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Hoping to settle Qwest fraud case, judge urges talks
By Jeff Smith
Rocky Mountain News
Thursday, January 11, 2007


Federal Magistrate Judge Craig Shaffer wants to resolve quickly a nearly two-year-old government civil fraud case against a handful of former Qwest executives, and on Wednesday he again encouraged settlement discussions.  Securities and Exchange Commission official Polly Atkinson said the regulatory agency is "always interested" in discussing possible settlements.  Atkinson noted, however, that the most productive negotiations probably will occur after former Qwest CEO Joe Nacchio's criminal trial is completed this spring.

The SEC has reached a tentative settlement with former Qwest Chief Financial Officer Robin Szeliga, court documents say.  Details haven't been disclosed.

Phillip Douglass, attorney for former Qwest accountant James Kozlowski, said his side has had some informal discussions with the SEC, but he didn't sound optimistic about a settlement anytime soon.

Civil-fraud charges also are pending against Nacchio, former Chief Operating Officer Afshin Mohebbi, former Chief Financial Officer Robert Woodruff and former Qwest accountant Frank Noyes.

Atkinson said to reporters after Shaffer's status conference that court rules require settlement discussions.  Colorado's federal judges tend to encourage those discussions to take place early and often.

Shaffer noted that 98 percent of the federal cases in Colorado are settled before trial, and he told the attorneys for the former Qwest executives to submit confidential "settlement memos" by March 28.  Such memos are supposed to discuss the strengths and weaknesses of a case and give an update on the possibility of a settlement.

The SEC in March 2005 accused a group of former Qwest executives, including Nacchio, of orchestrating a massive $3 billion financial fraud between 1999 and 2002.  Former top sales executive Gregory Casey settled within weeks, while others settled before the formal charges were filed.

Progress in the civil-fraud case has been slow because of the separate insider-trading case against Nacchio, who is scheduled to go to trial March 19.

For a while, the civil case virtually was frozen, but now depositions of potential witnesses unrelated to Nacchio's criminal case are beginning to take place.  Two potential witnesses have been deposed, Shaffer said, with another dozen or so slated to be questioned between now and April.

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