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Sunday, September 23, 2007

Inside the Data Mine

"....After making the initial statement about his client’s refusal to participate in the data-mining program, Stern has remained mum, refusing all press inquiries.

In an interview, Cliff Stricklin, a prosecutor from Stern’s opposition, simply grins and urges me to look up a legal strategy called “graymail.”

Graymail: (n.) a maneuver used by the defense in a spy trial whereby the government is threatened with the revelation of national secrets unless the case against the defendant is dropped.

In other words: Take me to court and I’ll reveal state secrets. Nacchio’s defense team ended up making the secret contracts a minor part of his defense due to rulings from the judge in closed sessions regarding classified information. It is likely that this defense will resurface in his appeal or his upcoming defense against the SEC’s charges of accounting fraud.

Twenty-six years into a career at AT&T, Nacchio was thought to be next in line to former AT&T Chairman Robert Allen. When he was passed up, he went his own way, building Qwest into a competitor to his former employer. As former Denver prosecutor Craig Silverman told a local reporter, “Nacchio used to be part of George W. Bush’s team, but now the Justice Department is trying to take all of his money and freedom.” History repeats itself: Nacchio is once again a disgruntled former employee and he’s not going down without a fight. It’s a good old-fashioned grudge match with cocky foes threatening to air the others’ dirty laundry.

Graymail may not be a remarkably unique concept, but the sudden evaporation of this close, security-level relationship and the timing of the Justice Department’s investigation are suggestive of government retribution. Bruce Afran, one of the lawyers leading the class-action suit against AT&T and Verizon for their participation in the government’s data-mining program, has followed the Nacchio case closely. When pressed during an interview, Afran chooses his words carefully: “We can’t ignore that Nacchio has been the only one to refuse to participate in the program, and that he was then indicted.” Afran explains that, because chief executives are paid in shares or options, they’re always selling shares. “Whenever you want to take revenge on an uncooperative CEO, all you need to do is charge him with insider trading,” says Afran, referring to a strategy commonly known as “selective prosecution.” He pauses, sips from his coffee, leans in a bit, and says, “As a lawyer, I think this is clearly a pretext for punishing him for failing to go along with their [the government’s] program.”

Even if you don’t buy that Nacchio’s indictment for insider trading is payback for his refusal to participate in the president’s data-mining program, Nacchio’s former company, Qwest, has taken some hard knocks in the business world. Knocks that, given the soaring stocks and the unprecedented merger success of other companies implicated in data mining, become all the more salient...."

 

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