Accounting & Tax

No Prison Time for Qwest Convictions

Last year a jury deadlocked on 11 counts against former senior vice president Thomas Hall.
Stephen TaubFebruary 11, 2005

A federal judge refused to hand out prison time to any individual found guilty in connection with a fraud case involving Qwest Communications International Inc.

Former senior vice president Thomas Hall, who this week became the first person sentenced in the case, received probation and will pay a $5,000 fine, according to the Associated Press. Hall pleaded guilty last year to a single misdemeanor count of falsifying documents, according to the wire service.

“I accept full responsibility for my actions,” Hall reportedly said in court. “I did not mean to harm anybody, but people were harmed.”

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Hall, as well as three other former Qwest executives — Grant Graham, former chief financial officer for Qwest’s global business unit; Bryan Treadway, a former assistant controller; and John Walker, a former vice president — had faced 11 charges each, including conspiracy, securities fraud, wire fraud, and making false statements to auditors.

The defendants had been accused of improperly booking $34 million in revenue in the second quarter of 2001, for an Internet equipment sale to Arizona schools, to help meet earnings projections and revenue expectations. According to the prosecution, the defendants artificially accelerated Qwest’s revenue recognition by fraudulently mischaracterizing two equipment-sale transactions.

On the 10th day of deliberations after a seven-week trial, Treadway and Walker were found not guilty on all counts. The jury found Graham not guilty on three counts and was deadlocked on the rest. The panel was deadlocked on all of the counts against Hall. U.S. District Judge Robert Blackburn then declared a mistrial on the deadlocked counts against Graham and Hall, reported Reuters.

Graham later pleaded guilty to a felony charge of being an accessory after the fact to wire fraud, according to the AP, which added he will probably receive a sentence identical to Hall’s later this year.

According to the wire service, U.S. District Judge Robert Blackburn said it would be unfair to sentence Hall to prison for a misdemeanor and while ordering probation for Graham on a felony. He said probation was sufficient for someone who expressed contrition and regret, and that he doubted Hall would commit more wrongdoing, according to the AP.

Blackburn also said he considered the fact that Hall had already lost his house, two jobs and more than two-thirds of his net worth, the wire service added.

In fact, Blackburn said that the person who had the best chance of being convicted was former Qwest accountant Doug Hutchins, the AP reported — but he was granted immunity in exchange for testifying against Hall and the others. “He created out of whole cloth a delivery schedule but for which this transaction would have failed early on,” Blackburn reportedly said.

Blackburn’s unwillingness to sentence the Qwest executives to prison also calls to mind the 15 former HealthSouth executives who pleaded guilty to their role in the company’s $2.7 billion accounting scandal but were not handed prison time.

Apparently, efforts are focusing on former chief executive officer Richard Scrushy — who is currently on trial.