Squeezed by the SEC

A former Qwest accountant says the SEC sued him after he failed to provide evidence against his bosses.

A former Qwest Communications accountant claims that federal regulators filed “sensational” and “insupportable” fraud charges against him because he did not “spill the beans” on his one-time boss, former Chief Executive Officer Joseph Nacchio, and Qwest’s former CFOs, according to several published reports.

Accountant James Kozlowski says the SEC’s Denver staff told him in the summer of 2004 that it would not press fraud charges against him if he offered more evidence against the Qwest executives. Kozlowski was subsequently sued for fraud by the SEC, according to the Rocky Mountain News.

“The ulterior purpose is evident here … i) give us the goods on Nacchio et. al. or we will sue you for fraud; and ii) we need to sue Mr. Kozlowski because we need to send a message to the accounting community,” Koslowski attorney Kevin Evans wrote to the court, according to the Associated Press.

“They really tried to squeeze this low-level person (at Qwest) to try to get him to cough up information on senior executives,” wrote Evans, according to the Denver Post. “When he couldn’t, they said ‘Fine, we’ll sue you.’ The Securities and Exchange Commission didn’t have a reasonable basis to sue James Kozlowski.”

According to the Rocky Mountain News, Evans claims that a high-ranking SEC official in Washington said in December 2004 that Kozlowski needed to be sued to send a message to the accounting community. Evans also asserts that a high-ranking Denver SEC official acknowledged that same month that Kozlowski had made a persuasive defense, the report added.

The paper reported that Kozlowski would divulge the names of the SEC officials if he gets court permission to proceed with his defense. He left Qwest in September 2000.

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