SEC to sue Qwest ex-execs
Nacchio is said to be a target
By Tom McGhee and Kris Hudson Denver Post Staff Writers


The Securities and Exchange Commission will sue at least five former Qwest executives, including former CEO Joe Nacchio, early next week, sources close to the investigation said Thursday.

The SEC is expected to announce settlements with another group of former executives in actions that could come as early as Monday, said one of the sources, both of whom requested anonymity.

As many as a dozen former executives of the Denver-based phone company could be involved.  In addition to Nacchio, former chief financial officers Robert Woodruff and Robin Szeliga, former president and chief operating officer Afshin Mohebbi, and former wholesale sales chief Greg Casey are expected to be sued, the first source said.

The civil actions would be based in part on information in Qwest's 1999 annual report, which the company filed with the SEC on March 17, 2000, a second source said.  In the annual report, the SEC said, Qwest failed to disclose information that would have alerted investors that some revenues were being booked improperly.

In some case, the SEC will sue corporate executives seeking damages equal to profits those executives made on suspect deals.  Nacchio, Woodruff and Casey left the company with millions in profits.  Qwest's stock later dropped close to $1 a share.  It had been as high as $60 share.

Any SEC enforcement action connected to the annual report is subject to a five-year statute of limitations that expires Thursday, the second source said.

If the statute runs out before the suit is filed, the SEC can't seek to fine the individuals on any misconduct associated with the document.

SEC Commissioner Harvey J. Goldschmid in Washington, D.C., refused to comment Thursday.

A spokeswoman for Nacchio would not comment Thursday.  Mohebbi said he didn't know anything about the suits.  Szeliga, Woodruff and Casey couldn't be reached late Thursday.

Over the past year, a number of former Qwest executives have received "Wells notices" from the SEC.  Such notices state the agency is considering suing for violations of securities laws.  Among the recipients were Nacchio and Mohebbi.

Other former executives who got notices are Susan Chase, William Eveleth, Deborah Petrie and Kym Smiley.

Augustine M. Cruciotti, former senior vice president of Qwest's construction business unit, and Steven Haggerty, the unit's former regional vice president, received notices but settled with the SEC.

Carr Conway, a former SEC investigator, said it is unlikely the SEC would file suit against an executive without first sending a Wells notice.  The notices offer the recipient an opportunity to explain his or her actions, he said.

"That is pretty much standard.  Otherwise you have an implicit accusation where you didn't give them their chance to tell their side of the story," he said.

The second source said the suit will focus on actions similar to those spelled out in an SEC lawsuit against Qwest that the Denver-based phone company settled for $250 million in October without admitting guilt.  The SEC found that Qwest fraudulently claimed approximately $3.8 billion in "spurious" revenue, while excluding $231 million in expenses.

The SEC claimed Qwest swapped fiber-optic capacity with other companies or sold it to them and improperly reported revenues on the swaps and sales, which misled investors about company finances.

Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com .