Accused: SEC was asked for guidance
By Tom McGhee, Staff Writer
Denver Post
Thursday, May 19, 2005

Regulators refused former Qwest accountant James Kozlowski's request for advice on accounting methods but later accused him of fraud for the approach he took, according to a document filed in federal court.

Kozlowski, who worked as an accountant for Qwest from 1998 to 2000, always acted with integrity, according to the document, an answer to a suit the Securities and Exchange Commission filed in March.

"For the (SEC) now to sue Mr. Kozlowski ... is inexcusable, particularly when the SEC itself refused to fulfill its responsibility to provide accounting guidance," says Kozlowski's response, filed Wednesday.

The SEC stands by the allegations in the complaint, said Randall Fons, the SEC regional director in Denver.

Kozlowski, 36, is one of 12 former Qwest executives, including former chief executive Joe Nacchio, sued by the SEC.  Five of the former executives have settled their cases.  Nacchio and others are fighting the charges.

The agency claims the executives it sued caused Qwest to record about $3 billion in false revenue and helped inflate Qwest's stock.

Among other things, the SEC alleges that Kozlowski helped improperly book deals that allowed the company to record phantom revenues.

Kozlowski asked the SEC for advice on how to book the deals in 1999, but the SEC "declined to provide the requested assistance," according to his 109-page response to the lawsuit.

Neither KPMG nor Arthur Andersen, Qwest's independent auditors during the period, ever suggested that the way the deals were booked was improper, the response said.

Staff writer Tom McGhee can be reached at 303-820-1671 or