On April 20, 2007, former Qwest telecommunications CEO Joseph Nacchio was found guilty on 19 of 42 counts of insider trading. “For anyone who has ever made a call in Qwest territory, the term ‘convicted felon Joe Nacchio’ has a nice ring to it,” U.S. prosecutor Troy Eid told the press. The mood was fairly universal. One securities lawyer pitched in: “The government has another notch in their belt. They’ve had a tremendous winning streak in these corporate crime cases.”
But it would have been more accurate to qualify the statement by saying that the government has had a tremendous winning streak in the corporate crime cases it chooses to pursue. We now know that the Securities and Exchange Commission has chosen not to pursue charges of insider trading in the case of a Wall Street executive named John J. Mack because of his “political clout.” And while former U.S. Attorney William Leone led the case against Qwest, he was one of the unfortunate attorneys on the Department of Justice’s “purge list,” replaced by none other than Bush-nominated Troy Eid, a former co-worker of Jack Abramoff at the firm Greenberg Traurig.In the wake of the Enron scandal, Nacchio’s verdict could be seen as the continuing triumph of an efficient and unbiased judicial system — one working to protect the people’s interests against unbridled business tycoons. But the insidious environment of purges and selective prosecution based on cronyism necessitates a more critical view. To celebrate Nacchio’s verdict in such a simplistic light would miss a far more interesting story about what telecommunications success and failure signify in a post-September 11th world.
Delving into Joseph Nacchio and Qwest’s story reveals a company with close ties to the White House — ties that appear to have been temporarily severed when, according to Nacchio and his legal team at Qwest, the company refused to participate in the government’s data-mining program — making it the only big telecommunications company that didn’t take part. Nacchio claims that secret government contracts he was expecting were never delivered after his refusal to participate in the National Security Agency program, resulting in skewed profit claims.
While currently under new leadership, wooing back government contracts, and finally turning a profit, Qwest will have to struggle to maintain a competitive edge in an industry of telecommunications giants. These giants have received favorable treatment from the Department of Justice and the Federal Communications Commission. Parallel to this success have come news reports that these ever-merging entities — notably AT&T, BellSouth and Verizon — are participating in domestic data-mining programs.
In an amoebic dance, SBC, AT&T, Bell South, Cingular, MCI and Verizon have all coupled and re-coupled, forming a terrain redolent of the days of Ma Bell. Comedian Stephen Colbert, with deadpan delivery, traced the acrobatics in his January 2007 TV primer explaining why Cingular changed its name to AT&T:
As you no doubt remember, Cingular was co-owned by BellSouth and SBC, which had been Southwestern Bell and Ameritech, which before that had been Illinois Bell, Wisconsin Bell, Michigan Bell, Ohio Bell, and Indiana Bell. … A couple of years ago Cingular bought AT&T Wireless and renamed it Cingular, but then SBC bought AT&T and changed its own name to AT&T. Then that new AT&T bought BellSouth, changing its name to AT&T, making it only logical to change Cingular into AT&T.
These mergers are even more conspicuous due to the number that have been approved in just the past three years. 2005 alone saw enough mergers to leave Americans with only two major telecommunications companies: Verizon and AT&T. Colbert cites the most recent and highly contested AT&T/BellSouth merger that combined the country’s two largest telecommunications companies. Despite the massive scope of the merger, when the Department of Justice conducted its regulatory analysis it concluded that there were no major antitrust issues.
In contrast to companies such as AT&T, BellSouth and Verizon, Qwest has encountered significant roadblocks in its expansion efforts, causing telecommunications experts to ask pointed questions about differing treatment from the Department of Justice, the FCC and the SEC. Specifically: Is there government retribution? The question gains clout in light of the recent U.S. attorney scandal and the selective prosecution that the Bush administration has been practicing.
The ties between the telecommunications industry and the White House have grown even deeper since the Sept. 11 attacks, making it impossible to understand data mining or the telecommunications industry without exploring this relationship.