Tech Law Journal Daily E-Mail Alert
February 26, 2003, 9:00 AM ET, Alert No. 612.
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Former Qwest Officers Indicted
2/25. A grand jury of the U.S. District Court (DColo) returned an indictment [29 pages in PDF] charging four former Qwest Communications officers with conspiracy, securities fraud, filing false reports with the Securities and Exchange Commission (SEC), making false statements to accountants, and wire fraud.

The indictment charges Grant Graham (former Chief Financial Officer for Qwest's Global Business Unit), Thomas Hall (former Senior Vice President in the Government and Educational Solutions Group within Qwest's Global Business Unit), John Walker (former Vice President in the Government and Educational Solutions Group), and Bryan Treadway (former Assistant Controller at Qwest).

The U.S. Attorneys Office for the District of Colorado stated in a release that "The indictment alleges that the defendants devised a scheme to falsely recognize more than $33 million of additional revenue for the 2quarter of 2001 -- a quarter for which Qwest was experiencing weak sales. The defendants allegedly sought to fill a gap in revenue by the company's Global Business Unit by immediately reporting millions of dollars from a purchase order with the Arizona School Facilities Board -- in violation of Securities and Exchange Commission rules. The indictment also alleges that the defendants sought to hide their actions by falsifying documents and engaging in securities and mail fraud." See also, substantially similar DOJ release,

The indictment begins with the allegation that "Beginning on or about March 2001 and continuing until on or about January 30, 2002, in the State and District of Colorado and elsewhere, the Defendants, Grant Graham, Thomas Hall, John Walker, Bryan Treadway and others known and unknown to the Grand Jury did knowingly and willfully agree, conspire and combine to commit the offenses alleged in Counts 2-12 against the United States, namely, filing and causing to be filed a false form 10Q with the Securities Exchange Commission (``SEC´´) in violation of 15 U.S.C. §78ff(a), maintaining and causing to be maintained false books and records in violation of 15 U.S.C. §78ff, 15 U.S.C. §78m, and SEC Rule 13b2-1, making and causing to be made false statements to accountants in violation of 15 U.S.C. §78ff and SEC Rule 13b2-2, committing securities fraud in violation of 15 U.S.C. §78j and SEC Rule 10b-5, making and causing to be made false statements to the SEC in violation of 18 U.S.C. §1001 and committing wire fraud in violation of 18 U.S.C. §1343 and §1346 ..."

Attorney General John Ashcroft lauded the work of the Corporate Fraud Task, which President Bush created last year. See, prepared statement.

SEC Sues Former Qwest Officers
2/25. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (DColo) against eight current and former officers of Qwest Communications alleging violations of federal securities laws in connection with fraudulently inflating the company's revenues.

Like the criminal indictment [29 pages in PDF] obtained by the Department of Justice (DOJ), this civil complaint alleges violations relating to the Arizona School Facilities Board. However, the SEC complaint, in addition, alleges a second fraudulent scheme involving sales to Genuity.

The complaint alleges that "In June 2000, Genuity Inc., an internet service provider, and Qwest, began negotiation of a proposed agreement in which Qwest would provide Genuity with internet services using equipment owned and operated by Qwest."

It continues that Qwest officers "participated in a scheme in which Qwest artificially split the agreement into two separate contracts. In the first contract Qwest purported to sell equipment to Genuity at an inflated price. In a second contract Qwest agreed to provide services to Genuity at a loss to Qwest and reassumed all risk of loss and obsolescence on the equipment purportedly sold pursuant to the first contract. There was no business purpose for separating the original agreement between Qwest and Genuity."

Rather, the complaint alleges, Qwest officers "used the separation of the contracts solely to justify the fraudulent immediate recognition of revenue." And, "As a result of the fraudulent transaction, Qwest recognized improperly $100 million in revenue and claimed $80 million in earnings before interest, taxes, depreciation, and amortization (``EBITDA´´) in its quarter ended September 30, 2000. Additionally, for the quarters ended September 30, 2000, December 31, 2000, March 31, 2001 and June 30, 2001 Qwest fraudulently recognized revenue of approximately $10.6 million despite the fact that Qwest had not begun providing any services." Consequently, various Qwest filings with the SEC "were all materially false and misleading."

The new SEC Chairman, William Donaldson, stated that "These defendants were part of a corporate culture that placed meeting Wall Street expectations above the duty to serve shareholders and above respect for the law. Today's action marks the beginning of our public efforts to hold accountable those at Qwest who abused the public trust. This case is the latest example, but by no means the last, of the aggressive action that we at the SEC are committed to take in our pursuit of corporate wrongdoers." See, prepared statement. See also, SEC release.

Qwest released a statement: "Qwest continues in its efforts to cooperate with the government in connection with the investigations. Fundamental to the Spirit of Service is complete integrity in all we do. As a company and as individual employees, we hold ourselves to the highest ethical standards as we conduct our business."

Senators Release Report on FISA Implementation
2/25. Sen. Charles Grassley (R-IA), Sen. Patrick Leahy (D-VT), and Sen. Arlen Specter (R-PA) released a report [40 page PDF scan] titled "FBI Oversight in the 107th Congress by the Senate Judiciary Committee: FISA Implementation Failures: An Interim Report by Senators Patrick Leahy, Charles Grassley, & Arlen Specter".

The report focuses on the DOJ's implementation of Foreign Intelligence Surveillance Act of 1978 prior to, and following the terrorist attacks of September 11. It states that "In the immediate aftermath of the attacks, the Congress and, in particular, the Senate Judiciary Committee responded to demands by the Department of Justice (DOJ) and the FBI for greater powers to meet the security challenges posed by international terrorism. We worked together to craft the USA PATRIOT Act to provide such powers. With those enhanced powers comes an increased potential for abuse and the necessity of enhanced congressional oversight."

The report continues that "Unfortunately, however, at times the DOJ and FBI have either delayed answering or refused to answer fully legitimate oversight questions. Such reticence only further underscores the need for continued aggressive congressional oversight."

The report states that "The FISA provides a statutory framework for electronic and other forms of surveillance in the context of foreign intelligence gathering. These types of investigations give rise to a tension between the government's legitimate national security interests, on the one hand, and, on the other hand, constitutional safeguards against unreasonable government searches and seizures and excessive government intrusion into the exercise of free speech, associational, and privacy rights."

The report "uncovered a number of problems in the FISA process: a misunderstanding of the rules governing the application procedure, varying interpretations of the law among key participants, and a break-down of communication among all those involved in the FISA application process. Most disturbing is the lack of accountability that has permeated the entire application procedure."

The report also found that "The FBI's information technology was, and remains, inadequate to meet the challenges facing the FBI, and FBI personnel are not adequately trained to use the technology that they do possess." See also, report at pages 35-6.

The report follows the FBI's failed investigation of Zacarias Moussaoui. The FBI's Minneapolis field agents, including Coleen Rowley, had requested a FISA warrant to search Moussaoui's property prior to the attacks of September 11, but were denied by FBI headquarters. Recently, the FBI gave an award to its top FISA lawyer, Marion "Spike" Bowman.

On February 24, the three Senators wrote a letter to Robert Mueller, Director of the FBI,  regarding Robert Jordan, the Assistant Director of the FBI's Office of Professional Responsibility. Also, on February 25, Sen. Grassley wrote another letter to Mueller complaining about the award given to Spike Bowman.

Senators Introduce Domestic Surveillance Oversight Act
2/25. Sen. Charles Grassley (R-IA), Sen. Patrick Leahy (D-VT), and Sen. Arlen Specter (R-PA) introduced a bill [7 pages in PDF] titled the "Domestic Surveillance Oversight Act of 2003". The bill would increase the public reporting requirements of the Department of Justice (DOJ) regarding its implementation of the Foreign Intelligence Surveillance Act (FISA).

For example, the bill would require that "the Attorney General shall issue a public report setting forth with respect to the preceding calendar year (1) the aggregate number of United States persons targeted for orders issued under this Act, including those targeted for ... electronic surveillance ..." and "pen registers".

The bill would also require public reporting of the number of times that information acquired through FISA orders is authorized for use by the Attorney General in criminal proceedings.

Sen. Charles GrassleySen. Grassley (at right) stated in a release that "If we shine some sunlight into the secretive FISA process, maybe things will shape up ... The Congress and the public have to know how the FBI and Justice Department use their powers."

Sen. Leahy stated in a release that "Taken together, the bipartisan report and bill emphasize the importance of congressional oversight in making sure that the FBI and Justice Department are working effectively to protect both the security and the liberty of all Americans ... Before we give the government more power to conduct surveillance on its own citizens, we must look at how it is using the power that it already has. We must answer two questions: Is that power being used effectively, so that our citizens not only feel safer, but are in fact safer? Is that power being used appropriately, so that our liberties are not sacrificed?"

Senators Grassley, Leahy and Specter are all senior members of the Senate Judiciary Committee.

2/25. On February 20, the The U.S. Court of Appeals (3rdCir) issued its opinion [PDF] in Dluhos v. Strasberg, a case involving judicial review of a Uniform Domain Name Dispute Resolution Policy (UDRP) arbitration award. On February 24, the TLJ Daily E-Mail Alert (No. 610) included a story about this case titled "Third Circuit Reverses in Domain Name Arbitration Case". On February 25, the Court of Appeals issued an Order Amending Slip Opinion [2 pages in PDF] which changed language that was quoted in the TLJ article. This change is as follows: "On page 12, delete ``a UDRP proceeding settles a disputed proceeding only to the extent that a season-finale cliffhanger resolves a sitcom's storyline -- that is, it doesn't.´´ Substitute in its place ``a UDRP proceeding settles a domain-name dispute only to the extent that a season-finale cliffhanger resolves a sitcom's storyline -- that is, it doesn't.´´"
People and Appointments
2/25. President Bush announced his intent to appoint 26 persons to the President's Export Council. The list includes Michael Armstrong, Michael Dell, James Morgan (Ch/CEO of Applied Materials, which manufactures systems for processing silicon wafers), Raymond Gilmartin (Ch/P/CEO of Merck & Co, and member of the board of Microsoft), and Solomon Trujillo (former Chairman of US West and Qwest). See, White House release.
More News
2/25. The Department of Commerce (DOC) announced that it is organizing an "Information and Communications Technologies Business Development Mission" to Northern Ireland and the Republic of Ireland on April 6-11, 2003. The deadline to apply to join the mission is March 12, 2003. The DOC stated that this mission will offer "Numerous opportunities for trade and partnership in e-commerce, telecommunications, electronics, and software. Also opportunities for partnership in R&D in lab and university and cross-border initiatives." See, notice and application form [PDF].

2/25. Robert Sachs, P/CEO of the National Cable and Telecommunications Association (NCTA) gave a speech titled "The Anytime, Anywhere Principle of Cable Broadband". He spoke at a meeting of the National Association of Regulatory Utility Commissioners (NARUC) in Washington DC.

Wednesday, February 26
The House will meet at 2:00 PM for legislative business; it will consider several non tech related measures under suspension of the rules.

10:00 AM. The House Commerce Committee's Telecom and Internet Subcommittee will hold a hearing titled "Health of the Telecommunications Sector: A Perspective from the Commissioners of the FCC". The first panel will be the five Commissioners of the FCC. See, notice. Location: Room 2123, Rayburn Building.

10:30 AM. U.S. Trade Representative (USTR) Robert Zoellick will testify before the House Ways and Means Committee about the administration's trade agenda. See, notice. Location: Room 1100, Longworth Building.

12:15 PM. The FCBA's Online Communications Practice Committee will host a brown bag lunch. The topic will be "Patent Licensing: Surprising Revelations About the True Currency of a Technology Based Economy". The speaker will be David Martin, CEO of M.CAM. RSVP to Beatriz Zaloom at Location: Kelley Drye & Warren, 1200 19th St., NW, Suite 500.

1:00 - 5:00 PM. Day one of a three day conference hosted by the International Association of Privacy Professionals (IAPP) titled "Third Annual Privacy Summit: Implementing and Managing Privacy in a Complex Environment". See, schedule. Location: Washington Hilton Hotel, 1919 Connecticut Avenue, NW.

Extended deadline to for the Department of Justice (DOJ) to submit evaluation to the Federal Communications Commission (FCC) regarding SBC's Section 271 application to provide in-region interLATA service in the state of Michigan. This is FCC WC Docket No. 03-16. See, FCC notice.

Thursday, February 27
The House will meet at 10:00 AM for legislative business.

Day two of a three day conference hosted by the International Association of Privacy Professionals (IAPP) titled "Third Annual Privacy Summit: Implementing and Managing Privacy in a Complex Environment". At 8:15 AM, there will be a panel titled "International Privacy"; the speakers will be Malcolm Crompton (Privacy Commissioner of Australia), Peter Hustinx (Netherlands Data Protection Authority), and George Radwanski (Privacy Commissioner of Canada). At 9:00 AM, Rep. Cliff Stearns (R-FL) is scheduled to speak. At 9:30 AM, Federal Trade Commission (FTC) Commissioner Orson Swindle is scheduled to speak. At 10:00 AM, there will be a panel that includes William Braithwaite (Price Waterhouse), Nuala Kelly (Chief Counsel for Technology, Department of Commerce), David Stampley (New York State Attorney General’s Office, Internet Bureau), Zoe Strickland (CPO, USPS), and John Bentivoglio (Arnold & Porter). See, schedule. Location: Washington Hilton Hotel, 1919 Connecticut Avenue, NW.

9:30 AM. The Senate Judiciary Committee will hold an business meeting. See, notice. Location: Room 226, Dirksen Building.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Z Tel Communications v. FCC, No. 01-1461. Judges Ginsburg, Sentelle and Randolph will preside. Location: 333 Constitution Ave., NW.

10:00 AM. The House Science Committee will hold an organizational meeting. Location: Room 2318, Rayburn Building.

10:00 AM - 4:00 PM. The Federal Communications Commission (FCC) will hold a hearing pertaining to its "review of broadcast ownership regulation". See, FCC notice [MS Word] and agenda [MS Word]. Press contact: Rosemary Kimball at 202 418-0511 or Location: Greater Richmond Convention Center, 403 N. Third Street, Ballroom Building, Level 1, Meeting Room 15AB, Richmond, VA.

11:00 AM. The Senate Governmental Affairs Committee will hold a hearing on several nominations, including Janet Hale (to be Under Secretary for Management, Department of Homeland Security), and Clark Ervin (to be Inspector General, Department of Homeland Security). Location: Room 342, Dirksen Building.

4:00 PM. Michael Meurer (Boston University School of Law) will present a paper titled "Sharing Copyrighted Works". For more information, contact Robert Brauneis at 202 994-6138 or Location: George Washington University Law School, Faculty Conference Center, Burns Building, 5th Floor, 720 20th Street, NW. This event had been scheduled for February 18, but was postponed due to snow.

Friday, February 28
9:00 AM - 1:30 PM. The American Enterprise Institute (AEI) will host an conference titled "Prospects and Politics of a U.S.-Taiwan Free Trade Agreement". The scheduled speakers include Rep. Tom DeLay (R-TX), William Kristol, Deanna Okun, and Therese Shaheen.

12:15 PM. The FCBA's Mass Media Practice Committee will host a brown bag lunch. The speaker will be Ken Ferree, Chief of the FCC's Media Bureau. RSVP to Wendy Parish at Location: NAB, Conference Room, 1771 N Street, NW.

2:00 NOON. Deadline to submit comments to the Office of the U.S. Trade Representative's (USTR) interagency Trade Policy Staff Committee (TPSC) regarding the operation and implementation of the World Trade Organization's (WTO) Agreement on Technical Barriers to Trade (TBT). See, notice in the Federal Register, February 3, 2003, Vol. 68, No. 22, at Pages 5327-5328.

Extended deadline to submit reply comments to the Federal Communications Commission's (FCC) regarding the Report [73 pages in PDF] of the FCC Spectrum Policy Task Force (SPTF). The report recommends that "spectrum policy must evolve towards more flexible and market oriented regulatory models." See, original notice [PDF] and notice of extension [PDF].

Day three of a three day conference hosted by the International Association of Privacy Professionals (IAPP) titled "Third Annual Privacy Summit: Implementing and Managing Privacy in a Complex Environment". See, schedule. Location: Washington Hilton Hotel, 1919 Connecticut Avenue, NW.

EXTENDED TO MARCH 11. Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Further Notice of Proposed Rulemaking, (FNPRM), released last month, regarding whether providers of various services and devices not currently within the scope of the FCC's 911 rules should be required to provide access to emergency services. This is CC Docket No. 94-102 and IB Docket No. 99-67. See, notice in the Federal Register, January 23, 2003, Vol. 68, No. 15, at Pages 3214 - 3220. See also, notice of extension.

Deadline to submit to the Copyright Office (CO) claims to royalty payments for digital audio recording devices and digital audio recording media, collected during 2002. Such claims are made in accordance with Chapter 10 of the U.S. Copyright Law and Part 259 of the Copyright Office regulations. See, CO notice with links to online claim submission forms.

Deadline to submit comments to the Federal Trade Commission (FTC) regarding its Agreement Containing Consent Order with Educational Research Center of America, Inc. (ERCA). On January 29 the FTC announced that it filed an administrative complaint against ERCA alleging violation of the FTC Act. The complaint states that the ERCA "collected personal information from high school and middle and junior high school students through surveys ..." It further states that it "represented, expressly or by implication, that information collected from students through the Surveys is shared only with colleges, universities, and other entities providing education-related services. ... In truth and in fact, information collected from students through the Surveys is shared ... also with commercial entities for marketing purposes." See, FTC release and notice in Federal Register, February 4, 2003, Vol. 68, No. 23, at Pages 5640-5642.

Monday, March 3
9:00 AM - 4:00 PM. The President's Council of Advisors on Science and Technology (PCAST) will hold a meeting. The agenda includes Presentation of R&D Subcommittee Draft Report on Technology Transfer and Discussion of PCAST’s Nanotechnology Work Plan. Pre-clearance is required to attend. Part of the meeting will be closed. See, PCAST notice and notice in the Federal Register, February 24, 2003, Vol. 68, No. 36, at Page 8608. Location: Indian Treaty Room, Eisenhower Executive Office Building, 17th Street and Pennsylvania Ave., NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Intellectual Property Development v. UA Columbia Cablevision, No. 02-1248, an appeal from the U.S. District Court (SDNY) in a patent case. Location: Courtroom 402, 717 Madison Place, NW.

Deadline to file FCC Form 477 with the Federal Communications Commission (FCC). All providers of local telephone service that serve 10,000 or more voice grade equivalent lines, or wireless channels, in a given state must file this form. Also, facilities based providers that serve at least 250 one-way or two-way broadband (defined here as in excess of 200 kilobits per second) service lines, or wireless channels, in a given state (or have at least 250 customers for such service in a given state) must also file. This form provides the FCC with the data that it uses for its twice per year report on the growth in use of broadband services. See, FCC notice [MS Word].

Deadline to submit comments to the Copyright Office (CO) in response to its Notice of Proposed Rulemaking (NPRM) relating to proposed regulations that set rates and terms for the use of sound recordings by preexisting subscription services for the period January 1, 2002 through December 31, 2007. For more information, contact David Carson (General Counsel) or Tanya Sandros (Senior Attorney, Copyright Arbitration Royalty Panel) at 202 707-8380. See, notice in the Federal Register, January 30, 2003, Vol. 68, No. 20, at Page 4744-4747.

Tuesday, March 4
Day one of a three day conference titled "Securing Your Cyber Frontier Through Awareness, Training and Education" hosted by the National Institute of Standards and Technology (NIST) and the Federal Information Systems Security Educators' Association (FISSEA). See, conference web site. Location: The Hilton Hotel, 8727 Colesville Road, Silver Spring, MD.

9:00 AM. The Bureau of Industry and Security's (BIS) Regulations and Procedures Technical Advisory Committee will hold a partly open and partly closed meeting. The agenda includes a discussion of encryption regulation recommendations. See, notice in the February 18, 2003, Vol. 68, No. 32, at Page 7765. Location: Room 3884, Hoover Building, 14th Street between Constitution and Pennsylvania Avenues, NW.

12:30 PM. The House Homeland Security Committee will hold its organizational meeting. Press contact: Kate Whitman at 202 225-5611. Location: Room 2172, Rayburn Building.

Deadline to submit comments to the General Services Administration (GSA) in response to its notice of proposed rulemaking regarding Section 211 of the E-Government Act of 2002. Section 211 authorizes the Administrator of GSA to provide for the use by States or local governments of its Federal Supply Schedule for "automated data processing equipment (including firmware), software, supplies, support equipment, and services ...'' See, Federal Register, January 23, 2003, Vol. 68, No. 3220, at Pages 3220-3225.

Extended deadline to submit reply comments to the Federal Communications Commission (FCC) regarding SBC's Section 271 application to provide in-region interLATA service in the state of Michigan. This is WC Docket No. 03-16. See, FCC notice.

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