TELECOM Digest OnLine - Sorted: Judge Dismisses Some Claims Against Qwest

Judge Dismisses Some Claims Against Qwest

Lisa Minter (
Thu, 2 Dec 2004 13:33:56 -0500 (EST)

DENVER - A federal judge has dismissed civil claims against a former
president of Qwest Communications International Inc. and some
allegations lodged against the telecommunications company in a lawsuit
filed by investors.

U.S. District Judge Robert Blackburn also threw out claims against a
former sales executive but left intact allegations that Arthur
Andersen's audit of Qwest's 1999 network capacity accounting was

Blackburn ordered that other issues may go forward against Qwest,
director Phil Anschutz and some former key executives, including
former chief executive Joe Nacchio who has denied wrongdoing.

The ruling made public late Wednesday came in a consolidated
investors' lawsuit filed in 2001 accusing the company and its
executives of misleading investors, and accounting and securities

The dismissed claims were included in an amended complaint filed in
February. That complaint added former president Afshin Mohebbi and
former sales executive Gregory Casey.

Attorney Thomas Egler, who represents the plaintiffs, declined comment

The Securities and Exchange Commission in 2002 accused Qwest's former
managers of massive accounting fraud. Qwest has agreed to pay $250
million to investors to settle the SEC claims without admitting or
denying the allegations.

In 2003, Qwest erased more than $2.5 billion of revenues and profits
from its 2000 and 2001 financial books.

It also has put $750 million into reserve, including $250 million to
pay the SEC fine, and has access to at least a portion of a $200
million insurance pool. Other company officials also may file claims
on the insurance.

The ruling came as Qwest has begun negotiating settlements of
shareholder lawsuits.

Blackburn said the additions of Mohebbi and Casey exceeded the scope
of a previous order in the case.

Among the claims he dismissed against Qwest were allegations that the
company exaggerated the number of its wireless customers, improperly
accounted for costs of a video DSL project, and engaged in practices
related to putting unauthorized charges on a customer's bill.

Still pending are claims that Qwest failed to properly disclose
$222 million worth of asset depreciation and a change in its
pension rate and improperly recognized revenue from some additional
fiber-optic capacity deals in 1999.

Blackburn also ruled that some claims against Arthur Andersen could
proceed, including an allegation that Arthur Andersen's 2000 audit of
Qwest's 1999 fiber-optic capacity deals was materially inaccurate.

Arthur Andersen in part had argued that the allegations weren't made
in a timely fashion.

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