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Latest corporate fraud allegations: Four former Qwest executives named in indictment


DENVER (AP) _ In the latest criminal charges to rattle corporate America, four former Qwest Communications executives were indicted for an alleged scheme to artificially boost revenue and then cover it up.

The federal grand jury indictment announced Tuesday comes nearly a year after regulators began investigating the company's accounting practices. Qwest is the dominant phone company in 14 states in the West.

At the same time, the Securities and Exchange Commission filed a civil securities fraud complaint against the same executives and four others.

The dual legal action comes as the SEC has been unraveling accounting failures at a raft of companies such as Enron Corp., WorldCom and Adelphia Communications.

None of the indicted Qwest officials was a top-level executive.

``The biggest question is, 'Is this it?''' said analyst Michael Bowen of SoundView Technology Corp. ``We're all waiting for the investigations to end.''

The indictment stemmed from a deal Qwest had with the Arizona School Facilities Board to build a statewide school computer network with Internet access.

Qwest incorrectly reported the sale of some equipment so it could record more than $33 million in revenue immediately, instead of booking the revenue as the system was installed over an 18-month to two-year period, the government said.

``No boardroom is beyond the reach of the law,'' Attorney General John Ashcroft said. ``No executive is above the law. The success of the free market depends on a marketplace known for its integrity.''

The grand jury returned 12-count indictments against each of the following: Grant P. Graham of Evergreen, Colo., chief financial officer for Qwest's global business unit; Thomas W. Hall of Englewood, Colo., senior vice president in the global business unit; John M. Walker of Littleton, Colo., vice president in the unit; and Bryan K. Treadway of Atlanta, assistant controller.

The four others sued by the SEC are Joel M. Arnold, former senior vice president of the company's global business division; Douglas K. Hutchins, a former director of the division; Richard L. Weston, former senior vice president of product development in Qwest's Internet solutions division; and William L. Eveleth, currently a senior vice president of finance.

``We think this is a case where Tom Hall has been offered up as a human sacrifice by a corrupt corporation,'' said Jeffrey Springer, Hall's lawyer. ``He's a salesperson who was given guidance and instruction from people in the finance department, the accounting department.''

Defense lawyers would not comment on whether settlement talks were being held.

Qwest said it was cooperating with the government. ``As a company, as individual employees, we hold ourselves to the highest ethical standards as we conduct our business,'' spokesman Steve Hammack said.

The SEC's civil fraud charges allege the eight former or current Qwest executives inflated the company's revenues by about $144 million in 2000-2001 to meet promises of double-digit revenue growth.

It said Qwest charged the Internet backbone company Genuity Inc. double what it charged another customer for similar equipment, then provided services at a loss to Qwest.

The SEC said it wanted the men to repay their salaries, bonuses and stock gains during the 1 1/2 years they allegedly engaged in fraudulent activities.

``The defendants played with the numbers so investors would believe the company was doing better than it really was,'' new SEC chairman William Donaldson said. ``The defendants couldn't make the numbers work by following the rules, so they cheated.''

Since firing Arthur Andersen LLP, the auditing firm convicted of obstruction of justice in the Enron collapse, Qwest has restated about $2.2 billion in revenue for 2000 and 2001 because of accounting errors.

The company still faces shareholder lawsuits, about $20 billion of debt and declining revenue.
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