Colorado & Denver News

DENVER (AP) ― A judge has refused to dismiss a civil fraud case against former Qwest finance chief Robin Szeliga, ruling the complaint lacked clarity but provided sufficient details to allow her to respond properly.

"It is abundantly clear to the court that the securities fraud claims against defendant Szeliga arise from alleged misrepresentations and omissions in several discreet areas," U.S. District Judge Marcia Krieger wrote.

Her decision, issued Wednesday, came in the Securities and Exchange Commission lawsuit against Szeliga and several former executives of the Denver-based telephone company, including one-time Chief Executive Officer Joe Nacchio.

On its heels, U.S. Magistrate Judge Craig Shaffer on Thursday ordered attorneys for both sides and prosecutors handling a criminal case against Nacchio to begin the arduous process of lining up depositions from about a dozen potential witnesses.

Shaffer acknowledged that some depositions will have to wait until Nacchio's insider trading trial has ended next spring to preserve his fair-trial rights but noted the civil case must continue to proceed.

About a dozen employees and former employees of accounting firms that handled Qwest's business and former Qwest employees have been identified as potential witnesses who likely could undergo questioning without jeopardizing the criminal case against Nacchio.

Shaffer told the attorneys to finalize a list of those who could be questioned and start scheduling the process in early December, suggesting a maximum of 14 hours per witness.

Shaffer told the attorneys he was concerned that the recollections of some witnesses may fade -- some of the allegations date to 1998. He noted that while the SEC has been interviewing witnesses for several years, defense attorneys have not yet been able to question them.

"We should at least try to have a somewhat level playing field," he said.

Szeliga had asked Krieger to dismiss the allegations against her or to order regulators to provide more details. She contended they took a "smorgasbord" approach instead of providing specific allegations against individual defendants.

In the amended complaint, SEC attorneys said the complaint stems from alleged misrepresentations about Qwest's fiber-optic capacity sales and swaps, the sale of the Dex directory publishing business and employee vacations, Krieger wrote in the opinion issued Wednesday.

However, she noted, the organization and presentation of issues in the SEC complaint left "much to be desired."

Attorneys representing Szeliga and the SEC did not return telephone messages seeking comment.

Szeliga, Nacchio, former Chief Financial Officer Robert Woodruff and four other one-time executives were accused in March 2005 of orchestrating a massive financial fraud that forced Qwest Communications International Inc. to restate billions of dollars in revenue.

The SEC wants repayment and civil penalties, with amounts to be determined at trial.

In a separate criminal case, Szeliga has been sentenced to two years' probation, six months of home detention and a $250,000 fine after she pleaded guilty to one count of insider trading.

Szeliga is expected to be a key witness against Nacchio who has pleaded not guilty to 42 counts of insider trading stemming from $101 million in stock sales. If convicted, Nacchio faces up to 10 years in prison and a $1 million fine on each count.

The SEC has said the fraud at Qwest occurred between April 1999 and March 2002, allowing it to improperly report approximately $3 billion in revenue that helped clear the way for its 2000 acquisition of U S West. The revenue was later restated.

Qwest has agreed to pay $250 million to settle SEC charges of fraud in a deal that did not cover individual officers.

Qwest is the primary local phone company in 14 Midwestern and Western states.

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