Former Qwest CEO charged

DENVER – The Securities and Exchange Commission charged former Qwest Communications CEO Joseph Nacchio and six other executives Tuesday with orchestrating a “massive financial fraud” at the telecommunications company that concealed the source of billions of dollars in reported revenue.

In a civil lawsuit, regulators blamed Qwest’s problems on aggressive revenue and earnings targets set by Nacchio and others that created a “culture of fear” and enormous pressure on employees to meet those targets.

The charges say the fraud occurred between April 1999 and March 2002, allowing Qwest Communications International Inc. to fraudulently report approximately $3 billion of revenue that was later restated and helped Qwest’s 2000 merger with U S West.

Also named in the SEC’s complaint were former chief financial officers Robert Woodruff and Robin Szeliga; former Chief Operating Officer Afshin Mohebbi; Gregory Casey, a former executive vice president of Qwest’s wholesale business; and James Kozlowski and Frank Noyes, two former finance executives.

The SEC described Nacchio, Woodruff and Szeliga as overseers of the fraud, directing the details to meet revenue targets “at all costs.” Among other things, the SEC said Denver-based Qwest repeatedly and improperly booked revenue from one-time sales of assets while falsely claiming to investors that the revenue was recurring.

The charges had been expected for months, and Nacchio has repeatedly denied wrongdoing regarding Qwest’s accounting practices.