SEC accuse Qwest fat cats of cooking the books

Disgorge the cream

By John Oates • Get more from this author

Posted in Financial News, 16th March 2005 09:48 GMT

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The Securities and Exchange Commission is taking civil action against Joseph Nacchio, ex-boss of Qwest, and six other executives including two former CFOs.

The SEC accuses the seven of inflating Qwest earnings by some $3bn between 1999 and 2002. Regulators want the execs to return the money they made, believed to be as much as $216m from Nacchio alone.

Robert Woodruff and Robin Szeliga, both former chief finance officers, along with Nacchio are accused of overseeing the scheme to inflate figures. The SEC said that in 2001 Nacchio told employees that hitting target numbers had to be achieved "at all costs".

Central to the accusations are exchanges of network capacity, often carried out just before the financial quarter ended, with other telco providers. Qwest staff called these "heroin" or "SLUTS", short for Simultaneous Legally Unrelated Transactions.

At the same time the three profited by as much as $300m by selling shares, according to AP. Naccio's attorney Charles Stillman told the newswire his client had never misinformed investors about Qwest's financial condition. He said regulators were blaming Nacchio for the results of an economic downturn.

The Justice Department is still investigating Qwest and may bring criminal charges.

Last year Qwest agreed to pay the SEC a $250m fine to settle fraud charges.®