Nacchio: Feds blacklisted Qwest

This weekend saw a startling new revelation that establishes a tie between two of the biggest telecom stories of the year, and could radically affect how both of them continue to evolve.

Newly-unsealed court documents related to former Qwest CEO Joe Nacchio's appeal on convictions of insider trading, show Nacchio claimed Qwest was asked by the federal government as early as February 2001 to participate in a classified program, which reports [1] suggests was the National Security Agency's domestic wiretapping program. The request, Nacchio said, occurred while Qwest was being considered for lucrative government telecom contracts. Qwest refused to participate in the program, and later that year, according to Nacchio, the government declined to award Qwest the contracts. The failure to land those contracts, which Nacchio had come to expect Qwest would win, played an integral part in the revenue slide that was at the center of the insider trading charges on which Nacchio was convicted.

This is not a movie. Not yet, at least. If these allegations are true, the domestic wiretapping controversy is broader and deeper than originally thought. Democrats probably will refresh their demands that telcos testify to their roles in the program, or that the government reveal fuller details of the wiretapping program that it so far has kept classified. President Bush otherwise may find it harder to demand that telco immunity be of any new surveillance legislation.

Meanwhile, in the Nacchio case, one of the key elements of his defense--that Qwest's revenue slide was as big a surprise to him as everyone else, because the company lost major contracts at the last minute that Nacchio believed Qwest was in line to win--suddenly makes more sense. The documents unsealed last week were part of pre-trial briefs filed months ago on Nacchio's behalf, but that were not allowed to be fully explored in his original trial.

This sounds like an amazing conspiracy theory, and could remain only that unless anyone in the federal government actually confirms that's the way it happened. Is Nacchio's side of the story enough to go on? Nacchio is, after all, alleging that the government essentially blacklisted Qwest for refusing to cooperate in its surveillance program. And he is trying to save himself from prison time and hefty fines. Buy the movie rights while you still can.

For more on this amazing story see the The Washington Post coverage [1] and the related political tussle over President Bush's demand for telco immunity in the wiretapping [2] scandal - Dan [3]