Qwest brass won't vouch for books

Decision seen as increasing distrust, but smart legally

Wednesday, July 31, 2002

By ALLISON LINN
SCRIPPS HOWARD NEWS SERVICE

A decision by top Qwest Communications executives not to personally certify the company's financial statements could increase investor distrust but is likely the smartest legal move, analysts and experts said this week.

Newly appointed Chief Executive Richard Notebaert and Chief Financial Officer Oren Shaffer both say they could not personally vouch for Denver-based Qwest's most recent financial statements because of bookkeeping problems that will force the company to restate some previous financial results.

The executives are among officers at 947 corporations who have been ordered by the Securities and Exchange Commission to vouch under oath, by Aug. 14, that their numbers are correct. The order was created this summer in an effort to restore plunging investor confidence.

But the SEC also said companies could instead explain, also under oath, why they couldn't vouch for their financial statements. In doing so, SEC spokesman John Heine said the executives would be in compliance with the order.

That's what Qwest plans to do, eventually. Qwest spokesman Tyler Gronbach said the executives plan to sign off on the numbers after they restate prior financial results.

Carr Conway, a forensic accountant with Dickerson Financial Investigation Group in Lakewood, Colo., said the executives were legally prudent not to personally take responsibility for the financial results until after the accounting issues are resolved.

Qwest is under SEC and criminal investigation, and the company conceded last weekend that it made some of what it called bookkeeping errors between 1999 and 2001.

"Their credibility has already been undermined," Conway said, "and it's just going to be worse if they're making statements that (turn out to be false)."

Tracy Pride Stoneman, a lawyer who represents investors with the Denver office of Burg Simpson, said she expects many executives -- even those not facing Qwest's accounting woes -- to be hesitant to sign on the dotted line until they can double-check their numbers.

But while experts might understand that, Stoneman expects that most shareholders will be distrustful of executives who refuse to sign.

And, if many executives say they can't personally account for the numbers, she said it could have the opposite effect of what the SEC intended. Instead of restoring investor confidence, it could redouble their distrust of executives.

A handful of executives, including those at PepsiCo, FedEx and AMR Corp., have already certified their earnings.

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