U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20138 / June 1, 2007
Accounting and Auditing Enforcement Release No. 2614 / June 1, 2007
SEC v. Joseph P. Nacchio, Robert S. Woodruff, Robin R. Szeliga, Afshin Mohebbi, James J. Kozlowski and Frank T. Noyes, Civ. No. 05-MSK-480 (CBS) (USDC D. Colorado).
Court Enters Final Judgment Against Former Qwest Chief Financial Officer Robin R. Szeliga in Settled SEC Financial Fraud Action
The Securities and Exchange Commission announced today that the United States District Court for the District of Colorado ("USDC of Colorado") entered a Final Judgment on May 30, 2007, in a settled action against Robin R. Szeliga, a resident of Littleton, Colorado, and a former chief financial officer of Qwest Communications International Inc. ("Qwest"). Szeliga, without admitting or denying the Commission's allegations, consented to the entry of the judgment that enjoins her from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder; directs her to pay $226,135 of disgorgement, plus $100,917 of prejudgment interest, and a $250,000 civil penalty; and prohibits her from acting as an officer or director of a public company. Szeliga's misconduct occurred when she was Qwest's senior vice president of financial planning and analysis and then chief financial officer.
According to the SEC's Complaint filed in the USDC of Colorado in March 2005, from at least April 1, 1999 through March 31, 2002, Szeliga and others at Qwest engaged in a massive financial fraud that hid from the investing public the true source of the company's revenue and earnings growth. The complaint alleged that to meet aggressive targets for Qwest's revenue and earnings growth, Qwest fraudulently and repeatedly relied on immediate revenue recognition from one-time sales of assets known as "IRUs" and certain equipment, while falsely claiming to the investing public that the revenue was recurring. The complaint also alleged that Szeliga and others fraudulently and materially misrepresented Qwest's performance and growth to the investing public, failed properly to account for IRU sales transactions in Qwest's financial statements, and caused the company to report falsely approximately $3 billion in revenue. The complaint also alleged that Szeliga and others failed to make required accounting disclosures about IRUs to the investing public. In addition, the complaint alleged that, to meet revenue targets, Szeliga and others caused the manipulation of revenue associated with Qwest Dex, formerly a wholly-owned subsidiary of Qwest. Additionally, the complaint alleged that Szeliga fraudulently lowered liabilities related to employee vacations to increase artificially Qwest's earnings to meet revenue and growth targets. The complaint further alleged that Szeliga sold Qwest stock knowing that Qwest had issued materially false information to the investing public in violation of the insider trading prohibition of the securities laws.
In addition, the Commission today instituted an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions to which Szeliga consented that suspends Szeliga from appearing or practicing before the Commission as an accountant.
The litigation against the remaining five defendants named in the Commission's complaint is continuing.
For additional information on related actions, see Litigation Release No. 20088 (April 24, 2007), Litigation Release No. 19313 (July 26, 2005), Litigation Release No. 19136 (March 15, 2005), Litigation Release No. 19134 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51373 (March 15, 2005), Litigation Release No. 19135 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51375 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51374 (March 15, 2005), Litigation Release No. 18936 (October 21, 2004), Litigation Release No. 18800 (July 27, 2004), Litigation Release No. 18754 (June 21, 2004), Litigation Release No. 18755 (June 21, 2004), Litigation Release No. 18374 (September 29, 2003), and Litigation Release No. 17996 (February 25, 2003).