UNITED STATES DISTRICT COURT
DISTRICT OF COLORADO
Civil Action No.
NEW ENGLAND HEALTH CARE EMPLOYEES PENSION FUND, On Behalf of
Itself and All Others Similarly Situated,
Plaintiff,
vs.
QWEST COMMUNICATIONS INTERNATIONAL, INC., JOSEPH P. NACCHIO,
ROBIN R. SZELIGA,
Defendants.
CLASS ACTION COMPLAINT FOR VIOLATION OF
THE SECURITIES EXCHANGE ACT OF 1934
SUMMARY AND OVERVIEW
1. This is a securities class action on behalf of all purchasers of the publicly
traded securities of Qwest Communications International, Inc. ("Qwest" or the "Company")
between 3/22/01 and 7/23/01 (the "Class Period"), against Qwest and certain of its officers
and directors for violations of the Securities Exchange Act of 1934 (the "1934 Act").
2. Qwest is a broadband Internet communications company that provides
communication services, data, multimedia and Internet-based services on a national and
global basis, and wireless services, local telecommunications and related services and
directory services in a 14-state local service area. In 7/00, Qwest completed its long
anticipated merger with U.S. West, Inc. in a $40 billion transaction. To make the merger
appear successful, defendants made false statements about the Company's business and
finances, manipulating the Company's results through several accounting artifices.
3. On 3/22/01, defendants Joseph Nacchio and Robin Szeliga appeared at a UBS
Warburg hosted senior management meeting where they falsely claimed that they would
legitimately achieve 1Q01 and FY01 EPS of $0.11 and $0.59, respectively.
4. On 4/24/01, Qwest reported its financial results for 1Q01, including revenue
growth of 12% and EBITA growth of 16%.
5. Subsequent to these statements, Qwest's stock price increased, trading as high
as $41.83 on 4/30/01. In fact, Qwest's 1Q01 results and its statements regarding those results
as well as the statements regarding the success of the integration with U.S. West and the
Company's strong expense controls were materially false and misleading due to the
Company's improper valuation of KPNQwest in violation of Generally Accepted Accounting
Principles ("GAAP") (as the value of its investment in KPNQwest had already declined
months earlier), and due to the following undisclosed facts: (a) Qwest's 1Q01 earnings were
better than expectations primarily due to its change in the discount rate to calculate its
pension obligations, increasing Qwest's 1Q01 results by at least $0.03; (b) Qwest's 1Q01
- 1 -
SNIPPETS:
This is a securities class action on behalf of all purchasers of the publicly traded
To make the merger appear successful, defendants made false statements about the Company's
On 3/22/01, defendants Joseph Nacchio and Robin Szeliga appeared at a UBS Warburg hosted
On 4/24/01, Qwest reported its financial results for 1Q01, including revenue growth of 12%
Qwest's 1Q01 results and its statements regarding those results as well as the statements
Company's improper valuation of KPNQwest in violation of Generally Accepted Accounting
This was the reason SG&A expenses had been only 22% of revenue in 1Q01 and not due to Qwest's
As a result of defendants' issuance of material and misleading statements, Qwest's stock
The individual defendants took advantage of this inflation, selling 1,255,000 shares of their
Defendant Qwest is a broadband Internet communications company that provides communication
Based on results for January and February, which shows strong growth for Qwest's Business
of revenues and EBITDA of $8.5B-$8.7B for 14.9%17.6%); and CAGR growth rates for 15%-17% revenue
"We achieved strong revenue and EBITDA growth for the quarter as our focus on execution and
During the call and in follow up conversations with analysts Nacchio and Szeliga stated *
Q managed extremely solid execution on all aspects this quarter, meeting expectations for
|
