Ex-Qwest Executive Hall Pleads Guilty

Former Qwest Communications International executive Thomas Hall pleaded guilty to a single misdemeanor count of falsifying documents, ending the first criminal case stemming from a federal investigation of the

September 24, 2004

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Former Qwest Communications International executive Thomas Hall pleaded guilty Thursday to a single misdemeanor count of falsifying documents, ending the first criminal case stemming from a federal investigation of the company.

In exchange, prosecutors dropped three counts of wire fraud and one count of securities fraud. Hall, who also agreed to cooperate with investigators who are still looking into Qwest, faces up to a year in prison and a fine of up to $100,000.

Sentencing was scheduled for Jan. 14.

Prosecutors are not seeking restitution but U.S. District Judge Robert Blackburn could require it.

"These investigations are a marathon, not a sprint, and I think we're making good progress," Assistant U.S. Attorney William Leone said after the hearing. "Given the magnitude of shareholder losses, we need to be thorough, fair and deliberate."Hall declined comment to reporters outside the courtroom.

He was accused of participating in a scheme to improperly inflate Qwest revenue by $34 million when he was a senior vice president in the company's global business unit.

A jury deadlocked on a broader set of fraud charges against him in April after a seven-week trial.

In 2002, the Securities and Exchange Commission and Justice Department began investigating allegations that Qwest inflated revenue through fraudulent transactions with the Arizona public school system and with other telecommunications companies.

Hall and three other former executives were charged with criminal fraud and conspiracy. Two of the executives, John Walker and Bryan Treadway, were acquitted. Grant Graham pleaded guilty in May to being an accessory after the fact to wire fraud with reckless indifference. He has not been sentenced.The four were accused of conspiring to inflate Qwest revenue through the sale of computer equipment to link Arizona schools to the Internet as part of a $100 million deal in 2001. Each faced 11 charges that could have resulted in decades in prison.

The investigations ultimately led the company to erase $2.5 billion in revenue and prompted former CEO Joseph Nacchio to quit in 2002.

Nacchio has denied wrongdoing.

Under the plea agreement, Hall admitted to signing a June 29, 2001, letter to the Arizona School Facilities Board thanking it for its request to accelerate the equipment sale to allow Qwest to report revenue for the quarter ending the next day. The letter also outlined terms of the accelerated deal. In fact, the board had reluctantly agreed to Qwest's proposal to speed up the equipment sale only if Qwest would agree to terms that violated accounting standards, prosecutors said.

A federal civil lawsuit stemming from the Arizona deal is pending against the four former executives and four other former Qwest officials.Qwest has not responded to reports that the company is negotiating with the SEC to settle separate civil fraud allegations related to swaps of goods and services with other companies. A union official last week said the company has tentatively agreed to pay $250 million to settle the claims.

To date, about a dozen former Qwest executives either have settled allegations or have been targeted in civil or criminal cases.

Two other former Qwest executives reached settlements with the SEC in June: Steven Haggerty, former regional vice president of Qwestlink, a construction business unit of Qwest, and Augustine Cruciotti, a former senior vice president of the unit.

Cruciotti agreed to pay $350,000 to settle charges that he arranged or helped arrange undisclosed agreements to trade fiber-optic capacity with other companies, resulting in improper recognition of $26.6 million in revenue, the SEC said. Haggerty agreed to pay $30,000 to settle charges he helped in such swaps.

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