Encryption Battle


      As soon as you set a passcode on your Apple iPhone, it sets off a feverish encryption process.

      If a hacker tries to get data off the memory chips, it just looks like a scrambled mess.

      But the same feature that's protecting your security, is keeping the FBI locked out of any secrets held in a terrorist's iPhone after he killed 14 people in California last December.

      A federal judge has ordered Apple to create software to unlock the iPhone.

      Apple is fighting the order.

      Full Measure has an extraordinary story that predates the Apple conundrum. In fact, it predates what most understand to be the beginning of widespread surveillance of U.S. citizens after 9/11.

      In October of 1997, Joe Nacchio was CEO of Qwest Communications, a major phone company out West.

      One of his vice presidents told him he had an unexpected visitor.

      Joe Nacchio: He came in and he said, 'Joe, we have a general downstairs who wants to meet you.' Which I thought was pretty surprising, because you know generals don't just drop by. It was a three-star.

      Sharyl: Who was the general?

      Nacchio: Well, his name is classified believe it or not. Who it was, I'm not, I'm still not allowed to disclose.

      The general was from a U.S. intelligence agency interested in paying Qwest to use its cutting-edge global fiber optics network for classified programs.

      But to learn more, Nacchio first needed a top-secret security clearance.

      Nacchio: I had my clearance by January of 1998. We received that contract shortly thereafter and that led to us working with multiple intelligence agencies.

      Nacchio's job as CEO of Qwest became steeped in a secretive world of classified meetings and clandestine government contracts. He's still barred from saying exactly what the projects involved.

      Nacchio: So you could either put equipment in, you could either monitor, there's a whole bunch of things you can do.

      Sharyl: As head of a telecom company, you were meeting with top spy agency people?

      Nacchio: Yes. I'm allowed to say that I worked with four clandestine security agencies and senior government officials.

      For several years, Nacchio says, government requests to monitor and surveil Qwest customers came with proper legal authority and brought Qwest lots of cash.

      Sharyl: The telecom companies, they make a lot of money off these contracts when they cooperate with the intel agencies?

      Nacchio: It's all done in a classified way that nobody sees it. So yes, we made money. And again, as a CEO of a public corporation, that's good business, besides being patriotic.

      Sharyl: Was it hundreds of millions of dollars over the years?

      Nacchio: Oh, easily yes.

      The mutually beneficial relationship continued until February 27, 2001, when Nacchio says he got an astonishing request at a meeting at the headquarters for the National Security Agency or NSA.

      Nacchio: I fly into Washington. My guys meet me, take me to a SCIF that we have that's in Maryland. A SCIF is one of those rooms that are designed to specs that you can't have eavesdropping in. When I grew up, and we used to watch Maxwell Smart on television, it was the cone of silence thing. I go in there, I get briefed, and then at the end, which was very surprising, a new request is made of us.

      Sharyl: By whom?

      Nacchio: By someone across the table. I was supposed to meet with (General) Hayden that day. He didn't show up at the last minute, which should have put yellow flashing lights in my

      Sharyl: He was head of the NSA at the time.

      Nacchio: He was head of the NSA. He was a three-star, head of the NSA, who Bush later appoints to be four-stars and runs the CIA. So when that request came, I was a little bit surprised. It didn't sound right to me. As a matter of fact, it sounded very wrong to me.

      Sharyl: What was the request?

      Nacchio: Well, it was a request to do something that under the law I didn't believe the foreign intelligence agencies, particularly the NSA, had, were authorized to do unless they had a FISA warrant.

      A FISA warrant would come from the secretive Foreign Intelligence Surveillance Court and would authorize the NSA to do something that was otherwise illegal for it to do: collect data in the U.S.

      Sharyl: And you can't say exactly what they asked you?

      Nacchio: No, that remains classified. But anyway, something was asked. I asked if they had a FISA warrant. They said it wasn't required. I thought that was pretty strange.

      If there was no warrant, he says, he asked if the White House had given executive authority for the project.

      Nacchio: They said that theyit wasn't required.

      Sharyl: This was under President Bush?

      Nacchio: Yes, this was under President Bush and this was prior to 9/11. So I said that we couldn't do it, and we wouldn't do it.

      The 9/11 terrorist attacks are often cited as justification for the government's controversial programs to collect information on Americans without court warrants.

      But the NSA proposition to Qwest was nearly seven months before 9/11, according to Nacchio.

      Nacchio: After that meeting, there were repeated requests over the next several months, and I continued to answer the request by saying, 'look, show me legal authority and we'll be happy to do it. Okay, but I can't do it without legal authority.' You know, in other words, I can be sued civilly but the government can't.

      Sharyl: How did you begin to understand that you were becoming odd man out?

      Nacchio: It was June 5th of 2001, about four months later. And I'm sitting next to Dick Clark, and Dick leans over to me and he says, kind of incidental to the purpose of the meeting, 'Joe, you know that contract that you thought you guys were getting?' And I said, 'yeah,' and he said, 'well it's going to someone else.' And I was a little bit surprised, 'cause we had been on this a long time.

      Dick or Richard Clarke was a key White House Advisor for Cybersecurity. He didn't respond to our requests for comment. He's shown in a photo from 2002, giving Nacchio a Presidential Certificate.

      In another photo, Nacchio and other CEOs are shown with Clarke, being sworn in on the President's National Security Telecommunications Advisory Committee.

      Nacchio says that contract Qwest wasn't getting after all, dealt a major blow.

      Sharyl: A valuable contract?

      Nacchio: Yeah, yeah, we're talking, we're talking in the hundreds of millions, okay. We're not talking 10 million. We're talking a big deal contract. Well, what ends up over the next several months is about four or five contracts we thought we were going to get, we never got. We didn't get.

      Nacchio viewed it as reprisal for his refusal to take part in what he viewed as an illegal program.

      Nacchio: It was in excess of $500 million that I was counting on that didn't come in that year, in 2001 alone.

      Nacchio left Qwest the following year without mending that fence. Then, three years later, in August of 2005, he got a call. The Justice Department was investigating him for insider trading of Qwest stock four years earlier.

      Nacchio claims the government was targeting him in retaliation, something the government strongly denies. His defense hinged on telling the jury how his relationship with the spy agencies had gone sour. But there was a catch: it was all top secret.

      Nacchio lost his case.

      Nacchio: I'm barred under the law from bringing any of it up. I'm barred from the contracts. I'm barred from naming the agencies. I'm barred from naming who I was with. I was even barred from saying the meeting on February 27th happened.

      Some of it would later become public.

      About the time of Nacchio's trial, the government's controversial programs were revealed for the first time.

      President George W. Bush, Dec. 17, 2005: This is a highly classified program that is crucial to our national security.

      The New York Times reported the NSA had been using phone companies to collect private information of U.S. citizens without court warrants.

      Snowden, June 6, 2013: The NSA specifically targets the communications of everyone. It ingests them by default.

      Later, NSA contractor Edward Snowden blew the whistle in this explosive interview with The Guardian. He exposed the Obama administration's vast expansion of data collection.

      Snowden: But I, sitting at my desk, certainly had authorities to wiretap anyone from you, or your accountant, to a federal judge, to even the President, if I had a personal e-mail.

      It was Snowden's example of a federal judge that hit home with Nacchio. By then, he was serving a four and a half year prison sentence.

      In a bizarre twist, the judge in Nacchio's case, Edward Nottingham, was soon embroiled in scandal, accused of soliciting prostitutes and allegedly asking one to lie to investigators. He resigned and apologized, but wasn't prosecuted.

      After his dealing with the spy agencies, Nacchio wonders if they knew about Nottingham's private scandal. Could that have been held over the judge's head as he ruled for the government against Nacchio?

      Nacchio: Look, I think the intelligence agencies in that time frame were wiretapping government officials, judges, I mean they were just monitoring everything.

      Government officials call Nacchio a convicted felon whose speculation can't be believed. Nottingham firmly denies anyone spoke to him about his personal scandals during Nacchio's trial.

      President Bush's NSA and CIA Chief Michael Hayden, Nacchio's point of contact back then, didn't respond to our requests for comment, but has championed the controversial surveillance.

      Michael Hayden, May 12, 2006 Press Conference: Everything we've done has been lawful. It's been briefed to the appropriate members of Congress. The only purpose of the Agency's activities is to preserve the security and liberty of the American people, and I think we have done that.

      President Obama also defends the government's mass data collection.

      President Obama, June 19, 2013: Nobody is listening to your phone calls. That's not what this program's about.

      Nacchio: My advice to people is, put nothing on the Internet that you wouldn't take a billboard out on 42nd Street and Broadway, and publicize. You have your bank records, your health records, you're looking at porn sites, you're illegal dating or whatever you're doing, is all known.

      Sharyl: By the government?

      Nacchio: And by their agents. Now, let's remember who the agents are. The agents are the telephone companies, the agents are the banks, the agents are Apple, the agents are Google, and the agents are Facebook. They're all involved.

      Sharyl: What do you tell Apple if they were to call you and ask for advice?

      Nacchio: I would have said, keep this very quiet and cooperate. Because you're going to lose this one in court, and what's going to happen to you when this is all over is, for the next five years of your life, every federal agency that has some jurisdiction on you, it's going to be crawling all over Apple. And that's what they do.

      Nacchio's conviction was overturned on appeal in a decision that found Judge Nottingham made key errors.

      But the government got the conviction reinstated by a split judges' panel.

      A hearing on the Apple case is scheduled for next month.