Wednesday, February 29, 2012
The SEC announced that it settled charges against Robert S. Woodruff, the former chief financial officer of Qwest Communications International Inc., a Denver-based telecommunications company. According to the SEC’s complaint, from at least April 1, 1999 through March, 2001, Woodruff and others at Qwest engaged in a large-scale financial fraud that hid from the investing public the true source and nature of the company’s revenue and earnings growth. The complaint alleged that, although Qwest publicly touted its purported growth in services contracts which would provide a continuing revenue stream, in fact, the company fraudulently and repeatedly relied on revenue recognition from one-time sales of assets known as “IRUs” and certain equipment without making required disclosures. The complaint also alleged that Woodruff and others fraudulently and materially misrepresented Qwest’s performance and growth to the investing public. The complaint further alleged that Woodruff sold Qwest stock in violation of the insider trading prohibition of the securities laws.
Woodruff agreed to a Final Judgment that finds that he is liable for disgorgement of $1,731,048, plus prejudgment interest of $640,427, imposes a civil penalty of $300,000; and prohibits him from acting as an officer or director of a public company for a period of five years. It is anticipated that the Commission will ask the Court to add the disgorgement, interest and penalty to a Fair Fund which was established in SEC v. Qwest Communications, Inc., Civ No. 04-cv-1267 (D. Colorado).