Qwest Communications, the Midwest regional telecommunications giant, has agreed to pay $250 million to settle a Securities and Exchange Commission investigation into its accounting practices, the company’s union said yesterday.
The settlement is among the largest ever reached by the S.E.C., although far short of the $750 million levied last year against Worldcom, which now does business as MCI.
Candice Johnson, a spokeswoman for the Communications Workers of America, which represents about 27,000 Qwest workers, said the company told the union yesterday morning that it had reached the settlement with the S.E.C.
A company spokesman, Bob Toevs, said only that “Qwest continues in its efforts to cooperate with the S.E.C. and the D.O.J. in their respective investigations.”
Matt Well, a spokesman for the S.E.C., declined to comment.
After word of the settlement had begun to leak out yesterday, the union confirmed it.
Analysts said the settlement would come after a more than two-year investigation into Qwest’s accounting practices and would be a significant step toward resolving the company’s management mistakes.
But the company is still the subject of a formal Department of Justice criminal investigation that dates to July 2002. Kevin Calabrese, an analyst with Argus Research, said Qwest also faced shareholder lawsuits and a suit brought by 14 states demanding $500 million to $600 million in back taxes.
Toward the end of the telecommunications boom in the late 1990’s, Qwest and other long-haul fiber carriers routinely swapped capacity on one another’s networks. In a practice also common in the industry, Qwest recorded as revenue the capacity that it provided to other carriers, as if that capacity had been sold rather than exchanged for in-kind service, Mr. Calabrese said.
In June 2002, Qwest announced the resignation of Joseph P. Nacchio, the chief executive, and named Richard C. Notebaert as his successor.
In October 2003, Qwest restated its earnings for 2000 and 2001, admitting it had understated losses during the period by $2.54 billion. The settlement disclosed yesterday “doesn’t change the business challenges, but it does eliminate one major piece of the overhang,” Mr. Calabrese said. “It’s pretty significant.”