Qwest to pay $250 million to settle SEC allegations of accounting fraud, source says
Thursday, October 21st 2004, 10:17 am
By: News On 6
DENVER (AP) _ Qwest Communications will pay $250 million to settle allegations that it improperly booked millions in revenue and that senior managers sought to cover it up, The Associated Press has learned.
The deal, expected to be announced as early as Thursday, would conclude a wide-ranging fraud investigation by the Securities and Exchange Commission.
Both Qwest and the SEC have approved the settlement, in which the Denver-based company will neither admit nor deny the agency's allegations, a source familiar with the case said Wednesday on condition of anonymity.
Qwest spokesman Tyler Gronbach said Wednesday he had no information about any pending deal but said the company was cooperating with the investigation. SEC spokesmen in Denver and Washington did not return call.
The SEC complaint has not been released publicly.
Federal regulators began investigating Qwest Communications International Inc. in 2002 for allegedly inflating revenue through fraudulent transactions with other telecommunications companies. Since then, the SEC has sued former and current employees, and the company restated financial results for 2001 and 2002 to lower revenue by about $2.5 billion.
The SEC complaint accuses Qwest of booking one-time revenue from the sale or trade of fiber-optic capacity as recurring revenue from operations, the source said.
It also says Qwest booked anticipated revenue long before it materialized, that its former phone book division delayed or moved up publication dates to artificially inflate revenue figures, and that at least one senior Qwest employee pressured vendors to allow Qwest executives to invest in their initial public stock offerings, the source said.
The complaint is especially critical of senior Qwest managers but does not mention any of them by name, the source said.
The Wall Street Journal reported last month that the SEC has notified former Qwest CEO Joseph Nacchio that its staff would recommend civil charges be filed.
Nacchio, who left the company in 2002, has denied wrongdoing. His spokeswoman, Marcia Horowitz, declined to comment Wednesday. She has said Nacchio would be vindicated if any civil charges are brought against him.
About a dozen former Qwest executives either have settled allegations or have been targeted in civil or criminal cases. In February 2003, Attorney General John Ashcroft announced indictments against four former Qwest officials accused of a scheme to inflate revenues.
Two of them pleaded guilty in plea agreements with the government, and two were acquitted.
Last month, a vice president for the Communications Workers of America, John Thompson, said a Qwest official had told him of the $250 million settlement. Thompson did not return a phone call on Wednesday.