Was Qwest’s Nacchio punished for rebuffing Bush demands?

May 13, 2006

When the government asked AT&T, BellSouth, and Verizon to turn over telecom records after 9/11, they went along. When the Bush gang asked Qwest, the company and its then-CEO Joseph Nacchio said no.

To be sure, as USA Today noted, the Bush gang used the hard sell, telling Nacchio that his decision could compromise national security and could jeopardize Qwest’s government contracts. Qwest’s lawyers asked NSA to take its proposal to the FISA court for a legal green light or to the U.S. attorney general’s office’s for a letter of authorization. When the administration balked at the attempts at checks and balances, Qwest turned the Bush gang down.

But now there’s a new question: was Nacchio punished for his disobedience?

…Nacchio is fighting charges that he illegally sold $101 million worth of Qwest stock in 2001. The 42 counts in the indictment against him carry a potential penalty of 10 years in prison each.

The request by the NSA for phone records may lend credibility to Mr. Nacchio’s strategy to put his role in security-related government projects at the heart of his defense on the insider-trading charges. It also could give his attorneys an opportunity to argue that the criminal charges against him are retribution for spurning the NSA.

According to filings with the U.S. District Court in Denver, a key element of Mr. Nacchio’s defense is his claim that he didn’t sell stock with insider knowledge that Qwest was headed for trouble. Instead, the filings say Mr. Nacchio was highly confident about Qwest’s prospects because he was privy to secret, national-security related government plans that were likely to result in large contracts for Qwest. Mr. Nacchio also might argue that the contracts didn’t materialize because he didn’t cooperate in turning over customer data.

Interesting. Did Nacchio engage in illegal insider trading? I haven’t the foggiest idea. But in 2001, Bush administration officials told Nacchio that it’d be in “his best interest” to cooperate with their legally dubious requests. Less than a year after he declined, Nacchio was facing federal criminal charges.

Like I said, I don’t know a thing about the merit of the accusations against Nacchio, but by subtly threatening him in the first place, the feds have offered Nacchio an interesting defense — and at the same time, made the former CEO a champion of consumer privacy and individual rights.

They can’t even prosecute a simple insider-trading case correctly….

When did the Fed initiate the investigation of Nacchio? Was it before or after he turned down the NSA? If the investigation began before he was approached by the NSA, then his defense is on shaky ground. On the other hand, if the Feds took an interest in his stock dealings only after he told the NSA to get lost, then his defense is extremely credible, although not ironclad.

If I had to bet right now, I’d bet on payback.

  • I don’t know the details of Bush’s approach to Nacchio, but I lived in Denver when Qwest’s troubles began and I’m pretty sure Nacchio’s a bad guy. He’s a money-grubbing, trickle down on your employess thug of a CEO and I’d bet that his legal trouble is based on more than just Bush administration payback. At the same time, just because two groups are almost pure evil, doesn’t mean they’ll automatically be able to work and play nice together.

    Hope to find out the truth someday.

  • Even if Nacchio is a scumball, if he can prove this stuff happened after the NSA business, and can thus give these assholes another kick between the legs (you can’t kick them in the balls, they don’t have any, just like you can’t drive a stake through their heart), then he’s a good guy now.

    Any weapon in a fight…

  • You’re right, Tom. It’s always fun to watch criminals turn on each other, even if they weren’t in the same ring.

  • I remember Nacchio’s stock sale, which was to yield him something like $190G a month for a year and a half. But it seems to me Qwest was already in pretty bad shape at the time — speaking as a customer, not sure whether the market reflected that or if the share price went down after his sale. There was, at any rate, some outrage that he was making a big score when the company was causing such consternation.

    Of course I am glad, as a customer, that Qwest took this stand.

    But anyone who is now thinking of Qwest as somehow heroic has never tried to get it to stop charging them for internet service cancelled four months before…

  • As a former Qwest employee, and still a customer, I can tell you that Nacchio is a bad guy that only looks out for himself and cronies. I put him on the same level as Kenneth Lay if not worse. Qwest still survives but has had a rough time keeping out of bankruptcy. If it’s payback from the Bush administration then they have done one good thing if they succeed.

    Joe needs some jail time and pay back his ill gotten gains. He ruined my 401k and that of thousands of other Qwest employees.

  • Nacchio promoted his company, was arrogant, and had horrible timing , none of these are punishable by jail time.

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