The Justice Department filed criminal charges against four former Qwest mid-level managers for corporate accounting fraud Feb. 25, accusing them of artificially boosting the company’s revenue to meet management’s targets in second quarter of 2001.
In the complaint filed in the U.S. District Court for the District of Colorado, the four are accused of inflating revenue on an equipment sale to the Arizona School Facilities Board and telecom carrier Genuity Inc. Genuity was recently purchased in bankruptcy court by Broomfield-based Level 3 Communications, Inc.
U.S. Attorney’s Office spokesman Jeff Dorschner would not say whether additional charges are expected to be filed against more Qwest employees.
“The investigations continues,” Dorschner said. “This is only one transaction.”
Dorschner said typically in cases like this, deals can be struck with some mid-level managers in return for information on managers at higher levels, but he would not comment specifically on this case.
The four former employees include: Grant Graham, 37, of Evergreen, former chief financial officer for Qwest’s Global Business Unit; Thomas Hall, 51, of Englewood, former senior vice president in the government educational solutions group within Qwest’s Global Business Unit; John Walker, 41, of Littleton, former vice president in the government and educational solutions group; and Bryan Treadway, 37, of Atlanta, former assistant controller.
A federal grand jury returned the 12 counts of fraud for a scheme to make an additional $33 million in revenue for second quarter 2001 a quarter in which Qwest had weak sales. The Global Business Unit was given a revenue target of $1.825 billion by Qwest management. The former employees are accused trying to hide their actions by filing false documents and engaging in securities and mail fraud.
The Securities and Exchange Commission filed civil charges against eight former employees for the same case.
No charges have been filed against former CEO Joe Nacchio or former COO Afshin Mohebbi who both testified in front of Congress last year about Qwest’s accounting practices.
Arrest warrants have been issued for the former employees charged with fraud and they have been give 48 hours to surrender the U.S. Marshal’s Service.
Qwest officials couldn’t be reached for comment.