Feds Considers Barring Qwest From Future Government Contracts

Qwest said Thursday that the notice by the General Services Administration was prompted by a criminal indictment and civil complaint against former Qwest employees in connection with a transaction with the Arizona School Facilities Board in 2001.

The civil complaint, filed by the Securities and Exchange Commission, also stemmed from a Qwest transaction with Genuity in 2000.

The complaints allege that former midlevel executives artificially inflated revenues to meet Wall Street targets.

The GSA general counsel's office has been reviewing Qwest's status as a government contractor since July 2002. Now the GSA inspector general has referred the matter to its suspension and debarment official, Qwest said.

Qwest said it is cooperating with the GSA and believes it will remain a telecommunications supplier to the government.

The Justice Department and SEC have been investigating whether Qwest artificially boosted its revenue. Since the probes began, Qwest has announced restatements lowering revenue by $2.5 billion for 2000 through 2002.

This summer, GSA suspended new contracts with MCI, the phone company formerly known as WorldCom, saying it lacked "the necessary internal controls and business ethics."

A week later the government said it was considering suspending business with Sprint Corp. because it overcharged the Justice Department more than $2 million. Sprint blamed a billing error and said there was no intent to defraud.

"If the GSA Inspector General recommended that Sprint be reviewed for possible debarment for a million-dollar discrepancy, then Qwest, who has restated billions of revenue and earnings, was obviously a target," Guzman and Co. analyst Patrick Comack said.

Shares of Qwest were down 12 cents to close at $4.04 on the New York Stock Exchange.

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