Thursday, July 28, 2005

U.S. Attorney Seeks to Delay Discovery in SEC Securities Fraud Case Against Former Qwest Executives

The U.S. Attorney's Office for the District of Colorado has asked for a 150-day delay in discovery in the SEC's securities fraud case against former Qwest executives, including former CEO Joseph Nacchio.  The SEC filed its complaint (here) in March 2005, and it alleges that the company improperly recognized over $3 billion in revenue from round-trip transactions and other accounting maneuvers, and also improperly excluded $71 million in expenses.  Since then, two defendants have reached agreements with the government: former CFO Robin Szeliga has entered a guilty plea to insider trading (earlier post here), and former executive vice president Gregory Casey settled the claims by agreeing to disgorge almost $1.4 million, pay a $250,000 civil money penalty, and agree to a director-and-officer bar (earlier post here).  The U.S. Attorney's Office is seeking the delay to permit it to complete an investigation of involvement of the individuals in the accounting for the transactions without the civil discovery interfering in the criminal review.

Parallel proceedings are common in this area, and the courts usually grant the prosecutor's request for a delay to complete an investigation because courts do not like to interfere in grand jury investigations, although the judge may not give the U.S. Attorney's Office all the time it wants because the investigation has been going on for almost three years now and the transactions occurred from 1999 to 2002.  An AP story (here) discusses the government's request and notes that Nacchio and two other defendants want to continue with limited discovery in the SEC case.  (ph) 

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/07/us_attorney_see.html

Civil Enforcement, Fraud, Investigations | Permalink

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