Qwest Communications International Inc.’s restatement took a while, and it was a doozy.
In July 2002, the Denver-based telecommunications giant said that it “in some cases applied its accounting policies incorrectly” and would have to restate previous results.
In October 2003, the verdict came in: Saying “we misinterpreted or misapplied” accounting principles, Qwest wiped out $2.49 billion in revenue and $2.54 billion in net income for 2000 and 2001. It was the most profits eliminated by any firm in the Tribune’s analysis of 2003 restatements.
By then, Qwest’s stock had plunged from a high of over $65 during the tech bubble to a close of $3.70 on the day the restatement was filed with the Securities and Exchange Commission.
By then, however, insiders had unloaded more than $515 million in stock in the two years that were restated, sometimes at $50 a share or higher.
One of the biggest sellers was former Chief Executive Joseph Nacchio, who sold more than $200 million worth of stock and took home combined bonuses of nearly $3.8 million in 2000 and 2001. He was replaced in June 2002 by former Ameritech Corp. and Tellabs Inc. CEO Richard Notebaert.
Although shareholder suits have sought to reclaim some of Nacchio’s compensation, Qwest spokesman Bob Toevs said he could not discuss whether the company itself would try to recover any compensation from top executives, calling it a “personnel matter.”
Nacchio’s attorney did not respond to interview requests.
During the period that was restated, Qwest paid its auditors, Chicago-based Andersen, about $20.6 million in fees, of which only $3.9 million, or 18.8 percent, was for audits. That percentage was among the lowest in the Tribune’s study.
In addition, Qwest paid $1.3 million for work in 2000 to Alvarado Construction Inc., owned by audit committee member Linda Alvarado. It said that did not impair her independence.
The company has said its accounting is under investigation by the SEC and U.S. attorney’s office. Civil and criminal fraud charges have been filed against several former Qwest officials.
Like other companies that have issued sizable restatements, Qwest said it has gone to great lengths to improve its financial reporting processes.
“Since mid-2002, the company has taken a series of significant steps to bolster the effectiveness and integrity of our internal controls,” Toevs said. “Qwest continues to improve and refine these controls as it seeks to foster an exemplary compliance environment.”
