[hold on — we’ll get to the
above in a few more paragraphs. . .]
after digging through some of
the pacer filings made accessible
thus far, out of the federal district
court, and the 10th circuit, in denver,
i need to revise some of my snark about
the vitality of joseph nacchio’s pro-
offered defense. but to do so, i’ll
have to offer a quick detour into in-
sider trading and securities law.
please bear with me — i think you
will find it all to be worthwhile.
as c.e.o. of qwest, joe nacchio made
statements about his confidence in the
various wall street, and internally-gen-
erated (qwest) projections for revenue,
cash-flow, and e.p.s. for the year 2001.
under then-generally-accepted principles
of federal securities law, he would be
liable for his statements — as a matter
of securities fraud — only if he did not
have a reasonable basis to believe them,
when he made them. his defense, it seems,
was not just that the government attacked
him for refusing their unconstitutional
no, he also alleged that,
from at least february 2001 onward (and,
that date is significant), many supposedly
classified government documents would prove
that he, on behalf of qwest, was engaged in
“very-high-level”, substantive, and deeply-
detailed negotiations/discussions with u.s.
clandestine agencies for significant new
contract work — new revenue.
these negotiations — secreted even from
his board of directors — were the basis of
his “reasonable belief” that qwest would meet
wall-street projections for the year 2001.
but he was largely prevented from establishing
this defense at trial, because the government
did not turn over the proof — so-called brady
material, in enough detail, or quantity, to
make this defense viable before the jury.
you see — under then-applicable securities
law, nacchio would not be liable for his
statements (even when they did not pan out),
and therefor, not liable for trading on the basis
of undisclosed negative information, if — at
the time he made the statement — he had
reasonable grounds to believe the projection
would turn out to be correct. even if it didn’t.
got that? [end, s.e.c. primer.]
okay — so then, he refuses to let the govern-
ment have warrantless access to qwest data, in
mid-2001, presumably relying on qwest legal advice
to the effect that qwest could be held liable
for violating the constitutional rights of qwest
customers — by letting the government through
its gates, without a regular warrant.
next — the government effectively “black-balls”
qwest — on much of the existing clandestine work,
switches, boxes, etc. — and qwest then, predictably,
cannot meet its projections for 2001 and 2002.
it is beyond the scope of this blog to sort out
whether the government contracts were large enough
to actually “move qwest’s needle” backward
in the manner alleged by joseph nacchio — and i
do remember that he was, and is, facing prison. . .
[and i also notice that his trading continued,
even after this time — and outside the levels
earlier established by his 10b-5(1) trading plan.
so, he is no saint — where’s the news in that, though?]
but the the above, and below, excerpts [click each
to read them!], from the newly-unsealed pre-trial
briefs in his case are tantilizing.
they provide very strongly corroboration that
the so-called “groundbreaker” or some other, un-
named, project was well-underway a full seven
months BEFORE the world trade center attacks.
and, because many of these documents were deemed
“brady” materials by the judge — they are
“exculatory” of the charges leveled against nacchio — they
would suggest that the documents admit things
about the government it would not want its people to know.
for example, they might establish that the
programs for which mr. nacchio was negotiating
plainly violated the watergate-era reforms
codified into FISA. it seems clear that — at
a minimum — the documents strongly support the
contentions of both mr. nacchio, and his lawyers,
that the projects envisioned warrantless surveillance
of u.s. citizens, in violation of their fourth amendment
rights. . .
wow. go get ’em, chairman conyers!