Re: Pres. Orders and Securities Act liability (strongly verging OT) - revived!

[Ethan Ackerman]

(meat of this post =
http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5719566,00.html
- background gravy follows)


So it looks like John Young was more right than I in what really
mattered - the question of why...

Way back in May 06, I said the Presidential 78m order then under
discussion only mattered in some securities contexts, not to insulate
telcos from EFF-type cases.
http://legalminds.lp.findlaw.com/list/cyberia-l/msg46586.html

But then "why the 78m delegation order in May 2006, when previously
everything was fine?" JYA wanted to know.
http://legalminds.lp.findlaw.com/list/cyberia-l/frm46639.html

It looks like we now have a possible answer - to appease telecom
C-levels who are more afraid of what was happening vis-a-vis
securities laws on one of their own than they were of ECPA & CPNI
impacts on their companies.

Said C-levels were getting a little uncomfortable when one of their
own, Mr. Nacchio, started having trouble asserting his "classified
contracts with the government" defense in his insider trading case.

Circa May 2006, it turns out, Mr Nacchio was losing a fight with a
judge and prosecuting attorneys over making a defense - the "Qwest
routinely had secret off-the-books contracts, and more in the
pipeline, and I was only called in when they were really final, and
when I signed off on the rosy revenue for 2001, I anticipated this
really big one* that it turns out we later lost due to retaliation, so
I had a good faith belief in the guidance when I signed it and traded
massively on it" defense.

However you feel re: Mr. Nacchio, his lawyers managed to dig up some
pretty compelling evidence, corroborated by internal gov.
investigation and testimony, that Qwest was denied (*large secret NSA
contracts at the relevant time period) in retaliation for not
cooperating with some NSA surveillance because he was advised it was
contrary to law.  After generating quite a bit of a record, and lots
of redacted testimony and classified proceedures act summaries, the
judge in his case ultimately didn't let him present this defense.
Those documents are now unsealed but redacted.  There's some real
doozies in the texts.

The Rocky mountain news just broke the story and the docs.
http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5719566,00.html

Mr. Nacchio's problems were insider trading charges, and his defenses,
related to wrongful trading & contrary guidance based on secret
contracts, were being denied.  Wholly unrelatedly, at the same time, a
statutory formality was done - a presidential order delegating
authority to the supervisor of supervisor of same agency to "suspend"
significant securities law obligations was issued.  The now
formality-following orders could, coincidentally, excuse and allow
misleading guidance and except otherwise wrongful statements.  Smells
like a duck...

(Yes, I know its a long and slightly tin-foil-hat-y post, but it was
much more fun to type that than just say 'hey look, the RMN broke a
big story and it matches up with the timeframe of a Pres. order we
discussed earlier.')


Postscript - the unsealed records are troves!
Its interesting, among other things, the frequency and volume of
classified (and presumably unreported revenues too) contracts Qwest
was negotiating.  The 78m order is not a dead letter...


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