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Former Qwest exec pleads guilty to fraud

By Sandy Shore
The Associated Press

Grant Graham

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DENVER — A former Qwest executive accused in a $34 million fraud scheme pleaded guilty yesterday and agreed to help prosecutors, giving the government its first victory in the criminal investigation of the telecommunications giant.

Grant Graham, 38, pleaded guilty to a felony count of accessory after the fact to wire fraud with reckless indifference. Prosecutors dropped seven other charges against the former chief financial officer of Qwest's global business unit.

"We hope justice is equally spread in the entire matter," said Graham's attorney, Dan Sears.

U.S. District Judge Robert Blackburn told Graham he could sentence him to up to 30 months in prison. The plea deal, however, calls for a year of probation and a $5,000 fine.

The case centers on the government's allegation that Qwest officials improperly booked nearly $34 million in revenue during a 2001 deal to link Arizona schools to the Internet.

After a seven-week trial, a jury last month acquitted Graham of three wire-fraud charges and deadlocked on three other counts of wire fraud, three counts of securities fraud, one count of conspiracy and one count of making a false statement.

Two other former executives, Bryan Treadway and John Walker, were acquitted of all 11 charges. The jury deadlocked on the same counts against a fourth defendant, Thomas Hall, who faces a July 7 retrial.

Attorneys refused to say whether Graham will testify against Hall or anyone else.

The guilty plea is the first to come out of investigations that prompted former Qwest chief executive Joseph Nacchio to quit in 2002 and ultimately led the Denver-based company to erase $2.5 billion in revenue. Qwest provides telephone services in 14 states in the West and Midwest, including Washington state.
 
Defense attorneys have said their clients were sacrificed by company higher-ups and had been led to believe the Arizona deal met accounting guidelines by colleagues and other officials.

According to prosecutors, Qwest reported the revenue from a sale of computer equipment to the Arizona School Facilities Board, which didn't pay for any of it until six months later.

In a scramble to meet revenue targets, prosecutors said, the defendants cajoled Cisco Systems into sending whatever equipment it had to a Phoenix warehouse by the end of the quarter. Some of the equipment was not even the right type, witnesses said.

Graham was accused of assigning accountants to find a way to make the transaction fit into accounting rules in a way that would allow Qwest to report the revenue. One of those men, Doug Hutchins, said Graham told him to bypass auditors on a key document in the deal but later changed his mind.

The accessory charge stems from what the government says was an August 2001 filing to the SEC that included the improperly booked revenue.

All four defendants and four other Qwest executives have been sued by the Securities and Exchange Commission, which says they inflated revenues by about $144 million in 2000 and 2001 to meet promises of double-digit revenue growth. That lawsuit has been put on hold pending the criminal trial. The company also faces several shareholder lawsuits.

The U.S. attorney's office has said its investigation is continuing.