Nacchio was convicted of running a pump-and-dump insider trading scam that netted him ~$100MM at the expense of common public shareholders. If there's an award for "most obnoxious implication of NSA's wrongdoing", it should go to the attempted rehabilitation of people like Nacchio.
Here's the indictment. It's quite straightforward.
http://extras.mnginteractive.com/live/media/site36/2007/0307...
Here's the cliff notes:
"No later than December 4, 2000, through and including September 10, 2001, NACCHIO was aware of material, non-public information about Qwest’s business, including, but not limited to" [litany of distressing concerns about Qwest's bottom line which ultimately proved dispositive in valuing Qwest].
Note the date.
Now, look at this table of Nacchio's stock sales:
http://oi60.tinypic.com/2n1tgr6.jpg
Nacchio claims to have believed that secret national security government contracts were going to rescue Qwest from their financial problems (note the implicit concession that Qwest had problems from which its financials needed to be rescued). One tie-in between Nacchio and NSA is the notion that by refusing requests from NSA, Nacchio lost those contracts. Stipulate that this is true; it's a plausible complaint. Nacchio still took the money and ran.
An indictment will read very clearly, because that's how it's written.
What it fails to do is take into account any exculpatory evidence or claims.
This isn't proof against Nacchio. You've mistaken a court finding for a lawyer's filing.
That doesn't mean the indictment is accurate, it is written at a point where it hasn't been scrutinized by the courts. They are pretty much always written as the very extreme position of what could have happened. They always present the offender as having clear intentions of breaking the law, when reality is much more complex. For example, they always throw in extra charges. In this case:
> Nacchio was convicted in 2007 of 19 counts of insider trading and acquitted on 23 counts. [1]
Prosecutors have to prove it's plausible the guy did it, they don't have an obligation to present an accurate or realistic scenarios in their original pre-trial arguments in order to win. Even the judgement by the courts can be inaccurate, this is why appeals courts are super important:
> The 10th U.S. Circuit Court of Appeals ruled Friday that the trial judge overstated the amount of Nacchio's alleged financial gain.
> Joseph P. Nacchio was the only head of a communications company to demand a court order, or approval under the Foreign Intelligence Surveillance Act, in order to turn over communications records to the NSA.
His conviction doesn't disprove he lost government contracts for fighting back against the NSA, only that he attempted to financially benefit from his unique knowledge of it. As even tptacek admits, it's a very plausible complaint. And one now effectively derailed.
Why are you defending this person?
The insider trading case does not disprove that QWest faced serious economic repercussions for non-compliance.
The question of whether his insider trading charge, which was filed by the SEC four years after his initial actions at QWest, was a response to his non-compliance is a lot less likely. But publicly discrediting your opponents sounds like the type of thing particular agencies do best.
The guy was convicted of defrauding his shareholders out of many millions of dollars. The basic fact pattern supporting the allegation is there in black and white; his attorneys have, from what I've read, acknowledged those facts.
I'm not arguing that the government didn't "retaliate" against Nacchio. I have actually no idea whether they did or didn't (it's tricky to tease it out given the timing of the prosecution, which again happened during a wave of similar prosecutions).
My point is that people should be wary about rehabilitating people like Nacchio. The accepted facts of that case do not paint a sympathetic picture.
There are good, strong arguments against NSA surveillance and coercive interventions with industry. They should survive inconvenient facts. But that's not even what's being asked right now. The only question here is, are those arguments damaged by the refutation of one single very convenient fact?
This happens all the time on HN: people really seem to want to observe the world through the lens of their issues. I have trouble with that. I think the NSA needs drastically better regulation, and that some of their actions warrant criminal justice attention. But I have an even bigger problem with accepting what seem to be obvious falsehoods in the service of that perspective.
As for peoples' sympathy for Nacchio, I'll tell you that I think that a company executive who cheats on stock options is not a rare thing. It's not my favorite thing, but the degree to which that affects me personally is close to nil; but a telecomm executive who (allegedly) told the NSA to piss off is something that affects me, and worth a second glance. Nacchio has been consistent in his denials and allegations throughout and continues to be to this day.
Here is an interview from March. http://www.foxbusiness.com/business-leaders/2014/03/27/forme...
And one from May http://denver.cbslocal.com/2014/05/28/defiant-joe-nacchio-la...
>But I have an even bigger problem with accepting what seem to be obvious falsehoods in the service of that perspective.
What seem to be? They either are obvious falsehoods or they are not. And, I have to tell you that the things that are obvious to you and the things that are obvious to me are not always of the same set. I can't even begin to imagine what kind of saint a person would have to be to earn standing in your court.
I do not care what Nacchio has to say. You can find anything he says compelling and that is fine.
I am saying that independent of anything Nacchio has to say, he does not appear to have been convicted on trumped-up charges. But that belief is extremely common; even Jason Kottke featured it on his popular blog.
The amount at hand was (curse HN for hiding the parent thread), ~$100m. Let's be generous and say as much as $250m. A significant amount? Yes. As much as has remained unprosecuted in other significant cases of fraud.
Pardon my French here.
Hell. Fucking. No.
I'm answering briefly in the midst of a number of other tasks and with a slow system, so I'm not even going to pretend that my case here is complete or entirely cogent.
But as memory serves, there was a financial bailout in recent memory on the order of $650 billion dollars, and some trouble in the real-estate sector. So it's not clear to me just how significant a $100m case is. Especially if other circumstances (noted above) meant the government was itself influencing the financial outcome (and limiting disclosure).
The question is less one of fabricated enforcement than selective enforcement, along with concerns over parallel construction.
Moreover, coercive punishment is straight out of Machiavelli or any two-bit warlord. How do you get your underpaid and resentful soldiers to do unspeakable things to the enemy on the battlefield? Threaten doing unspeakable things to them, their loved ones, and belongings yourself. That is a huge concern in any surveillance state.
I was curious as to just how Nacchio's case measures up with other prosecutions, and, actually, it's a pretty good-sized dollar amount, if one accepts the prosecutors' accounting. From the FBI, other financial crimes prosecuted 2007-2011:
http://www.fbi.gov/stats-services/publications/financial-cri...
"On December 6, 2010, the FFETF-Securities Fraud Working Group held a national press conference to announce the conclusion of OBT. U.S. Attorney General Eric Holder gave remarks on behalf of DOJ. In coordination with the national press conference, local press conferences were held across the country by U.S. attorneys participating in the operation. The operation involved 343 criminal defendants nationwide and more than 120,000 victims with losses attributable to alleged criminal activity of more than $8 billion."
That works out to an average of $23 million per defendant.
Also:
"As of the end of FY 2011, the FBI was investigating 1,846 cases of securities and commodities fraud and had recorded 520 indictments/informations and 394 convictions against this criminal threat. Additional notable accomplishments in FY 2011 include: $8.8 billion in restitution orders; $36 million in recoveries; $113 million in fines; and $751 million in forfeitures. The chart below reflects securities and commodities fraud pending cases from FY 2007 through FY 2011."
Assuming $8.9 billion at hand, $17.1 million per indictment (not clear if cases involved multiple indictments).
Health care fraud (HCF):
"The following notable statistical accomplishments are reflective in FY 2011 for HCF: $1.2 billion in restitutions; $1 billion in fines; $96 million in seizures; $320 million in civil restitution; and over $1 billion in civil settlements. The chart below reflects HCF pending cases from FY 2007 through FY 2011."
The link also gives some idea of case volume and significant cases:
Corporate fraud pending cases ranged from 529 for FY 2007 to 726 for FY 2011.
Securities and Commodities fraud pending cases: 1,217 FY 2007 to 1,846 FY 2011.
Mortgage fraud "suspicious activity reports.
FY 2007: 45,717. FY 2011: 93,508.
Dollar losses (millions), pending cases:
2007: $813, 1,199
2008: $1,491, 1,642
2009: $2,798, 2,794
2010: $3,238, 3,129
2011: $3,029, 2,691
Beazer Homes: Involved restitution of $50 million Colonial Bank and Taylor, Bean & Whitaker: Attempt to fraudulently acquire $553 million in TARP funding.
Galleon Group: Insider trading. No specific amount, but Galleon had $7 billion in assets.
Joseph Blimline, Porvident Royalties: $485 million fraud against 7,700 investors.
A&O Entities: $50 million diverted to personal benefit, another $100 million in Ponzi scheme, totalling $150 million for the seven defendants.
Nicholas Cosmo: A "several-hundred-million-dollar Ponzi scheme". $179 in restitution.
_Health care_
Glaxosmithkline: "A $600 million civil settlement under the False Claims Act was agreed upon in addition to $150 million in criminal fines and forfeiture."
American Therapeutic Corporation: "its owners and operators of facilities have submitted approximately $205 million in fraudulent claims to Medicare".
_Mortgage fraud_
Luis Belevan, The Guardian Group: "defrauding at least 1,800 local distressed homeowners out of a $1,595 upfront fee for bogus promises of assistance .... Belevan generated almost $3 million in funds in just nine months"
Howard Shmuckler, the Schmuckler Group: "lients paid fees ranging from $2,500 to $25,000 to modify the terms of their mortgages" (no cumulative dollar amount specified).
Carl Cole, David Crisp: 140 fraudulent mortgage transactions on 108 properties with loans totaling $142 million.
_Financial Institutions_
Anthony Raguz: 1,000 fraudulent loans totalling $70 million, $1 m in bribes, etc., failure of St. Paul Croatian FCU for $170 million in losses.
Gary Foster, Citigroup: "embezzlement of more than $22 million from Citigroup."
William T. Hernandez: "ordered to pay $453,819 in restitution for embezzling money".
_Financial Institution Failures_
Donna Shebetich: "underreported millions of dollars in delinquent mortgages". Bank had $15.8 m in assets.
Elexa Manos: "a scheme to steal $4 million from the Dwelling House Savings & Loan".
Robert E. Maloney, Jr.: "a multi-million-dollar fraud and money laundering conspiracy." So, at least $2 million.
Other categories: insurance fraud, mass marketing fraud,
_Money laundering_
Barclays, NY: "This investigation resulted in the forfeiture of $298 million."
Credit Suisse: "This investigation resulted in the forfeiture of $536 million, which was the largest forfeiture ever received for this type of violation."
_Forensic Accountant_
Fair Finance: "over 5,000 victim-investors totaling approximately $200 million in loss."
Galleon Group: "largest hedge fund insider trading scheme in history." No dollar amount, but $7 billion in the fund per above.
American Therapeutic Corporation: restitution payments of $87 and 72.7 million, totalling $159.7 million.
Good, and thanks for clearing it up.
>I am saying that independent of anything Nacchio has to say, he does not appear to have been convicted on trumped-up charges. But that belief is extremely common; even Jason Kottke featured it on his popular blog.
That's fine, but I don't think it makes much difference if the charges were trumped up or legit. When you've got the NSA, you don't always need to trump up charges. Just be patient, catch your mark breaking some law. Maybe give the mark a little nudge if needed. One of Nacchio's complaints was that he wasn't allowed to disclose certain exculpatory facts in public.
In court, the standard is that the prosecution should prove its case to the jury of the accused's peers beyond a reasonable doubt. That's great and should stay that way.
But for the purposes of Internet message board discussion, there's no need for that high of a threshold. The appeal didn't say Nacchio didn't insider-trade; just that his gains should be considered gains-less-taxes.
⚫ Defendants are entitled to defense. You might even say it's in the name.
⚫ People are entitled to exploration and speculation of both history and legal issues. Legally guaranteed that right in some places.
⚫ Why are you so intent on prosecuting him? For that matter, I note a pretty pronounced pro-Spook bias in many of your posts.
⚫ The circumstances which lead to Qwest's precarious financial state were largely, some might say entirely, the result of the Government's actions against the company for failure to comply with NSL and other intelligence requests.
⚫ I see nothing even in the prosecution's case which establishes that the sale of stock 1) wasn't part of a longer-term asset sale, that 2) it wasn't part of a pre-planned asset divestiture plan. Quite common, there's been previous discussion on HN, I believe, on planned sales by Bill Gates and Steve Ballmer of Microsoft stock.
⚫ If some of the "material, non-public information" related to surveillance requests, Nacchio was pretty much in a damned-if-you-do, damned-if-you-don't situation. Specifically: he was culpable if he disclosed the reason for target undershoots, or if he didn't.
The point remains that the document you've provided as definitive evidence is anything but.
That's a cheap shot. As you know, personal attacks are not welcome on Hacker News.
You usually do a good job of forcefully arguing your positions while remaining civil. We need you to keep doing that. Please set a right example, not a wrong one. This stuff matters.
It weakens your arguments when you stoop to the lower levels, anyway.
I get your point about remaining civil (though I disagree that stooping to lower levels always weakens one's arguments), and I commend you for taking such a proactive role in this, I really do. Sometimes though, discourse here has different problems than strictly has to do with civility, when I open a thread about yet another NSA scandal and I see tptacek pushing the very same hot button again and again, derailing all top discussion into something that has little if anything to do with the topic. Yes sure he is often technically correct, but he's a smart guy (really smart, and that is when I'd expect better, wouldn't you?), knowing very well that what and how he writes makes people think he's defending the NSA somehow. Somebody will engage, and the by now very familiar pattern unrolls in the same way it always does, taking up parts of the thread-space that could've been useful and interesting discussion. He could also make the same statement in a much less inflammatory way. Or simply not at all, because in this particular case he was pre-empting a sentiment that nobody actually claimed.
In short, I don't think forcefully arguing their positions would have addressed the frustrations that gave cause to coldtea's "cheap shot" (I can't really speak for him of course), but rather the opposite.
It's particularly harmful when a good writer or established user goes there, because then everybody else does and it's degenerate internet goo for the lot of us.
The old line about heat vs. light comes to mind. We can't have both. Hacker News is about clearing a place for thoughtful conversation, or at least trying to. This is not a subject matter thing, it's a quality thing.
"Yahoo also felt that warrantless requests placed discretion for data collection 'entirely in the hands of the Executive Branch without prior judicial involvement' thereby ceding to the government 'overly broad power that invites abuse” and possible errors that would result in scooping up data of U.S. citizens as well.'
Oh.
When stories about PRISM first leaked, there was intense speculation that it was a system that gave the NSA direct access to servers.
http://online.wsj.com/articles/SB100014240527487044715045744...
If you don't cooperate with whatever they want you to do they'll get you for something, and then they'll paint you as the scum of the Earth in the media, so nobody pays too much attention to what they did exactly.
In one case, we have a socially decent person (fuck "law abiding", in this context) who is wronged by "justice".
In the other case, we have someone who got away with something wrong, only to be nailed for something else.
One person is a "solid citizen" (placed in quotes because, again, who knows what the fuck that means).
The other is Al Capone.
I don't know if I'm OK with going after Capone for reasons-unrelated-to-the-real-reason (taxes versus criminal conspiracy), but I think it's important to acknowledge the difference.
Something like insider trading is a particularly grey area, because directors trade all the time with more knowledge than the public (how could they not), and leaks of information happen all the time without punishment. I don't know all the details of this particular case, but I'd be skeptical of taking the conviction at face value, given the willingness of some branches of the US government to openly lie to the public, distort the truth, bypass or neuter the judicial branch, and vindictively punish and vilify those who refuse to cooperate in illegality or blow the whistle on their activities.
More generally, whether you take a conviction as a proof of moral turpitude relates to how much faith you have that the justice system in a given country is operating in a just, transparent and fair manner. If you don't have that faith, a criminal conviction means nothing in moral terms.
Otherwise you make a law for Al Capone and you end up prosecuting Aaron Swartz.
No, if "everyone that powerful has done something illegal" then the other is what we call a scape-goat.
Al Capone was in criminal business through and through, not someone who had a legit business and also "had done something illegal", much less something that "everybody that powerful" had also done.
Intent matters too. Catching Al Capone for tax evasion was meant to punish him for his larger serious crimes. Whereas in this situation (if it's as described), the caught the guy for "insider trading" to punish him for something else he did RIGHT.
They may have been confused by you writing, "Here's the indictment. It's quite straightforward." Either way, point is this is yet another NSA thread derailed by a smaller issue (insider trading vs. 4th amendment, domestic spying, etc). It's too bad people choose to engage and let it happen over and over.
I'm not saying that this thread or even HN is a victim of this.
I do want to use this opportunity to contribute that there are NSA programs designed to derail conversations.
As such, it's fairly one-sided. It's just what the prosecutor has presented to a grand jury, and the grand jury has said "yeah, that looks like enough evidence that it's worth having a trial." Note also that grand juries these days pretty much always just rubber-stamp whatever the prosecutor puts in front of them.
"Rather than tread over the ground well-described by my colleagues in the criminal defense bar, today I'd like to describe something else for you: what a federal grand jury proceeding looks like. From 1995 through 2000, I presented cases of varying complexity to federal grand juries as a federal prosecutor in Los Angeles. That experience did not inspire confidence in the process. Rather, it taught me that the adage that a grand jury will indict a ham sandwich is an understatement. A better description would be that the prosecution can show a grand jury a shit sandwich and they will indict it as ham without looking up from their newspapers. The notion that the Supreme Court relies upon — that the grand jury has a "historical role of protecting individuals from unjust persecution" — is not a polite fiction. A polite fiction would have some grounding in reality. It's an offensive fiction, an impudent fiction, a fiction that slaps you across the face and calls your mother a dirty bitch."
http://www.popehat.com/2014/02/27/the-kaley-forfeiture-decis...
If you want more meat than that: the US government, and in fact the majority of modern Western-style governments, do not directly control enterprises ("that's fascism/marxism/communism") but there remains a need for governments to interact and leverage infrastructure, information and capabilities of private enterprises - a need that can not be fulfilled by the blunt instrument of eminent domain.
Western style governments instead rely on coercion and leverage and also provide market advantages (and sometimes "Soft Power"; look that up) to achieve policy goals. The idea is then that governments nudge private enterprises to efficiently allocate their resoures for the greater good that individual customers and market pressures can't account for (because the calculus of a consumer doesn't include national strategy and because access to restricted information can't make it into the marketplace).
A fantastic example of that is the global cyberintelligence war, which the US and Five Eyes would very much like to win, and you should a tleask hope that we don't lose. [The vast majority of the Snowden leaks are about international espionage and sabotage (not about 'terrorism', the 2000's boogyman; find more in previous comments by yours truly).] There are other examples such as private enterprises with shared strategic interests having been invited to participate in international treaties like the Trans Pacific Partnership.
This has its own sort of internal self-consistent logic that is somewhat grounded in, although also represents a significant departure from, the ideas of Western 'Enlightenment' thinkers.
A criticism of this sort of leverage is that it has to grow more and more intense as the need, frequency, and scope of demands intensify due to resource exhaustion, accumulating expenses/promises, and competition with large centrally organized states and other Western-style states that are willing to interfere more to compete more (the 'prisoner dilemma' or 'tragedy of the commons' scenario). Every person you ask will give you a different answer on how much of this behavior, if any at all, has been happening.
The current conception of the state is that it must correct the market where it fails to allocate things efficiently (natural monopolies, etc) and that it may also collectivize cost where chance or circumstance have the power ruin individuals (providing emergency services during storms, snowplows during winter, equal access to education even for the poverty stricken) for the same reason people collectivize risk via insurance. But that otherwise it should remain minimal in size. I acknowledge there are debates about the concept of the state that would fill libraries. These are broad strokes.
States have learned that wielding private enterprises for both Soft Power (having the world rely on US company services or Chinese goods, owning water supply [Nestle]) and coercive power (withholding access to treatments and cures of diseases, manipulating social media to stir unrest, exporting favorable financial regulations via the WTO and World Bank [why BRICS made their own]) and by giving domestic corporations favors so that they can compete internationally (traditionally tariffs, huge tax subsidies (sugar), and recently information from the cyberintelligence war) as well as financial manipulations (manipulating currency exchange rates so that they are favored for export) enable them to achieve policy goals. Countries must participate if their competitors are, sort of like a cold war but without the existential threat of annihilation.
So states play a large part in the fluxuations of markets. Some of this is highly public ("Today at 9:00, China bans bitcoins"), but others are surreptitious.
In so many words: because it is 'invisible' and because it is a 'hand'.
From what I can tell - yes - he was guilty of insider trading by the letter of the law. Sharing insider information as CEO about the future of the company with shareholders is by definition insider trading. Despite circumstances, warning that contracts were being gutted is still illegal.
Of course, insider trading laws are broken on a minute-to-minute basis by hundreds of corporate executives and others. If you want to nail someone for insider trading, and they have a management position at a company, you could do it fairly easily. White collar crime is very rarely even investigated, let alone prosecuted or punished, though.
"My boss was an asshole today." Fine.
"We're about to get bought out for $x million." Very much not fine.
Well if your boss was an asshole today, because you can't make any sales that's something you can say as a realtor in a private company, but can't say as the guy trying to close XXX,000 sized seat contracts at a public company because your inability to perform is going to be reflected in the quarterly reports.
> "We're about to get bought out for $x million." Very much not fine.
Here's another example. If your company is in the process of a public merger, and you're publicly involved in the M&A process you can't throw a wild party the day before the public announcement of its success, because someone will inevitably ask "why are you guys celebrating?"
Heck, there are people that had the death penalty due to planted evidence and/or witnesses in favor of them ignored, only to be found innocent decades later, through newer findings like DNA.
So who really knows, especially in particularly charged cases with special interest like this.
Furthermore, having been served a National Security Letter, Nacchio was not able to speak to his company or shareholders about the situation.
Nacchio continued to insist on legal avenues and Uncle Sam did exactly what it threatened. Nacchio warned major stakeholders that all of the major QWest contracts were about to go belly up.
The US government threw Nacchio in prison for insider trading.
Oh and then QWest went bankrupt and was bought by competitor CenturyLink (who presumably had fewer difficulties complying).
Sometimes the market has more than one invisible hand.
Edit: A good point by a fellow commentor - no independent investigation has been performed into the QWest story. I looked but could not find FOIA information online.