Constant's pations

If it's more than 30 minutes old, it's not news. It's a blog.

Tuesday, May 16, 2006

NSA: Has Verizon violated 10b-5?

1933/4 Acts and 10b-5 as promulgated under the PSLRA and Sarbox clearly make it a federal crime to commit fraud on the market, or issue misleading information with the intent that they be relied upon.

We've previously covered the White House hair splitting. Note carefully what the White House has not actually denied:

  • Reading between the President's responses to the USA Today Article [ CLick ]

  • Securities Litigation Discovery plan: [ Click ]

  • Where government fails to regulate, Wall Street remains primed to trash Click

    * * *

    Added: 17 May 2006

    This section of the discussion recognizes the Presidential memoranda of 5 May 2006, but questions its legal authority. Rather, the broader pattern of conduct suggests the President has satisifed all the elements of Harlow so that all agents and contractors would lose their qualified immunity in their individual capacities.

    (For more on the EFF lawsuit and case law in re state secrets: [Vitis Klein's Tabs 1-5 here Click ]

    The links in this section merely recognize another White House effort to stifle litigation. Don't be fooled, the White House -- as Qwest correctly stated -- does not have the legal authority, as it claims in the 5 May 06 Memoranda, to grant any immunity to the laws.

    But even if this immunity were true, the problem the White House has is that by invoking this 1934 provision -- which it may ignore -- it has to file a report on the specifics with the full Senate Intelligence Committee, relatd to the details. This is a good thing: If the NSA agency head fails to comply with this 1934-wavier-requirement, they subject themselves to being indicted for violating the law.

    Congress will have no say in whether this statute is or is not enforced. Rather, it becomes a matter for the legal system to adjudicate. Those who get in the way may be subject to obstruction of justice charges.

    Here are the links showing that this "creative trick" actually puts the President, White House, Gonzalez, and NSA in a worse position:

    Intermediaries, access agents [ Click ] and corporatoins in other nations Amdocs via]

    Questions [Am. Prospect: Click ]

    Securities wavier, but still have a filing requirement with Congress
    1934 Act: 13(b)(3)(A) [ This is not an absolute waiver: Note the referenced section 2 of 13(b) says that a report has to be filed with Congress related to the details of this Click

    [ Think Progress: Click ]

    POTUS Memorandum [Click ]

    15 U.S.C. 78m(b)(3)(A) CLick

    Key phrase: "pursuant to Presidential authority to issue such directives". The issue is, if this "authority" were bonafide, why did Qwest refuse? We can conclude that Qwest determined all interactions and statements they were getting directly or indirectly form the White House, NSA, and DoJ were not lawful, and a violation of the Constitution.

    Let's consider the legal issues. Two issues under Harlow which the President has already confirmed, he's violated the law, and he didn't follow FISA. By revealing this information and his failure to get a warrant, he no longer can credibly claim the situation is privileged; rather, because the Harlow tests have been satisifed, the President, NSA personnel, and contractors are strippped of their absolute immunity, the public may bring a claim.

    Harlow test in re Qualified Immunity:
    Prong A: What did the President do: He's openly admitted that he didn’t get a warrant as required, but engaged in unlawful domestic surveillance -- violating FISA [thereby elminiating teh requirement to discovery on classified data]; and

    Prong B: Did the conduct violate a clearly established right: Yes, the 4th Amendment; POTUS claims that this is "legal" is at odds with the statute and what he's already admitted.

    Claims of "authority" are matters for the court to decide, whether it is legal authority, and not something for the President to assert, especially when the conduct violates a clearly established right [4th Amendment] and promulgated Congressional statute [FISA], stripping the government agents and contractors of absolute immunity. [ Harlow: 457 U.S. 800 28 USC 2674 EFF Tab3: See page 20 of 24 Click ]

    The President has no lawful "authority" to direct someone to violate clearly established rights or statute, meaning he cannot lawfully invoke the 1934 provisions to "permit" contractor obfuscation of this illegal activity.

    But there's more. Contractors cannot blindly defer to a government agent. Rather, to remain protected, contractors have to ensure the asserted power is lawful. [See Klein Tab5: See 4 of 8, right side Click ] It was up to the contractors to determine whether the agent -- in this case the President -- had the authority to do what he wanted done. it is not a defense for the telecoms, other than Quest, to review whether this 1934-related memorandum was lawful assertion of Presidential "authority."

    * * *

    Unable to post the following . . .

    In re Think Progress [ Ref ]

    Need to consider Harlow. The above discussion incorrectly assumes the 1934-related memoranda was a lawful assertion of Presidential authority. The contractors have the duty to ensure that the proposed plan was lawful; Qwest already decided it was not. The President cannot then re-assert something as "lawful authority" {1934 Act waiver}, when the primary objective of that highly dubious claim of "state secrets" is rather to suppress evidence of criminal activity. [Consider Harlow test in re Bush's memoranda: More at link under name)]

    Congress has no legal authority to "ratify something as lawful" that clearly violates the Constitution and FISA. These two problems mean that the US officials are stripped of their immunity claim and the lawsuit can proceed. The real attention needs to be put on 5 USC 3331, and gather evidence showing the Members of Congress have violated their oaths of office: "Preserve, protect, and defend the Constitution, especially from idiots in the White House."

    Stop wasting time with Congress--they're reckless, negligent, and useless -- and should be treated as co-conspirators in the larger war crimes, reckless disregard for the Constitution and FISA. This is called malfeasance and they are not fit to be respected as "leaders." Rather, you can work with your friends to invoke Jefferson's Manual and House Rule 603 for state proclamations calling for impeachment. Do not wait until the November 2006 election to solve this -- keep the pressure on now in your local communities, and look to IL, VT, and CA for models and lessons.

    * * *

    Original: 16 May 2006

    Questions for Verizon

  • 1. What coordination did Verizon make/have with anyone in the NSA, DoJ General Counsel’s office, NSA General Counsel, or the White House staff, or anyone else directly or indirectly related to the RNC or the Senate Intelligence Committee?

  • 2. What basis is Verizon using to assert that "this program" is or is not related to Al Qaeda?

  • 3. Qwest has publicly commented on their refusal to cooperate. What is the reason that Verizon will not comment on the activities?

  • 4. Qwest has publicly commented on their refusal to cooperate. What is Verizon's reason for stating that it does or does not have any relationship to the activities?

  • 5. Qwest has publicly commented on their refusal to cooperate. What specific threats did Verizon or other members of the board receive if they refused to cooperate with the White House, NSA, DoD, DoJ, or others who approached you?

  • 6. Qwest has publicly commented on their refusal to cooperate. Qwest is also a publicly traded firm. Verizon would (apparently) have us believe that nobody every approached Verizon. Either Qwest is telling the truth, and Verizon is lying; or Qwest is lying and Verizon is telling the truth. Is it Verizon's position that Qwest has falsely made claims and public statements -- with the intent that the market rely on that statement -- that is not true, therefore a violation of PSLRA and rule 10b-5?

  • 7. Verizon claims that the media reports are "false." Which specific media reports is Verizon asserting are "false" and how has Verizon been specifically damaged by these "false claims"? Please specify the monetary damages. If there is no specific monetary damage, Verizon's assertion that the claims are "false" are considered to be unreliable and speculative. Please include the specific data of publication, the reporter who published, and the communication which Verizon provided to the media. Please provide proof of service that your General Counsel is aware, and what discussions your Board of Directors had related to this issue.

  • 8. If, as Verizon asserts -- contradicting the Qwest statement -- that NSA did not approach Verizon, please discuss who (other than in the NSA0 approached Verizon. Please discuss contacts with DoJ, DoD, RNC, White House staff, or any other intermediaries directly or indirectly related to discussions related to transferring any data from any Verizon-related entity directly or indirectly to the government, NSA contractor, or any other US government firm. Failure to discuss "the non NSA intermediaries" with an affirmative assertion that this never occurred, may be construed as waffling; or an assertion that Qwest (by implication) has committed fraud. Which?

  • 8. Did Verizon enter into a non-arrangement whereby Verizon "freely agreed" to do something, and there is no formal contract of the data transfer between Verizon and any other entity including Choice Point or any other non-government contractor who may be involved in data mining or other work directly or indirectly for the NSA, White House, RNC, DoJ, DoD, or other Executive Branch entity?

  • 9. When Verizon says "data" and "domestic calls" does Verizon mean transcripts of the phone call; or does the "data" mean something else?

  • 10. Did Verizon provide information to other entities other than the NSA on a voluntary basis?

  • 11. Which business lines -- other than the three listed -- does Verizon use to do data mining on the customer phone records.

  • 12. AT&T has a system called PSL which AOL subsequently purchased. How does Verizon use a PSL-like system to do data mining and searching on voice-to-text/text-to-voice information?

  • 13. Narus also lists various companies which they integrate various computer equipment with. Narus and AT&T have been linked to the JTTF and other domestic law enforcement. Is it Verizon's position that at no time was Verizon asked by anyone in any law enforcement to integrate any Verizon Optical scanning/laser technology with any other device?

  • 14. Please discuss the various conferences Verizon and NARUS have met and discussed issues after 1994 related to STA, data mining, and other information retrieval systems.

  • 15. AT&T also conducts various data integration tasks for commercial entities. Could Verizon please discuss how the commercial integration efforts relate to what AT&T has done. Please discuss any commercial support Verizon may provide when interfacing with various DoD switching and messaging systems. Also include in your discussion any data interface Verizon employees may have provided while they were attending the Potomac Golf Association events in 2002-2006.

  • 16. Verizon states that in "most cases" calls are not tracked. Please discuss the exceptions to whether calls are or are not tracked. Are there training and maintenance scenarios where some calls are tracked. Please discuss how the Verizon provides support to the DoD facilities and the volume discounts provided to various insurance firms that are targeted at military and government employees.

  • 17. Which non-NSA entities does Verizon provided data to on a regular basis?

  • 18. Qwest has publicly commented on alleged threats by the NSA and White House to participate. What is Verizon's reasons for not commenting on matters related to these issues; or is Verizon's position that Qwest's statements are or are not 10b-5 violations?

  • 19. What information does Verizon have about the explosives placed in the World Trade Center prior to Sept 2001?

  • 20. Does Verizon provide any direct or indirect support for DoD messaging systems or the Intel Link system?

  • 21. What is Verizon's view on the Qwest comments that they were threatened if they did not cooperate?

  • 22. If there is a bonafide threat of a terrorist attack, is it Verizon's position that Qwest is not being patriotic or committing treason? If so, please provide evidence or information that Verizon has that would support these allegations of sedition and treason against Qwest financial, contracting and corporate officers.

  • 23. Verizon is a state chartered entity. Please discuss the audit requirements under Generally Accepted Auditing Standards which Verizon is required to meet, the last audit visit, and any shares your auditor may own in any firm related to the NSA.

  • 24. What data did Verizon's general counsel confirm that the request for information by anyone -- including but not limited to the NSA -- was bonafide? How was this information communicated to the Board of Directors; why does it appear Qwest reviewed the request, discussed it openly with corporate counsel, but Verizon refuses to confirm that this legal decision was made?

  • 25. What planned sales of stock do corporate officers have; and to what extent have the board of directors reviewed 10b-5 before issuing this statement.

  • 26. The PSLRA and Sarbanes-Oxley act require forward looking statements to include disclaimers. Is it Verizon's position that the "press release" below is a forward looking statement under PSLRA; or is the "release" not intended to be relied upon by the market? If it is intended to be relied upon, why is there not the appropriate discussion of the PSLRA in the release?

  • 27. What duty does Verizon hold to its shareholders? Does Verizon look at the duty it owes to the public as being different, similar, or exactly the same as that of shareholders. Please discuss why Verizon's conclusions are different than those of Qwest on this matter. Is it Verizon's position that Qwest has a higher loyalty to the rule of law and 4th Amendment than Verizon; or does Qwest have a lower loyalty to the rule of law and 4th Amendment than Verizon?

  • 28. Once the data was reviewed -- as Qwest asserts it was -- how did Verizon determine that the requests for information were or were not consistent with the law? How was outside counsel involved? What review of 10b-5 was made?

  • 29. The FISA Act currently requires warrants before releasing data. Qwest asserts that they were not provided warrants and refused. However, other reports have suggested that Verizon refuses to protest and cooperated with non-NSA entities. Given there were no FISA warrants issued, how can Verizon explain its legal position which does not match Qwest's -- that because there were no warrants, they would not cooperate with the requests which Verizon says never occurred?

    * * *

    Verizon's Statement [ Ref ]

    As the President has made clear, the NSA program he acknowledged authorizing against al-Qaeda is highly-classified. Verizon cannot and will not comment on the program. Verizon cannot and will not confirm or deny whether it has any relationship to it.

    That said, media reports made claims about Verizon that are simply false.

    One of the most glaring and repeated falsehoods in the media reporting is the assertion that, in the aftermath of the 9/11 attacks, Verizon was approached by NSA and entered into an arrangement to provide the NSA with data from its customers' domestic calls.

    This is false. From the time of the 9/11 attacks until just four months ago, Verizon had three major businesses - its wireline phone business, its wireless company and its directory publishing business. It also had its own Internet Service Provider and long-distance businesses. Contrary to the media reports, Verizon was not asked by NSA to provide, nor did Verizon provide, customer phone records from any of these businesses, or any call data from those records. None of these companies - wireless or wireline - provided customer records or call data.

    Another error is the claim that data on local calls is being turned over to NSA and that simple "calls across town" are being "tracked." In fact, phone companies do not even make records of local calls in most cases because the vast majority of customers are not billed per call for local calls. In any event, the claim is just wrong. As stated above, Verizon's wireless and wireline companies did not provide to NSA customer records or call data, local or otherwise.

    Again, Verizon cannot and will not confirm or deny whether it has any relationship to the classified NSA program. Verizon always stands ready, however, to help protect the country from terrorist attack. We owe this duty to our fellow citizens. We also have a duty, that we have always fulfilled, to protect the privacy of our customers. The two are not in conflict. When asked for help, we will always make sure that any assistance is authorized by law and that our customers' privacy is safeguarded.

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    Other: [ Click ]