Former Qwest CFO Pleads Guilty to Insider Trading

A former Qwest Communications International Inc. chief financial officer pleaded guilty Thursday to a single count of insider trading, becoming the highest-ranking executive to admit to wrongdoing in a scandal that forced the telephone company to erase billions of dollars in revenue.

Robin Szeliga, 44, faces as many as 10 years in prison and a $1-million fine, although sentencing guidelines recommend a term of 15 to 21 months. U.S. District Judge Walker D. Miller delayed formal acceptance of the plea until a Nov. 4 hearing.

Szeliga admitted to improperly selling 10,000 shares of Qwest stock in 2001 for a profit of $125,000. She sold the stock at $41 a share in April 2001 based on what the government said was nonpublic information. Denver-based Qwest is the local phone provider in 14 Midwestern and Western states.

Prosecutors said Szeliga knew some business units would fail to meet revenue targets in the first two quarters that year, and that Qwest improperly used nonrecurring revenue in trying to meet those goals.

“I plead guilty, sir,” Szeliga told the judge in a low voice, adding that she was taking medication for depression. She is free on bond.

Szeliga could play a crucial role in the government’s three-year effort to punish anyone involved in Qwest’s multibillion-dollar accounting scandal. Until now, federal prosecutors have had poor luck successfully prosecuting former Qwest managers, but Szeliga may have been in a position to know what executives -- including former Chief Executive Joe Nacchio -- knew and when they knew it.

Szeliga, Nacchio and five other former executives were accused in a civil complaint of orchestrating a massive financial fraud. The Securities and Exchange Commission wants all seven to repay an amount to be determined at trial and civil penalties.

The SEC has said the fraud at Qwest occurred from April 1999 to March 2002, allowing the company to improperly report about $3 billion in revenue that helped clear the way for its 2000 acquisition of the regional phone company US West. The revenue was later restated.

Qwest agreed last year to pay $250 million to settle SEC fraud charges in a deal that did not include individuals. Szeliga has reached a deal with the SEC, but details have not been disclosed.

This year Nacchio asked a federal judge to dismiss the SEC charges against him, arguing that the allegations were “not the stuff of securities fraud.”

Among other things, the SEC said, Qwest repeatedly booked revenue from one-time sales while falsely claiming to investors that the income was recurring -- allowing defendants to reap tens of millions in profits.

The SEC described Nacchio, Szeliga and another CFO, Robert Woodruff, as the scheme’s overseers.