Accounting & Tax

Ex-CFO of Qwest Enters Guilty Plea

''This has to make Joe Nacchio nervous,'' says one observer about the telecom's former chief executive.
Stephen TaubJuly 14, 2005

Robin Szeliga, a former chief financial officer of Qwest Communications International Inc., has pleaded guilty to one count of insider trading, reported the Associated Press. U.S. District Judge Walker D. Miller delayed formal acceptance of the plea until a November 4 hearing, according to the AP.

Although Szeliga faces up to 10 years in prison and a $1 million fine, sentencing guidelines recommend a term of 15 to 21 months, added the wire service. Several experts cited by the Rocky Mountain News, however, suggested that she might be sentenced only to probation if she cooperates fully with prosecutors in a widely expected case against former chief executive officer Joseph Nacchio.

Szeliga, still free on bond, left the Denver courthouse through a back door, according to the AP.

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“This has to make Joe Nacchio nervous,” Craig Silverman, a former Denver deputy district attorney who has followed the three-year-old Qwest criminal case, told the News. The paper added that Nacchio spokeswoman Marcia Horowitz said recently, “As he has said from the beginning, Mr. Nacchio did absolutely nothing wrong. These matters are now before the courts and will be addressed there.”

We reported last month that according to the Justice Department, on April 30, 2001, Szeliga allegedly sold 10,000 shares of Qwest stock at $41 per share, obtaining gross proceeds of approximately $410,000. At the time, the DoJ asserted, Szeliga “knew that the various Qwest business units were not going to meet revenue targets and expectations for the first and second quarters of 2001.”

The DoJ further alleged that Szeliga and others knew that Qwest was ultimately able to meet its announced 2001 first-quarter and second-quarter earnings expectations only “through the significant use of non-recurring revenue sources,” which were used as publicly undisclosed “gap-fillers” to meet revenue targets.

The Securities and Exchange Commission is also on the case. In March, the SEC charged Nacchio, Szeliga, former chief financial officer Robert S. Woodruff and six other former Qwest officers and employees with fraud and other violations of the federal securities laws. In three separate but related civil actions, the Commission alleged that, between 1999 and 2002, the individuals engaged in a multi-faceted fraudulent scheme designed to mislead the investing public about the company’s revenue and growth.

Last fall, without admitting or denying the allegations, Qwest agreed to pay a civil penalty of $250 million to settle SEC securities fraud charges. The commission alleged that between 1999 and 2002, Qwest fraudulently recognized over $3.8 billion in revenue and excluded $231 million in expenses as part of a scheme to meet revenue and earnings projections.

Szeliga has also reportedly reached a tentative settlement of SEC civil charges.