New York State Comptroller Files Securities Fraud Lawsuit Against Qwest
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The New York State comptroller, Alan Hevesi, filed a securities-fraud lawsuit late Tuesday against Qwest Communications International, its former top executives, several ex-directors, and its onetime auditor Arthur Andersen, alleging they conspired to artificially inflate its results.
The lawsuit filed in federal court in Manhattan alleges the Denver telecommunications company’s revenue and earnings were “significantly and materially” overstated between March 31, 1999, and July 28, 2002.
“Defendants’ unlawful conduct was intended to, and did, artificially inflate the value and price of Qwest’s securities to the detriment of the [New York State Common Retirement Fund],” the lawsuit says.
Mr. Hevesi is the sole trustee of the New York State Common Retirement Fund, a large pension fund for New York public employees.
The pension fund was lead plaintiff in a similar lawsuit against WorldCom, its former executives, outside directors, auditor, and underwriters. As a result of settlements in the WorldCom case, class members are expected to recover more than $6.1 billion.
A Qwest spokesman in Denver declined to comment yesterday, saying the company’s policy was to not speak about pending litigation. An Arthur Andersen spokesman didn’t immediately have a comment yesterday.
A Former Qwest chief executive, Joseph Nacchio, a defendant in M.r Hevesi’s lawsuit, is awaiting trial on 42 counts of insider trading. He has denied wrongdoing. A lawyer for Mr. Nacchio didn’t immediately return a phone call seeking comment yesterday.
Four other former Qwest executives have pleaded guilty to criminal charges in the matter.
The company agreed last year to pay $400 million to settle a separate shareholder lawsuit in federal court in Colorado. Qwest previously agreed to pay $250 million to settle civil charges brought by the Securities and Exchange Commission.
Published reports have indicated that the New York State Teachers’ Retirement System, a large pension fund for New York’s public educators, opted out of the class-action settlement in Denver earlier this month.
A spokesman for Mr. Hevesi, John Chartier, said the New York State Common Retirement Fund also decided to opt out of the lawsuit. Mr. Chartier said the New York State Common Retirement Fund’s losses resulting from the alleged manipulation of Qwest’s financial results were about $250 million. “We felt like we could obtain a better settlement on our own,” he said.
