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Qwest tangled in Enron Broadband
'01 DEAL TARGETED
By Greg Griffin, Staff Writer
Denver Post
Friday, May 26, 2006

Two months before Enron collapsed in late 2001, it swapped fiber-optic network capacity with Denver-based Qwest in a deal regulators say allowed the companies to fraudulently inflate their revenues.

The swap -- in which Enron's broadband unit agreed to pay Qwest $195 million and Qwest agreed to pay Enron $308 million -- is one of a handful of similar deals at the center of the Securities and Exchange Commission's fraud case against former Qwest executives.

Qwest spokesman Bob Toevs declined to comment Thursday on the Enron deals because they remain part of pending litigation.

Qwest's dealings with the energy giant were part of lawsuits by the SEC and shareholders alleging accounting fraud.

Qwest settled the SEC case in 2004 by paying $250 million, and it has reached an agreement to pay $400 million to settle the shareholder litigation.  It neither admitted nor denied guilt in either case.

Qwest made a $222,707 claim against Enron Broadband when its parent filed for bankruptcy Dec. 2, 2001.  Broomfield-based Level 3 Communications topped the list of unsecured creditors of Enron Broadband with a $7.2 million claim.

In the 2001 swap between Qwest and Enron, the SEC says Qwest intentionally paid $36 million and $75 million in excess of fair-market value for Enron's network capacity, which it described as having on "scrap value."

Qwest also backdated the contract so it could book $85.5 million of the revenue it received from Enron in the third quarter, the SEC said.

The former Qwest executives being sued by the SEC have denied the charges and are seeking to have them dismissed.

Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.

http://www.denverpost.com/business/ci_3865905