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Former Qwest Execs Indicted For Fraud

Four former executives of Qwest Communications were indicted for fraud, Attorney General John Ashcroft announced Tuesday.

The four were indicted on 12 counts by a federal grand jury in Denver. They are accused of devising a scheme to create more than $33 million in revenue by wrongly reporting a purchase order with the Arizona School Facilities Board, in violation of Security and Exchange Commission rules.

The government says Qwest sold equipment including materials to create Internet access to the statewide school computer network, billed the customer and held the merchandise for later delivery. In violation of SEC rules, they booked the revenue before the merchandise was delivered.

The company also knowingly filed false documents to hide its actions, the Justice Department said.

"As we continue our efforts to battle corporate fraud, our message is clear. We will protect the integrity of our markets by punishing those who falsify financial information out of sheer greed," Ashcroft said in a statement.

Arrest warrants were issued for Grant Graham of Evergreen, Colo., chief financial officer for Qwest's global business unit; Thomas Hall of Englewood, Colo., a senior vice president in the global business unit; John Walker of Littleton, Colo., a vice president in the unit; and Bryan Treadway of Atlanta, an assistant controller.

Qwest had been under investigation by both the Justice Department and the Securities and Exchange Commission and was the subject of congressional hearings into its financial practices.

The Justice Department said Tuesday that its investigation was continuing.

The probes have examined whether Qwest artificially inflated its revenues by swapping network capacity with another scandal-plagued telecommunications company, Global Crossing Ltd.

The company said it was restating its financial reports for 1999 to 2001 because of accounting errors, including $950 million in revenue booked from swaps.

The company fired Arthur Andersen LLP, the auditing firm that was convicted of obstruction of justice in the Enron collapse, and brought in KPMG LLP in June to look at its books.

Last June, chief executive Joseph Nacchio resigned under fire. Thousands of workers have been laid off and the company's stock plummeted. Lawmakers have charged that Qwest executives cashed in millions of dollars in options before the stock fell.

The House Energy and Commerce Committee in December completed its own probe into Qwest's business practices.

Qwest has had other woes as well. In August, Qwest agreed to pay the state of Colorado $1 million, plus payments to customers, to settle complaints that it failed to adequately inform consumers of the least expensive telephone service they could obtain, instead encouraging them to buy pricer packages. Others complained of poor customer service.

Qwest is the local phone company for 14 states extending from Minnesota west to Washington state and southwest to Arizona and New Mexico. It bought US West, one of the Baby Bells created from the breakup of AT&T, following a bidding war with Global Crossing.

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