Qwest is the latest company to be target of criminal investigation by federal government

Thursday, July 11th 2002, 12:00 am

By: News On 6

DENVER (AP) _ Qwest Communications International Inc., the local phone company in 14 states, is the latest multibillion-dollar company to become the target of a criminal investigation by the federal government.

Both the company and U.S. Attorney's office confirmed Wednesday that an investigation is under way, but they did not provide specifics. The Denver-based company is already the focus of a regulatory probe into its accounting practices.

Qwest said it would fully cooperate. It had earlier denied a Friday report in The Wall Street Journal that the U.S. attorney and FBI were investigating. Drake Tempest, Qwest executive vice president and general counsel, said then it was ``outrageous'' that Qwest would hear about such an investigation in news reports.

Media reports have indicated that one of the practices being examined is a process called ``capacity swaps.'' Qwest reportedly bought capacity on another company's system and booked it as a capital expense _ which is recorded slowly over several years _ while selling the same amount of capacity to the other firm and booking that immediately as revenue.

The announcement comes in the wake of President Bush's speech Tuesday on scandals in corporate America in which he called for doubled prison terms and aggressive policing ``to end the days of cooking the books.''

In the past year, Qwest has faced a Securities and Exchange Commission inquiry into its accounting practices, a downgrade of its credit rating to junk status and a sinking stock price. Longtime chief executive officer Joseph P. Nacchio resigned last month.

Qwest is the local phone company for 14 states extending from Minnesota west to Washington and southwest to Arizona and New Mexico. It employs 57,000 people worldwide.