Federal prosecutors Thursday charged Robin Szeliga, Qwest’s former chief financial officer, with insider trading and appeared to secure her cooperation in their criminal investigation into alleged accounting fraud under ex-chief executive Joe Nacchio.
In seeking the cooperation of the company’s top financial executive, prosecutors probing Qwest are pursuing a strategy also used in the WorldCom and Enron criminal cases.
A federal jury convicted former WorldCom CEO Bernard Ebbers of fraud in March based largely on the testimony of his CFO, Scott Sullivan.
In the case of Enron, a plea agreement with former CFO Andrew Fastow could prove central to the prosecution of former chairman Kenneth Lay and former CEO Jeffrey Skilling.
Szeliga, Qwest’s CFO from March 2001 to July 2002, faces one count of insider trading in connection with the sale of 10,000 shares of Qwest stock in April 2001. The sale netted her a pretax profit of $125,000.
Prosecutors allege she knew at the time that the company could not meet its revenue projections without committing accounting fraud.
U.S. Attorney Bill Leone said Szeliga reached a plea agreement with his office and is cooperating with the government’s investigation.
“We’re pleased with the progress we’re making. There is a tremendous amount of evidence to review. We’re going to follow the evidence where it leads,” he said.
In March, the Securities and Exchange Commission filed civil charges against 12 Qwest executives. Nacchio, Szeliga and former CFO Robert Wood ruff were alleged to have profited from insider trading.
Only Szeliga has been criminally charged.
Szeliga was arraigned Thursday morning before a federal magistrate in Denver, where she entered a not-guilty plea and waived her right to an indictment. She could face up to 10 years in prison and $1 million in fines if convicted.
Her attorney later requested a hearing in which she is expected to change her plea to guilty.
Her attorney did not return calls Thursday. Szeliga, 44, could not be reached at her Littleton home.
Also Thursday, Szeliga reached an agreement in principle with the staff of the SEC, which is suing her and other former Qwest officials, alleging that they inflated the company’s revenues by $3 billion and misled investors.
Legal experts said the plea agreement with Szeliga is a significant development in the government’s criminal investigation into former Qwest executives.
“This would be an important step in the process if they’re considering charges against higher-level people,” said former federal prosecutor Tony Leffert, now a lawyer with Robinson Waters and O’Dorisio in Denver.
But another former federal prosecutor said the charge filed Thursday has limits as a tool to go after others.
“It’s significant that somebody at her level has admitted to criminal wrongdoing at Qwest. But this is more an admission of individualized guilt than collective corporate misconduct,” said Sean Connelly, of the Denver law firm Hoffman, Reilly, Pozner & Williamson. “It’s not a charge that directly implicates others at Qwest.”
A spokeswoman for Nacchio maintained his innocence.
“As Mr. Nacchio has stated consistently, he did nothing wrong during his tenure at Qwest,” Marcia Horowitz said. “Nothing that happened today involving another Qwest executive changes that fact.”
Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.
