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 revenue later wiped off the books.
The civil lawsuit blamed Nacchio and others for creating a “culture of fear” and putting enormous pressure on employees to meet revenue and earnings goals through bogus sales procedures that became an addiction.
The suit is the most dramatic development yet in the government’s three-year investigation of Denver-based Qwest Communications International Inc., the primary local phone provider in 14 Western states. It was filed hours after former WorldCom CEO Bernard Ebbers was convicted in New York of engineering a multibillion-dollar accounting scheme at his Mississippi telecom.
The SEC said the fraud at Qwest occurred between April 1999 and March 2002, allowing it to improperly report approximately $3 billion in revenue that was later restated and helping its 2000 merger with U S West.
Among other things, the SEC said the defendants reaped tens of millions in profits for themselves while they covered up the scheme from investors and the public.
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 accountants.