Ethics Newsline®

DENVER
The U.S. Securities and Exchange Commission (SEC) last week filed civil charges against Joseph Nacchio, the former chief executive of Qwest Communications International, and 10 other executives accused of orchestrating the firm’s $3 billion bookkeeping fraud.

Nacchio and the others are accused of bullying workers into distorting balance sheets to meet investors’ expectations when the firm, then known as U.S. West, was wooing a 2000 takeover bid by Qwest.

Regulators accused Nacchio of creating a “culture of fear” by putting “extreme pressure” on subordinate executives, resulting in fraud that forced the company to restate more than $2 billion in revenue for 2000 and 2001, reported the Reuters news agency.

Along with Nacchio, the SEC filed suit against 10 Qwest executives, including the company’s former president and two former chief financial officers. The SEC settled immediately with four of them, noted Reuters.

The SEC, which settled its complaint with Qwest itself last October for more than $250 million, now is targeting individual executives for their salary raises, bonuses, and stock sales during the time of the alleged fraud.

The government wants Nacchio to surrender $216 million and is eyeing $84 million from the other alleged co-conspirators, reported the New York Times.

Nacchio and others last week released statements denying any wrongdoing.

The charges come at a particularly inopportune time for Qwest, which is vying to outbid Verizon for ownership of MCI, the firm formerly known as WorldCom, whose one-time head, Bernard Ebbers, was convicted of fraud and conspiracy last week.