New York state's comptroller filed a securities fraud lawsuit Qwest Communications International, also naming several of the telephone company's former top executives, former directors and auditor, Arthur Andersen.
Comptroller Alan Hevesi is the sole trustee of the New York State Common Retirement Fund, which is a large pension fund for New York public employees and the country's second-biggest public pension fund with about $140 billion in assets at the end of March and more than 900,000 members. The fund had opted out of a class action lawsuit filed in Colorado in 2001 that netted shareholders $400 million last year.
The fund was the lead plaintiff in a similar lawsuit against WorldCom Inc. Hevesi's office expects to recover more than $6 billion in that case.
The Qwest lawsuit, filed in Manhattan, alleges that Qwest's revenue and earnings were overstated from April 1999 through July 2002 -- causing the pension fund to lose more than $240 million.
The Securities and Exchange Commission has said that improper accounting at Qwest allowed as much as $3 billion in revenue to be improperly reported as recurring, driving up the company's stock price while executives made millions selling off their own shares. Qwest eventually restated earnings from 2000 and 2001 -- erasing about $2.2 billion in revenues.
Former chief executive Joseph Nacchio was indicted in December on 42 counts of insider trading for allegedly illegally selling more than $100 million in stock though he has proclaimed his innocence. Four other former Qwest executives have already pleaded guilty to criminal charges and the company agreed to pay $250 million in 2004 to settle SEC fraud allegations.
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