Federal prosecutors on Tuesday charged eight former and current employees of Qwest Communications with helping the phone carrier inflate its financial results by almost $150 million through improper accounting.
The Securities and Exchange Commission filed civil charges against the employees, alleging that they inflated the company’s revenue by approximately $144 million in 2000 and 2001 in order to meet earnings projections and revenue expectations.
The Justice Department filed criminal charges against four former mid-level managers, charging the executives in a 12-count indictment of a scheme to falsify revenue in the second quarter of 2001 by $33 million.
“Accurate financial statements are the bedrock of our capital markets,” said SEC Chairman William H. Donaldson. “This agency will pursue aggressively anyone and everyone who has participated in an illegal effort to misrepresent a company’s financials and mislead the investing public.”
Both Donaldson and Attorney General John Ashcroft said the investigation into Qwest remains ongoing. Ashcroft said if found guilty of the criminal charges, the individuals could face 10 years in prison and fines of up to $1 million.
Denver-based Qwest, the No. 4 U.S. long-distance carrier, admitted last year that it overstated its revenue by over $2 billion in 2000 and 2001, sparking investigations by the Securities and Exchange Commission and the Justice Department.
The announcement later led to the resignations of chief executive Joseph Nacchio and president Afshin Mohebbi. Both have denied wrongdoing and neither was charged in Tuesday’s complaint.
But the Justice Department may be gunning for them.
Tuesday’s announcement follows an up-the-ladder strategy the Justice Department has employed in the wake of the scandals at Enron and WorldCom: it targets mid-level employees in hopes they will rat out senior executives.