Papers Contradict Nacchio's Defense

By Carrie Johnson
Washington Post Staff Writer
Tuesday, October 23, 2007

Qwest Communications belonged to a business alliance that won a rich national security contract in the summer of 2001, undermining claims that authorities retaliated against its former chief executive for refusing to support an unidentified government program earlier that year, prosecutors said in documents released yesterday.

The court papers, which initially were filed under court seal in February, arrived little more than a week after the release of contradictory arguments that onetime Qwest leader Joseph P. Nacchio used in a bid to defend himself on criminal insider-trading charges. In April, a Denver jury convicted Nacchio on 19 counts of selling stock when he knew the telecommunication company's performance had begun to falter.

Qwest was one of more than a dozen "strategic vendors" that provided services to the Eagle Alliance, which won a contract in July 2001 to upgrade computer systems and equipment at the National Security Agency, according to a document that prosecutors attached to their court filing yesterday.

The contract, valued at more than $2 billion and known as "Groundbreaker," amounted to one of the most tantalizing aspects of Nacchio's criminal defense. In essence, he argued that despite warning signals about waning demand for telecommunications services in 2001, he remained optimistic that Qwest would pick up millions of dollars in secret government contracts.

Those hopes were dashed, Nacchio contended, after he questioned the legality of an U.S. government plan in a February 2001 NSA meeting, he said in court papers.

Nacchio's claims attracted substantial attention among privacy advocates and lawmakers as part of renewed debate over the boundaries of government eavesdropping and the possible financial liability of telecom companies that have been sued for their roles in the operations.

Arguments underlying Nacchio's defense, with portions blacked out for security reasons, came into view this month. But the government responses only began to become public late yesterday.

"Qwest was not 'left off' the list of subcontractors for the Groundbreaker project," prosecutors wrote.

The Eagle Alliance formed in 2000 to bid on a contract that called for a revamping of NSA internal systems, according to a news release by Computer Sciences Corp., which led the team. CSC announced that it and its subcontractors had won the contract the following July.

It remains unclear how much money, if any, Qwest collected under the contract, as representatives at the telecom company and other sources declined to comment yesterday, citing national security concerns.

Government lawyers also argued that notes from an FBI interview with former Qwest executive James Payne, who attended a meeting between Nacchio and NSA officials in February 2001, rebut Nacchio's contention that the meeting's purpose was to discuss Groundbreaker. Rather, prosecutors wrote in the court filing, "Mr. Payne describes this meeting as a 'howdy call.' "

Ultimately, before the criminal trial began, U.S. District Judge Edward W. Nottingham rejected Nacchio's government retaliation claim as irrelevant, writing that "there are a number of factors that one can talk about or one can imagine that would lead to Qwest not getting a contract in this situation."

The decision to exclude that evidence forms the basis of part of Nacchio's criminal appeal to be argued in December. Jeffrey Speiser, a defense lawyer for Nacchio, declined to comment on the materials released yesterday, as did a spokesman for Qwest.

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