Trial of 4 Former Executives at Qwest Communications Begins

The government opened its case against four former Qwest Communications International Inc. executives Monday, saying they intentionally broke accounting rules to improperly record $34 million in revenue and then lied about it.

Assistant U.S. Atty. William Leone said in Denver federal court that the executives devised a scheme that let Qwest improperly book a 2001 computer equipment sale to Arizona school officials, hoping to meet lofty profit targets and help their own performance reviews and bonuses.

Prosecutors say the four conspired to lie about the deal and hid facts from then-auditor Arthur Andersen and regulators.

“We believe the evidence will show the defendants broke important rules about revenue recognition and reporting revenue at Qwest, and then the defendants lied about what they had done,” Leone told the jury.

Former executives Grant Graham, Thomas Hall, John Walker and Bryan Treadway are charged with securities fraud, wire fraud and other charges. They have pleaded not guilty.

Defense attorney Dan Sears said prosecutors would be unable to prove that any statutes had been broken. He said the government’s case was based on guidelines, not rules. Sears, who represents Graham, said accounting and legal experts had signed off on the deal and if any defendants had done anything wrong, they wouldn’t have been acting alone.

The case is the first stemming from investigations that forced Qwest to erase $2.5 billion in revenue from its books and prompted former Chief Executive Joseph Nacchio to quit under pressure in 2002. The trial is expected to last a month.