Qwest Admits to Accounting Errors of $1.16 Billion
The Denver-based company plans to restate its earnings for the last three years. Qwest officials said it “incorrectly” accounted for $1.16 billion in sale transactions of fiber optics network capacity and sales of its communications equipment, among other items.
Company Chairman and CEO Richard C. Notebaert said during a conference call with investors the company would continue to review accounting records with its new auditor KPMG, who recently replaced troubled accounting firm Arthur Andersen.
Qwest will restate its earnings for the last three years upon the completion of the review, Notebaert said, though he could not specify when or by how much its earnings will be adjusted.
The company’s accounting revision could extend beyond its fiber optics division, which is already under heavy scrutiny from the Securities and Exchange Commission. The company also faces a criminal probe by the U.S. Justice Department.
Qwest is the latest telecom company to reveal massive accounting improprieties. Last month, WorldCom, the country’s second-largest long-distance provider, admitted it incorrectly stated its earnings by $3.9 billion; last week the company filed the largest bankruptcy in U.S. history.
Qwest delayed its financial forecast for 2002, but Notebaert, who became CEO last month after the ouster of Joseph Nacchio, maintained that the company would not follow WorldCom’s path.
We will not be the next shoe to drop,” he said. “We believe we’re doing the right thing by discussing this issue in a very transparent way.”
Qwest’s stock dropped 34 cents, or 23 percent, to $1.16 a share early Monday. Qwest shares have fallen nearly 94 percent over the last year.