Former Qwest Communications International CFO Robin R. Szeliga will pay $577,000 as part of a Securities and Exchange Commission settlement stemming from her role in the alleged accounting fraud at the telecommunications company.
She consented to a judgment entered by a federal district court in Denver on May 30, without admitting or denying the Commission’s allegations.
Under the deal, Szeliga must make $226,135 of disgorgement payments while paying $100,917 of prejudgment interest and a $250,000 civil penalty. The judgment also prohibits her from acting as an officer or director of a public company, and includes a suspension from appearing or practicing before the SEC as an accountant.
From at least April 1, 1999, through March 31, 2002, Szeliga, who at the time was Qwest’s senior vice president of financial planning and analysis, and then chief financial officer, engaged with others at the company in a “massive financial fraud” that hid from the investing public the true source of the company’s revenue and earnings growth, according to the complaint.
It alleged that to meet aggressive targets for revenue and earnings growth, Qwest “fraudulently and repeatedly” relied on immediate revenue recognition from one-time sales of assets, while falsely telling investors that the revenue was recurring. Szeliga and others “fraudulently and materially misrepresented” Qwest’s performance and growth, failed properly to account for the one-time sales transactions in Qwest’s financial statements, and caused the company to report falsely about $3 billion in revenue, it was alleged.
The complaint also said that Szeliga and others failed to make required accounting disclosures about the one-time transactions, and added that she and others, to meet revenue targets, caused the manipulation of revenue associated with Qwest Dex, formerly a wholly-owned Qwest subsidiary. In addition, the complaint charged that Szeliga fraudulently lowered liabilities related to employee vacations, artificially boosting earnings to meet revenue and growth targets.
The complaint also accused Szeliga of illegal insider selling, claiming she unloaded Qwest stock knowing that the company had issued materially false information.
In April, former Qwest CEO Joseph Nacchio was found guilty in a federal-court trial of 19 counts of illegal insider trading, for selling $52 million worth of Qwest shares in Apriil and May 2001 after receiving private warnings that the company would miss revenue targets. During the trial, Szeliga told jurors that her former boss had routinely downplayed concerns from other Qwest executives that the company’s financial projections were too optimistic.
Nacchio, who was acquitted on 23 other counts related to earlier trades, faces 10 years in prison and a $1 million fine on each count when he is sentenced July 27.
Szeliga served as Qwest’s CFO and executive vice president of finance from March 2001 to July 2002, and before that, starting in 1998, held various accounting positions at Qwest, including senior vice president of financial planning and analysis and reporting.
According to the original complaint, Szeliga while CFO signed all Qwest’s materially false quarterly reports filed with the SEC, and its materially false annual reports for 2000 and 2001. She also allegedly signed false management representation letters to Qwest’s outside auditors, drafted and reviewed all earnings releases, and, as CFO, addressed analysts during calls.