DENVER—A judge told federal attorneys on Wednesday they have until Nov. 19 to decide which classified Qwest Communications documents to turn over to one-time CEO Joe Nacchio and other former executives facing a civil fraud lawsuit.
The Justice Department had asked for 90 days, but Magistrate Judge Craig Shaffer refused, saying the government has known since at least July the defendants wanted the information.
“I’m sure this will cause some discombobulation, but at some point I will need to be mindful that we need to move this case forward,” Shaffer told Justice Department attorney Lisa Olson.
The lawsuit alleges the one-time executives conspired to commit financial fraud between April 1999 and March 2002 at Qwest, the Denver-based telecommunications company.
The SEC says the alleged fraud paved the way for Qwest to improperly report approximately $3 billion in revenue that helped seal its 2000 acquisition of former Baby Bell U S West. The phone company later restated $2.2 billion in revenue.
The SEC wants the repayment and civil penalties from the former executives, with amounts to be determined at trial.
Separately, Qwest paid $250 million to settle SEC charges of fraud in a deal that did not cover individuals. Qwest did not admit any wrongdoing in the settlement.
At issue Wednesday were secret documents governed by the Classified Information Procedures Act. The law requires anyone who views such information to have a security clearance.
Shaffer said Nacchio is aware of what is in the documents in question in the SEC case, but the other defendants still need access to at least some of that information as part of their defense.
Nacchio was convicted in April on 19 counts of insider trading stemming from stock sales while he was CEO of Qwest. Prosecutors said he knew about financial problems at Qwest when he made the sales but that the public did not.
Nacchio has said he was upbeat about Qwest’s future because he knew the company could be in line for lucrative contracts with clandestine government agencies. Details of those potential deals have not been made public.
Nacchio was sentenced to six years in prison. His appeal is scheduled to be heard Dec. 18.
In addition to Nacchio and former Qwest accountant James Kozlowski, the remaining defendants include former Qwest President Afshin Mohebbi; former Chief Financial Officer Robert Woodruff; and former Qwest accountant Frank T. Noyes.
Olson said at least four agencies are involved in clearing the documents in the SEC case, requiring multiple levels of communication and approval. Adding to the problem is that some of the documents’ classified status requires that any discussion of them happen in a Sensitive Compartmented Information Facility, called a “skiff,” which is a room that is impenetrable to electronic surveillance.
“Sort of like the ‘Get Smart’ Cone of Silence,” Shaffer mused. It was a reference to a gag in the 1960s spy-spoof television series, with a voice-muffling cone so powerful that secret agents who were in it couldn’t even hear each other.
On other matters, attorneys told Shaffer their depositions are keeping up with the schedule he set in July. Federal regulators and defense lawyers have identified 201 people they want to interview.
No trial date has been set.
