Risk Management

Court Goes Easy on Qwest CFO

Finance chief is expected to testify against former boss Joseph Nacchio.
Stephen TaubJuly 28, 2006

Former Qwest chief financial officer Robin Szeliga is not going to prison.

Szeliga, who the Associated Press called the highest-ranking executive from Qwest to plead guilty in the telecom company’s accounting scandal, was sentenced to two years’ probation, six months of home detention, and a $250,000 fine for insider trading.

In a tearful apology for an “error in judgment,” she told U.S. District Judge Walker Miller that she “strayed from the Lord’s guidance” and would accept whatever punishment she received, according to the wire service. “My life is forever changed by this mistake,” she said in what the AP described as a soft voice that trembled at times. “I have had to come to grips with my own failings and demons.”

Szeliga is expected to testify in the trial of former Qwest CEO Joseph Nacchio, who faces 42 counts of insider trading. U.S. Attorney Bill Leone praised Szeliga’s cooperation for being “very substantial,” added the AP. Judge Miller also acknowledged the cooperation, asserting: “It is my practice to give careful consideration, considerable weight, to the parties’ agreement because they know considerably more about the case than I will ever know.”

But the judge did couch the praise, commenting: “I do not divorce this conduct from the overall illegality. There does seem to be a culture of — I would use the word — greed.” Szeliga faced a maximum penalty of 10 years in prison and a $1 million fine for the single insider-trading count. She agreed to pay $125,000 in restitution, which is equal to the sum she earned on the illegal stock trade, according to the report.

On April 30, 2001, Szeliga allegedly sold 10,000 shares of Qwest stock at $41 per share, obtaining gross proceeds of approximately $410,000, noted the Department of Justice. At the time, government prosecutors asserted that 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- 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.

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