Fraud suit gets green light
Fund blames losses on ex-Qwest execs; some claims limited
By Jeff Smith, Rocky Mountain News

Tuesday, September 13, 2005

A federal judge has allowed a securities fraud lawsuit against former Qwest executives to proceed but limited the scope against some defendants.

U.S. District Judge Robert Blackburn also rejected a claim that Stichting Pension Funds of The Netherlands had filed its 2004 suit too late.

Stichting, which bought 5.6 million Qwest shares between July 2000 and March 2002, said it lost $100 million because of Qwest's misrepresentations and revenue-inflation schemes.

Blackburn, in denying several motions to dismiss, ruled that Stichting had "sufficiently" alleged that former Chief Financial Officer Robin Szeliga, former General Counsel Drake Tempest, former Chief Operating Officer Afshin Mohebbi and former top sales executive Gregory Casey had knowingly participated in a scheme to defraud.

But Blackburn limited claims against Casey and Mohebbi to communications capacity transactions, and he dismissed a claim that Tempest had control over those who allegedly committed fraud.

Blackburn hasn't yet ruled on motions to dismiss by the other defendants, which include former Chief Executive Joe Nacchio and founder Philip Anschutz.

Attorneys for Tempest, Mohebbi, Casey, Szeliga and Stichting didn't return calls for comment.  Qwest spokesman Bob Toevs declined to comment on pending litigation.

Qwest last year agreed to pay $250 million to settle civil fraud allegations with the Securities and Exchange Commission.

The SEC has sued Nacchio, Szeliga, Mohebbi, Casey and former CFO Robert Woodruff individually for fraud, with Casey recently settling for $2.1 million.

Szeliga has reached a tentative settlement.