to another topic discussed in that February, 2001, meeting.

Nacchio and an associate "went into that meeting expecting to talk about the 'Groundbreaker' project and came out of the meeting with optimism about the prospect for 2001 revenues from NSA," attorney Herbert J. Stern, in Nacchio's latest appeal to include the evidence.

"[T]he Court has prohibited Mr. Nacchio from eliciting testimony regarding what also occurred at that meeting, [redacted]," Stern writes. "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."

Nacchio is appealing his conviction on 19 accounts of insider trading for $52 million of stock sales in April and May 2001. He was sentenced last spring to six years in prison, but he is free pending appeal. Prosecutors argued that the CEO did not warn investors before he sold his stock that Qwest was unlikely to meet its revenue goals, but his defense team argued that he acted in good faith with investors because he expected that the secret contracts would come through.

Although the redacted documents do not say what the program was, several mentions are made to Nacchio's belief that the NSA's proposal was inappropriate and illegal, the Rocky Mountain News reports. Prosecutors said the classified defense "would have been proven false," according to the paper.

USA Today revealed last year that Qwest was the only phone company not to comply with the NSA's request to compile phone records into a massive computer database, which it said was instituted only after 9/11.

Stern said at the time that Nacchio had asked the NSA whether "a warrant or other legal process had been secured." Stern said Nacchio learned there was a "disinclination on the part of the authorities to use any legal process" and concluded that "the requests violated the privacy requirements of the Telecommunications Act."