5 ms·

The Story Of Joseph Nacchio And The NSA

64 points by Esifer 13y ago

deleted 13y ago
[deleted]
rayiner 13y ago
...after "being convicted of insider trading in April 2007 for selling $52 million of stock in the spring of 2001 as the telecommunications carrier appeared to be deteriorating."
- salem 13y ago
  Selective enforcement? There don't seem to be that many cases: http://www.sec.gov/spotlight/insidertrading/cases.shtml http://www.sec.gov/spotlight/insidertrading/cases.shtml
  - rayiner 13y ago
    Selling stock based on private knowledge of the company's deteriorating finances while trumping up the company publicly is not your run of the mill "everybody breaks the law" selective enforcement situation. The SEC brings tons of insider trading cases (the page you linked to points out that the ones on the page are just "examples"). See: http://www.mofo.com/files/Uploads/Images/130116-Insider-Trading-Annual-Review.pdf http://www.mofo.com/files/Uploads/Images/130116-Insider-Trad... (Page 3.). The SEC and DOJ together brought 86 insider trading cases last year. Two recent convictions were Raj Rajaratnam (hedge fund manager) in 2011, and Raj Gupta (former chief executive of McKinsey) in 2012. It's a favorite go-to for the SEC because it's relatively easy to prove as far as financial crimes go.
    - salem 13y ago
      "The SEC brought 58 insider trading actions in FY 2012 against 131 individuals and entities." Seems like a small number to me considering the size of the market. The chances of being caught seems to be small indeed, unless someone is really looking. Speaking of Raj Gupta, he was connected with Raj Rajaratnam, who was funding a group with alleged close ties to the Tamil Tigers. I'm not saying there was no wrong doing, but something fails the smell test.
      - tptacek 13y ago
        Raj Gupta was a huge Democratic Party fundraiser, so much so that his status within the party was the lede in many stories written about the case. Yet it was a Democratic administration that he helped put into power that took him down.
      - rayiner 13y ago
        Note that the SEC tends to focus on public-company stuff, so the industry isn't that big. How many F500 c-suite execs are there?
lmg643 13y ago
this story has been floating around for a week or so now. i remember when the qwest insider trading scandal first broke back in 2001 - it fit with the times - bernie ebbers, worldcom etc - corrupt telecom executives. it is quite disturbing to think that a CEO might have been targeted in this way for refusal to cooperate with the NSA. so much so, that i have a hard time believing that this is actually the case. lots of people in jail have elaborate theories for why they are innocent. the market topped in 2000. spring of 2001 the market was already in serious trouble. nacchio would undoubtedly have known about earnings shortfalls that would occur as part of the implosion of the telecom bubble. the company had a number of accounting irregularities and was engaged in phony broadband deals with enron. qwest would not have escaped the market troubles with an NSA deal. let's keep some perspective here people.
johng 13y ago
Wow. Play all _or else_ is what it sounds like they told him.. and then followed through :(
tptacek 13y ago
This came up last week, too. Joseph Nacchio sold millions of dollars of Qwest stock after gaining access to information about weak future sales and, according to other Qwest insiders including the company CFO, being warned specifically about the future value of his shares. Nacchio also wasn't the only Qwest exec to get taken down in the probe, and, obviously, Qwest wasn't the only company to be probed and ultimately prosecuted during the same time frame.
- etherael 13y ago
  > Joseph Nacchio sold millions of dollars of Qwest stock after gaining access to information about weak future sales "Gaining access to information about weak future sales" = He was threatened directly by the NSA that they would cut existing and not provide future contracts to the tune of approximately 3bn worth of revenue if he didn't play ball. How is he supposed to notify the public of this fact when there's an implicit gag order in the requesting? So he has two options, take the financial hit for doing the right thing and telling them to go fuck themselves, or selling the stock and taking the legal hit for breaking insider trading laws.
  - wavefunction 13y ago
    Wondering if he knew he was going to get railroaded and decided to both build up some cash reserves via "insider trading" and do the "right thing" at the same time wrt by declining to cooperate.
    - etherael 13y ago
      At a guess he took a gamble, he made 3 million in salary in 2000, so the amount he sold was not trivial, even for him, he may have thought the government would not attempt to prosecute him, he may have thought if it came to trial the court would throw it out under the circumstances, he probably made a cost benefit analysis and acted upon it and ended up on the wrong side. That's life. EDIT: Interesting that this is downvoted, are you taking it as an indication that I'm attempting to say he got what he deserved with the above? That is not my intention, I'm simply pointing out that when you fight a bully, you often get a broken nose.
jessaustin 13y ago
I found this bit from the article interesting: In July the FISA court ruled that the NSA violated the Fourth Amendment's restriction against unreasonable searches and seizures "on at least one occasion." And yet I've read so many assurances from the legal eagles here on HN that since the relevant service providers already had these records, there was no way the Fourth Amendment applied. After all, it's just about your papers in your house! Because 18th Century! Yeah, I knew that was bullshit, but it's nice to learn that even the craven, supine FISA court agrees. Try again guys!
- etherael 13y ago
  Lawyers have this habit that they share with coders, when they are consulted as to why the system is behaving in a certain way, they treat it in an exercise in debugging legislature, and tracing the path of execution of case through the legal system, much like a coder will debug a program, and trace the path of execution through the computer, and the various methods and decision trees in the source. The difference is though, when a coder finds out why the program is doing what the user doesn't want it to do, he will say "See, there you go, we can fix it now" where the lawyer will say "See, there you go, it turns out you're in the wrong because the law says so", the deeper embedded in the fabric of the legal profession they are the harder it seems to be for them to consider the possibility that although it's the law, it can still be utterly and completely wrong.
smutticus 13y ago
This article is rather short on details. Here are a few more articles for the interested. http://www.denverpost.com/business/ci_7230967?source=commented http://www.denverpost.com/business/ci_7230967?source=comment... http://usatoday30.usatoday.com/news/washington/2006-05-10-nsa_x.htm http://usatoday30.usatoday.com/news/washington/2006-05-10-ns... http://www.denverpost.com/nacchio/ci_11786798 http://www.denverpost.com/nacchio/ci_11786798
squozzer 13y ago
It's probable Nacchio was trading stock illegally. It's also not surprising the feds would use whatever leverage they could to obtain compliance. Cops recruit snitches all the time using similar tactics. The difference is that snitches exist to inform police of criminal activity, not to spy (or enable spying) on their customers.

64 points by Esifer 13y ago

deleted 13y ago

[deleted]

...after "being convicted of insider trading in April 2007 for selling $52 million of stock in the spring of 2001 as the telecommunications carrier appeared to be deteriorating."

salem 13y ago
Selective enforcement? There don't seem to be that many cases: http://www.sec.gov/spotlight/insidertrading/cases.shtml http://www.sec.gov/spotlight/insidertrading/cases.shtml
- rayiner 13y ago
  Selling stock based on private knowledge of the company's deteriorating finances while trumping up the company publicly is not your run of the mill "everybody breaks the law" selective enforcement situation. The SEC brings tons of insider trading cases (the page you linked to points out that the ones on the page are just "examples"). See: http://www.mofo.com/files/Uploads/Images/130116-Insider-Trading-Annual-Review.pdf http://www.mofo.com/files/Uploads/Images/130116-Insider-Trad... (Page 3.). The SEC and DOJ together brought 86 insider trading cases last year. Two recent convictions were Raj Rajaratnam (hedge fund manager) in 2011, and Raj Gupta (former chief executive of McKinsey) in 2012. It's a favorite go-to for the SEC because it's relatively easy to prove as far as financial crimes go.
  - salem 13y ago
    "The SEC brought 58 insider trading actions in FY 2012 against 131 individuals and entities." Seems like a small number to me considering the size of the market. The chances of being caught seems to be small indeed, unless someone is really looking. Speaking of Raj Gupta, he was connected with Raj Rajaratnam, who was funding a group with alleged close ties to the Tamil Tigers. I'm not saying there was no wrong doing, but something fails the smell test.
    - tptacek 13y ago
      Raj Gupta was a huge Democratic Party fundraiser, so much so that his status within the party was the lede in many stories written about the case. Yet it was a Democratic administration that he helped put into power that took him down.
    - rayiner 13y ago
      Note that the SEC tends to focus on public-company stuff, so the industry isn't that big. How many F500 c-suite execs are there?

lmg643 13y ago

this story has been floating around for a week or so now. i remember when the qwest insider trading scandal first broke back in 2001 - it fit with the times - bernie ebbers, worldcom etc - corrupt telecom executives. it is quite disturbing to think that a CEO might have been targeted in this way for refusal to cooperate with the NSA. so much so, that i have a hard time believing that this is actually the case. lots of people in jail have elaborate theories for why they are innocent. the market topped in 2000. spring of 2001 the market was already in serious trouble. nacchio would undoubtedly have known about earnings shortfalls that would occur as part of the implosion of the telecom bubble. the company had a number of accounting irregularities and was engaged in phony broadband deals with enron. qwest would not have escaped the market troubles with an NSA deal. let's keep some perspective here people.

johng 13y ago

Wow. Play all _or else_ is what it sounds like they told him.. and then followed through :(

tptacek 13y ago

This came up last week, too. Joseph Nacchio sold millions of dollars of Qwest stock after gaining access to information about weak future sales and, according to other Qwest insiders including the company CFO, being warned specifically about the future value of his shares. Nacchio also wasn't the only Qwest exec to get taken down in the probe, and, obviously, Qwest wasn't the only company to be probed and ultimately prosecuted during the same time frame.

etherael 13y ago
> Joseph Nacchio sold millions of dollars of Qwest stock after gaining access to information about weak future sales "Gaining access to information about weak future sales" = He was threatened directly by the NSA that they would cut existing and not provide future contracts to the tune of approximately 3bn worth of revenue if he didn't play ball. How is he supposed to notify the public of this fact when there's an implicit gag order in the requesting? So he has two options, take the financial hit for doing the right thing and telling them to go fuck themselves, or selling the stock and taking the legal hit for breaking insider trading laws.
- wavefunction 13y ago
  Wondering if he knew he was going to get railroaded and decided to both build up some cash reserves via "insider trading" and do the "right thing" at the same time wrt by declining to cooperate.
  - etherael 13y ago
    At a guess he took a gamble, he made 3 million in salary in 2000, so the amount he sold was not trivial, even for him, he may have thought the government would not attempt to prosecute him, he may have thought if it came to trial the court would throw it out under the circumstances, he probably made a cost benefit analysis and acted upon it and ended up on the wrong side. That's life. EDIT: Interesting that this is downvoted, are you taking it as an indication that I'm attempting to say he got what he deserved with the above? That is not my intention, I'm simply pointing out that when you fight a bully, you often get a broken nose.

jessaustin 13y ago

I found this bit from the article interesting: In July the FISA court ruled that the NSA violated the Fourth Amendment's restriction against unreasonable searches and seizures "on at least one occasion." And yet I've read so many assurances from the legal eagles here on HN that since the relevant service providers already had these records, there was no way the Fourth Amendment applied. After all, it's just about your papers in your house! Because 18th Century! Yeah, I knew that was bullshit, but it's nice to learn that even the craven, supine FISA court agrees. Try again guys!

etherael 13y ago
Lawyers have this habit that they share with coders, when they are consulted as to why the system is behaving in a certain way, they treat it in an exercise in debugging legislature, and tracing the path of execution of case through the legal system, much like a coder will debug a program, and trace the path of execution through the computer, and the various methods and decision trees in the source. The difference is though, when a coder finds out why the program is doing what the user doesn't want it to do, he will say "See, there you go, we can fix it now" where the lawyer will say "See, there you go, it turns out you're in the wrong because the law says so", the deeper embedded in the fabric of the legal profession they are the harder it seems to be for them to consider the possibility that although it's the law, it can still be utterly and completely wrong.

smutticus 13y ago

This article is rather short on details. Here are a few more articles for the interested. http://www.denverpost.com/business/ci_7230967?source=commented http://www.denverpost.com/business/ci_7230967?source=comment... http://usatoday30.usatoday.com/news/washington/2006-05-10-nsa_x.htm http://usatoday30.usatoday.com/news/washington/2006-05-10-ns... http://www.denverpost.com/nacchio/ci_11786798 http://www.denverpost.com/nacchio/ci_11786798

squozzer 13y ago

It's probable Nacchio was trading stock illegally. It's also not surprising the feds would use whatever leverage they could to obtain compliance. Cops recruit snitches all the time using similar tactics. The difference is that snitches exist to inform police of criminal activity, not to spy (or enable spying) on their customers.