Risk & Compliance

SEC Suit Against Former Qwest CEO Seen

The civil allegations against Joseph Nacchio could include allegations that he helped the company to improperly inflate revenue.
Stephen TaubSeptember 14, 2004

The former chief executive of Qwest Communications International Inc., Joseph Nacchio could soon face civil charges, according to The Wall Street Journal, which cited people familiar with the matter.

The paper reported that the regulator recently sent a so-called Wells notice to Nacchio, who stepped down in June 2002. The action indicates that the SEC plans to recommend that the agency file civil charges against the former executive, according to the report.

A spokesman for Nacchio issued a statement saying his client had cooperated fully with government authorities, the paper said. The statement reportedly added that Nacchio “consistently stated, and states today, that he did nothing wrong in his tenure at Qwest. The actions which appear to be the focus of the SEC’s inquiry were subject to review and approval by numerous people, including other senior company personnel, the company’s outside legal and accounting professionals and the Qwest board of directors and its audit committee.” The company is currently embroiled in an accounting scandal.

Nacchio’s representative also reportedly said a Wells notice is part of an investigative process over which the former CEO has no control. “If required to answer to civil charges when that process is complete, he will do so with vigor and be vindicated,” according to the statement.

The civil allegations against Nacchio could include his helping the company improperly inflate revenue, according to the Journal. Qwest restated earnings by $2.2 billion and revenue by $2.5 billion for 2000 and 2001. The errors stemmed mainly from revenue-recognition issues.

Nacchio reportedly cashed out more than $300 million in personal Qwest holdings. He also received $12.4 million in pension and severance and collected $125,000 a month from the company until this past June, according to the Journal.