VideoQwest Communications International Inc. finally restated its results for 2000 and 2001, and the revision was not pretty.
The telecom company, which is currently being investigated by the Securities and Exchange Commission and the Justice Department, said its net losses for those two years were about $2.5 billion larger than originally reported.
Qwest said its restated loss in 2000 ballooned to $1.04 billion on revenues of $14.1 billion. It originally reported an $81 million loss on revenues of $16.6 billion. In 2001, the restated loss rose to $5.6 billion on revenues of $16.5 billion, compared with the originally reported loss of $4 billion on revenues of $19.7 billion.
"With the restatement complete," said Richard C. Notebaert, Qwest's chairman and CEO, in a statement, "we are now focusing all of our resources to dramatically improve customer satisfaction and grow our key lines of business." Notebaert told Dow Jones the completion of the restatements would also give the company greater access to the capital markets.
Qwest has not filed audited financial statements for the first half of 2003. The company must issue these reports by year-end to comply with conditions of its loan agreements, according to Reuters.
In 2002, the company reported a loss of $38.5 billion, including charges for accounting changes for goodwill, the write-down of assets and a gain on the early payment of debt.
The company had warned it would restate its results after uncovering questionable accounting practices. In a report of 200-plus pages filed with the SEC, the company said the restatements involve, among other matters, revenue recognition issues related to optical capacity asset transactions, equipment sales, directory publishing, and purchase accounting.
The company added that it is in settlement talks with the SEC on charges of accounting fraud.
Qwest also reported that Notebaert, who took over in June 2002, will receive a $1.1 million salary and a bonus of at least $825,000 this year. When he was hired, he was also given 200,000 restricted stock awards worth $1 million and 5 million stock options with an exercise price of $5.10.
After former chairman and chief executive Joseph Nacchio was forced to resign in June 2002, Qwest paid him $12.23 million in severance and awarded him a $3 million consulting contract, according to published accounts. Nacchio will also be paid a monthly fee of $125,000 through 2004. In addition, he and his wife will receive medical benefits for life and free long-distance services for 10 years.
Another Guilty Plea at McKesson
Another former executive of McKesson Corp. pleaded guilty to violating securities laws in connection with the health-care company's accounting scandal, which cost shareholders $9 billion.
Albert Bergonzi became the fourth former executive of HBOC (he became executive vice president of McKesson HBOC after a 1999 merger) to enter guilty pleas for his part in a scheme that allegedly overstated revenue by more than $300 million. The others are former sales chief Dominick DeRosa, ex-treasurer Timothy Heyerdahl, and one-time co-president Jay Gilbertson, according to the San Francisco Chronicle.
In June, Albert Bergonzi and two other HBOC executives — former HBOC chief executive Charles W. McCall and former general counsel Jay Lapine — were charged with conspiring to "cook the books" beginning in 1998 by back-dating contracts and through secret deals related to software licensing contracts, according to Reuters.
"We falsely inflated quarterly software sales revenues, by among other things, recording revenue on contracts that were conditioned on 'side letters' that permitted customers to cancel the contract or return software… and backdating contracts to record revenue in prior quarterly periods," Bergonzi said in the court filing, according to Reuters.
"I actively participated in the use of side letters and backdating, both in contracts I negotiated and by encouraging my subordinates to use them in contracts they negotiated," he added. "I understood that, as a result of these activities, HBOC's and McKesson HBOC's accounting personnel would and did make false entries in company books and records at quarter end in order to increase revenue and net income."
Bergonzi faces up to 15 years in prison, according to several published reports. U.S. District Judge Martin Jenkins' told Bergonzi that any leniency depends upon his cooperation. "It really is in my sole discretion… to determine the sentence in this case,'' the judge said, according to the San Francisco Chronicle. Outside the courtroom, federal prosecutor John H. Hemann reportedly noted that "It's safe to say we're still investigating this case."
McKessonHBOC dropped HBOC from its name in July 2001.
Small Bank Would Rather Go Private than Deal with Sarbanes-Oxley
If you don't like it, go private.
This is how one financial services firm has chosen to deal with the Sarbanes-Oxley Act, the sweeping governance law that has mandated a slew of reporting requirements.
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