U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19313 / July 26, 2005

Accounting and Auditing Enforcement
Release No. 2283 / July 26, 2005

SECURITIES AND EXCHANGE COMMISSION v. JOSEPH P. NACCHIO, ROBERT S. WOODRUFF, ROBIN R. SZELIGA, AFSHIN MOHEBBI, GREGORY M. CASEY, JAMES J. KOSLOWSKI AND FRANK T. NOYES, Civ. No. 05-MK-480 (OES) (USDC D. Colorado).

SEC SETTLES WITH FORMER QWEST EXECUTIVE VICE PRESIDENT

The Securities and Exchange Commission today settled its claims against Gregory M. Casey, a resident of Houston, Texas, and a former executive vice president of Qwest Communications International Inc. ("Qwest"). Casey, without admitting or denying the Commission's claims, consented to the entry of a judgment dismissing the claims against him for primary liability pursuant to Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5 thereunder; enjoining him from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act 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; directing him to pay $1,390,344 of disgorgement, plus $456,481 of prejudgment interest, and a $250,000 civil penalty; and prohibiting him from acting as an officer or director of any public company for five years.

According to the SEC's Complaint, filed in the United States District Court for the District of Colorado in March 2005, Casey's actions in several indefeasible rights of use ("IRUs") transactions were part of a scheme by Qwest to inflate revenue and earnings artificially. Specifically, Casey provided, or knew others provided, secret side agreements to IRU customers allowing those customers to exchange, or "port," the capacity purchased for different capacity. The purpose of the secret side agreements was to conceal from Qwest's accountants and auditors the purchasers' ability to port, as such exchange rights would have defeated, under GAAP, the immediate recognition of revenue. Additionally, Casey participated in backdating IRU agreements to demonstrate falsely that the agreements were completed by the end of the quarter as required by GAAP to recognize revenue in that quarter. Finally, to close IRU sales, Casey caused Qwest to purchase capacity Qwest did not need. Under GAAP, Qwest should not have recognized revenue where there was no legitimate business need for the IRU assets received.

Related Actions

In March 2005, the Commission filed a civil action against Joseph Nacchio, Robert Woodruff, Robin Szeliga, Afshin Mohebbi, Casey, James Kozlowski, and Frank Noyes (Litigation Release No. 19136).

In March 2005, the Commission filed a settled civil injunctive action against Roger B. Hoaglund, a former Qwest senior vice president (Litigation Release No. 19136).

In March 2005, the Commission filed a settled civil injunction action against William L. Eveleth, a former Qwest vice president of finance (Litigation Release No. 19136).

In March 2005, the Commission instituted settled cease-and-desist proceedings and filed related civil actions for penalties against Mark A. Schumacher and Brian K. Treadway, former controllers at Qwest (Litigation Release Nos. 19134 and 19135; Sec. Exch. Act. Rel. Nos. 34-51373 and 34-51375).

In March 2005, the Commission instituted settled cease-and-desist proceedings against Jennifer J. Black, a former director of finance at Qwest (Sec. Exch. Act. Rel. No. 34-51374).

In October 2004, the Commission filed a settled civil action against Qwest Communications International Inc. (Litigation Release No. 18936).

In July 2004, the Commission filed a civil injunctive action against Michael Felicissimo, the former CFO of Qwest's wireless division (Litigation Release No. 18800).

In June 2004, the Commission instituted settled cease-and-desist proceedings and filed related civil actions for penalties against Augustine M. Cruciotti, a former Qwest executive vice president, and Steven L. Haggerty, a former Qwest senior vice president (Litigation Release Nos. 18754 and 18755).

In September 2003, the Commission instituted and settled cease-and-desist proceedings and filed a related civil action for penalties against Loren D. Pfau, a former Qwest sales manager (Litigation Release No. 18374).

In February 2003, the Commission filed a civil injunctive action against former Qwest officers Joel M. Arnold, William L. Eveleth, Grant Graham, Thomas W. Hall, Douglas K. Hutchins, Bryan K. Treadway, John M. Walker, and Richard L. Weston (Litigation Release No. 17996).

http://www.sec.gov/litigation/litreleases/lr19313.htm