A federal judge refused Monday to acquit four former Qwest executives accused of artificially boosting company revenue by $34 million, saying there is enough evidence to support guilty verdicts.
Thomas Hall, Grant Graham, John Walker and Bryan Treadway are accused of conspiring to help the telecommunications company improperly book the money in June 2001 to meet financial targets, perhaps hoping to boost their own bonuses.
All have pleaded innocent to conspiracy and fraud charges stemming from a $100 million deal to connect Arizona schools to the Internet.
Prosecutors say the defendants adjusted terms of the deal to allow revenue to be booked right away, instead of over the life of the contract, and then lied to cover their actions.
U.S. District Judge Robert Blackburn issued his decision on a defense motion for acquittal before jurors entered the courtroom.
"The relevant evidence, direct and circumstantial, is sufficient to support a conclusion by a reasonable juror, including these reasonable jurors, that each defendant could be found guilty beyond a reasonable doubt," Blackburn said.
He said the decision on Treadway was the most difficult of the four because there was evidence to suggest he did not know about the transaction. But Blackburn also said evidence could indicate "there came a time that the attitudes and actions of Mr. Treadway changed not for the good."
The case is the first stemming from investigations that prompted former chief executive Joseph Nacchio to quit in 2002 and ultimately led Qwest to remove $2.5 billion in revenue from its books.
Graham was chief financial officer for Qwest's global business unit, which was $29 million short of its second-quarter revenue target before the Arizona revenue was recorded. Hall and Walker also worked in the unit; Treadway was the company's controller.
The defense asked for the acquittals last week, saying the government in part had based its criminal case on "an accounting guideline" issued by the Securities and Exchange Commission staff.
The defense also suggested the four men were led to believe the transactions were legal by others who were given immunity in the case, including the former managing partner of Arthur Andersen, the company's auditor.
Debbie Colia, Qwest's former vice president for compensation and benefits, testified that the $34 million would have had little or no effect on bonus calculations for any of the defendants.
Under questioning by Hall's attorney, Colia said Hall, who earned $250,000 annually, probably saw his bonus increase by less than $500 because of the deal.
"The sale was so small compared to the company as well as the division's (revenue) targets that quarter that it was insignificant ... to the bonus payout," she said.
Under cross-examination by prosecutor Tim Neff, she agreed that the sale boosted revenue higher than the quarterly target for the business unit in which Graham, Hall and Walker worked. That likely had a positive effect on bonus calculations, according to her testimony.
Blackburn has said he wants the case to go to the jury by Friday. Qwest provides telephone services in 14 states in the West and Midwest.