The Denver, Colorado-based company is still in discussions with the SEC and Justice Department, and said that while it cannot give assurances that it will have the resources available to pay the settlements or judgments, we believe that it is probable that all but $100m of the reserve will be recovered from insurance.
Qwest is the smallest of the four US fixed-line telcos, and its accounting practices have been under investigation by the SEC for two years, as well as by the Justice Department. The probe has centered on whether Qwest and other carriers inflated revenues by incorrectly booking network capacity deals to meet Wall Street’s revenue expectations.
Last October, Qwest restated its financial results for 2000 and 2001, cutting revenue by $2.5bn and posting larger net losses than previously announced.
To make matters worse, in February 2003, a number of current and former executives were accused of accounting fraud. Their trial began last month and still continues, after they pleaded not guilty to charges including conspiracy and securities fraud.
The carrier has also come under fire after it granted 3.7 million stock options to five executives, including 1.9 million options to CEO Dick Notebaert. Some groups have branded the options grant obscene, although many telecoms analysts called it reasonable.
In the meantime, Qwest intends to complete the lay-offs of 2,300 employees identified last year by cutting 700 more jobs during 2004. By the end of 2003, approximately 1,600 of the planned reductions had been completed.
This article is based on material originally published by ComputerWire
