Qwest admits criminal probe

The Denver-based company initially denied an investigation

Telecoms giant Qwest Communications has said that it is the subject of a criminal investigation.

The company confirmed in a statement that it was informed by the US attorney's office in Denver "that it had begun a criminal investigation of Qwest".

"The US attorney's office did not disclose the subject matter of the investigation," Qwest added.

Shares in the company were briefly suspended ahead of the announcement, but afterwards plunged as much as 41%.

They eventually closed down 31.9%, or 83 cents, at $1.77.

Last week the Wall Street Journal reported that an investigation had been started, but this was initially denied by the company on Monday.

Qwest is the US' fourth biggest local telecoms company and serves the Northwest and the Rocky Mountains.

Changes at the top

In June, the company replaced its long-serving chairman and chief executive, Joseph Nacchio, with Richard Notebaert.

Mr Notebaert is the company's new boss

Qwest said that Mr Nacchio had resigned voluntarily, but media reports claimed that he had been asked by the board to step down.

Mr Notebaert has since announced a reorganisation of the company.

Qwest's share price has fallen from $64 in March 2000.

Shareholders were also outraged by Mr Nacchio's $1.5m bonus in 2001, given the company's losses of billions of dollars.

In addition, the company's joint venture with the Dutch telecom company KPN - a European fibre-optic cable network - has gone bankrupt.

KPNQwest suffered a net loss of 375m euros in 2001, but failed to release its annual report as it fell into bankruptcy in May.

Under scrutiny

Qwest said it plans "to fully co-operate" with the investigation by the US Department of Justice.

The US regulator, the Securities and Exchange Commission is already probing the company's accounting practices.

It can only levy fines in civil actions, and is reportedly examining how the company booked some of its revenue after swapping capacity.

In recent months, the company has also struggled to manage its cash flow, with a debt pile of $26bn.

It has also seen its debt downgraded to "junk" status by credit rating agencies.

The investigation into Qwest follows a slew of US corporate scandals, including accounting fraud at the telecom firm WorldCom and the collapse of the energy trader Enron.