So Whatever Happened to Qwest? An Object Lesson in Resisting Government Surveillance

CEO is imprisoned over insider trading. He says it's because they wouldn't play ball with the NSA.

Qwest logo

Why don't telecoms or big tech companies just say no to the federal government demanding user records? Forget what the law says, would the feds actually come in and shut down the biggest companies in the country for refusing? Of course not – it would send the country into chaos.

But because of the expansive scope of the United States government, most of our biggest companies also earn a specific – and not small – amount of revenue from federal contracts. Over the past year, the ailing fortunes of Research in Motion (makers of the BlackBerry) have been illustrated by its loss of various government agency contracts in favor of other mobile tech providers.

The federal government doesn't need to hammer these companies in a massive public display of authority to get cooperation. It just needs to hammer them in the right way in the right place. Business Insider takes note of the fate of the telecom company once known as Qwest, and its former CEO, currently in jail:

Former Qwest CEO Joseph Nacchio is currently serving a six-year sentence after being convicted of insider trading in April 2007 for selling $52 million of stock in the spring of 2001 as the telecommunications carrier appeared to be deteriorating.

During the trial his defense team argued that Nacchio, 63, believed Qwest was about to win secret government contracts that would keep it in the black.

Nacchio alleged that the government stopped offering the company lucrative contracts after Qwest refused to cooperate with a National Security Agency surveillance program in February 2001.

The PRISM scandal has given Nacchio's claims new life. Arguably, a telecom dependent on federal contracts to survive doesn't deserve to do so. But to further go after Nacchio directly, presuming his defense is even remotely true, sends a scary warning message to any fellow corporate leaders about who is calling the shots.

Comments

[Thane-kin]

RIM actually trades as BlackBerry now.

[jesse.in.mb]

Teehee, RIM.

[Thane-kin]

I always laugh whenever somebody mentions a "rimshot"

[Nikkis enthusiastic dissent]

There career site used to be (?) "rimjobs.com" or similar. No joke.

Is your new handle a reference to otherkin? Please say yes. Or are you just a small thane?

[Thane-kin]

Yes, and I have a Draugr tulpa.

[Nikkis enthusiastic dissent]

Scary!

[jesse.in.mb]

I just thought it was Thane's cousin or something joining the commentariat.

[Thane-kin]

THERE CAN ONLY BE ONE

[Episiarch]

Frylock: Shake wait. The Highlander was just a movie.

Master Shake: No, Frylock, The Highlander was a documentary, and events happened...in real time.

[Thane-kin]

Never seen it, but apparently it won the Academy Award for Best Movie Ever Made.

[db]

http://s3-media3.ak.yelpcdn.co.....9s9g/l.jpg

[Anonymous Coward]

Sounds like Booz-Allen better get ready for its spanking.

[Thane-kin]

I dunno about that. Booz-Allen has been a government stooge from its inception. I dunno that a spanking would accomplish much for their government masters.

[Anonymous Coward]

Just a little spanking with the hand, just to remind them to hire only people who worship at the altar of the State.

No Libertarians Need Apply.

[Drake]

They aren't going to be touched because:

1. Campaign donations.
2. Jobs for retired Congress members and their kids.

[sarcasmic]

"That's a nice government contract you've got there. Be a shame if something happened to it."

[Libertymike]

You do treasure and value your crony capitalist status, don't you?

[Nikkis enthusiastic dissent]

Arguably, a telecom dependent on federal contracts to survive doesn't deserve to do so.

Are they dependent on federal contracts to survive, or will they just get wiped out by the competition if all the federal contracts go to someone else?

[Invisible Finger]

Is it really competition in the first place then? Sounds like the government picking who gets to stay in business and who doesn't. So it isn't a free market and the competition is merely an illusion.

[Nikkis enthusiastic dissent]

Well, that's what I'm asking.

[Episiarch]

DING DING DING WE HAVE A WINNER

[Loki]

It's almost like we're not living in a country with a free market economy at all, but actually a facsist economy. Hmmm, curiouser and curiouser...

[Rrabbit]

When the government overall spends 42% of the GDP (and that's using the government's own fake GDP numbers), many corporations will be in bed with the government one way or another.

[Scruffy Nerfherder]

Almost all telecom companies depend on the government in some way, whether it be in the form of contracts (on which the government has been on a spending spree for over a decade) or regulatory permissions or even spectrum allocation.

I have a book on telecom law that is a good 3 inches thick from my days as an engineer in the cellular industry.

[Invisible Finger]

Sounds like a really old book.

[Scruffy Nerfherder]

Most of it applies to POTS. Everyone always liked to complain about how bad service was for regular old telephone service, but very few ever made the connection that it was largely the result of the massive amount of regulation on the companies.

[Clich? Bandit]

For the record, POTS is one of the single most reliable technologies ever to hit this planet. The 5 9s is a LOW standard for POTS. Cell on the other hand is atrocious by comparison. Not saying POTS is the end all be all but having been in this industry for 17 years, I can tell you that over 400 million US POTS lines having less than 8 minutes of downtime in a year is quite an accomplishment.

[Scruffy Nerfherder]

FTR, I meant customer service. And yes, I agree that POTS is extremely reliable, kind of like old diesel engines were extremely reliable, and the new ones suck balls thanks to all of the fancy EPA add-ons.

[Rrabbit]

These telecommunications federal contracts were huge. Several billion per year in highly profitable no-bid contract revenue going to your competition rather than to you is a severe hit for any business.

It also has been claimed that part of Nacchio's defense in the trial for insider trading was not allowed due to national security concerns.

[Invisible Finger]

Somewhat on-topic: Reason contributor wants to work for the CIA. (Not the Kochs.)

http://www.zerohedge.com/news/.....cia-choose

[Thane-kin]

And not just any money, but in this specific case taxpayer money paid to either Google or Amazon by none other than the Central Intelligence Agency, or CIA for short.

It says that, then talks about competition between IBM and Amazon and never mentions Google again. Huh?

[Ken Shultz]

It doesn't really matter whether the government meant to send a message--it has the same effect anyway.

Oh, and the most important lesson to take away from this isn't that the Obama Administration is a bunch of thugs in suits. It's that the more capitalists are made beholden to government, the less likely it is that capitalists will work to serve their customers' interests.

[Homple]

Well, if your biggest customer IS the government....

[np]

But to further go after Nacchio directly, presuming his defense is even remotely true, sends a scary warning message to any fellow corporate leaders about who is calling the shots.

Jeez, 6 years, only to emerge as a felon. I remember reading about this a while back. Nacchio had maintained this was payback for denying them their spying since the beginning. Insider trading is a charge they easily pin on anyone in corporate America

[Ken Shultz]

Putin does the same thing.

This isn't the only time the Obama Administration has been accused of this.

Some claimed they were forced to do those mergers during the credit crisis, too.

[Rrabbit]

This was mainly the Bush administration. Nacchio was convicted in July 2007.

[Loki]

In Ken's defense, it is sort of hard to tell one from the other.

[sarcasmic]

Insider trading is a charge they easily pin on anyone in corporate America

Kinda like antitrust laws.

If you raise prices you're gouging.
If you lower prices you're dumping.
And if prices don't change you're colluding.

Once they decide they're going to get you, you're fucked. Rule of man, not rule of law.

[Spiny Norman]

...after Qwest refused to cooperate with a National Security Agency surveillance program in February 2001.

So not just a post-9/11 thing, then.

[Tonio]

Nacchio wasn't convicted until 2007, so it's possible that he was made an example of to cow the other telcos into cooperating.

[Clich? Bandit]

The refusal stuff was pre 9/11.

[Clich? Bandit]

At the time (as i was a recently former employee of said company) I said it loud and often. Nachio, while no saint, was railroaded for publicly telling the fed to fuck off. He did it on an employee conf call once where he said something to the effect of "If you receive ANY non specific requests that don't list exact TNs (they had a habit of sending blocks) you are to send it immediately to legal." I will always have some small amount of respect for him for doing that.

Now, that being said, it does appear as a lover's quarrel that he ended up getting the shaft on, so again he is no saint.

[Robert]

How is private knowledge of withdrawal of consider'n of a gov't contract a defense against a charge of insider trading, rather than evidence in favor of it??