DENVER -- A federal jury acquitted two former Qwest executives of improperly booking nearly $34 million in revenue, a stinging defeat for the government in the first criminal trial stemming from accounting irregularities at the telecommunications giant.
    The jury deadlocked in the case against a third defendant and on most counts against a fourth, leaving prosecutors the choice of retrying the high-profile case. Assistant U.S. Attorney William Leone said that decision would be made within two weeks.
   Thomas Hall, Grant Graham, John Walker and Bryan Treadway were accused of improperly booking nearly $34 million in revenue as part of a $100 million deal in 2001 to link Arizona schools to the Internet.
    Prosecutors say the four conspired to declare the revenue before the purchases were made and then lied to accountants and investigators about what they had done.
    Defense attorneys said the men were scapegoats, sacrificed by higher-ups eager to boost revenue, and that they were led to believe the deal was legitimate by accountants and company officials.
    "They lumped me in," said Walker, who was cleared of all charges. "The FBI and U.S. Attorney's Office never spoke to me before they indicted me."
    Treadway, who also was acquitted, declined to comment.
    The verdict is the first to come out of investigations that prompted Qwest chief executive Joseph Nacchio to quit in 2002 and ultimately led the Denver-based company to erase $2.5 billion in revenue. Qwest provides telephone services in 14 states in the Midwest and West, including Utah.
    All four men had faced 11 charges, including fraud and conspiracy. A conviction could have meant decades in prison.
    Graham, a former chief financial officer of the global business unit, was acquitted of three charges and a mistrial was declared after the jury failed to agree on eight remaining charges.
    The judge also declared a mistrial in the case against Hall, a former senior vice president. The jury failed to agree on any counts against him.
   During deliberations, the jury had asked the judge for guidance on what constituted criminal intent. It said Friday it could not go any further.
   According to testimony in the case, Qwest reported the revenue from a sale of computer equipment to the Arizona School Facilities Board, which didn't pay for any of it until six months later.
    In a scramble to meet revenue targets, prosecutors said, the defendants cajoled Cisco Systems into sending whatever equipment it had to a Phoenix warehouse by June 30, 2001, the end of the quarter. Some of the equipment was not even the right type, witnesses said.
    "These four gentlemen didn't bilk Qwest of millions of dollars," Graham's attorney, Dan Sears said during closing arguments. "Call it misguided, call it exuberant, but don't call it criminal."
   
   Events leading to the trial
   
   * Feb. 1, 2000: Qwest wins contract to provide high-speed Internet access for Arizona schools.
   
   * June 20, 2001: Morgan Stanley Dean Witter downgrades Qwest stock after analyst questions accounting practices.
   
   * Aug. 22: Qwest chairman Joseph Nacchio disputes claim by Morgan Stanley that Qwest was using questionable accounting to hide slowing sales and sagging profits.
   
   * Feb. 11, 2002: Qwest says it will cooperate with a subpoena stemming from a government investigation into a swap of fiber-optic network capacity with Global Crossing.
   
   * March 11: Qwest says it will respond fully to a Securities and Exchange Commission request for documents in an inquiry into accounting practices in 2000, 2001.
   
   * April 4: Qwest says SEC has begun formal inquiry into accounting practices.
   
   * June 16: Nacchio resigns as chairman and CEO, is replaced by Richard Notebaert. Founder Philip Anschutz resigns as nonexecutive chairman but remains on the board.
   
   * July 10: Justice Department confirms criminal investigation of Qwest.
   
   * July 29: Qwest says it will restate earnings from 2000, 2001.
   
   * Aug. 20: Qwest announces sale of its yellow pages business for more than $7 billion, heading off bankruptcy threat.
   
   * Sept. 22: Qwest reverses $950 million in revenue from fiber-optic capacity swaps.
   
   * Oct. 29: Qwest says it will restate $531 million in revenue that was improperly recognized, and take nearly $11 billion in charges for reduced value of telephone and fiber-optic networks.
   
   * Oct. 29: Qwest says it will restate $531 million in revenue that was improperly recognized, and take nearly $11 billion in charges for reduced value of telephone and fiber-optic networks.
   
   * Nov. 15: Qwest says it will erase $358 million in earnings for 2000, 2001.
   
   * Feb. 11, 2003: Qwest restates more financial results, lowering 2000 and 2001 revenue by $2.2 billion.
   
   * Feb. 19: Qwest reports $35.9 billion loss for 2002.
   
   * Feb. 25: Four former Qwest executives indicted by Justice Department for alleged conspiracy and securities fraud. They and four other former and current Qwest officials are named in an SEC civil lawsuit alleging fraud. The complaint was put on hold pending end of criminal case.
   
   * Aug. 28: Former Qwest chief financial officer Robin Szeliga leaves the company after becoming a key witness in federal probes of the company.
   
   * Oct. 16: Qwest files restated earnings for 2000 and 2001, raising the total revenue erased for the period to $2.54 billion.
   
   * Feb. 23, 2004: Opening statements begin in trial of former executives Grant Graham, Thomas Hall, John Walker and Bryan Treadway, who face securities fraud, wire fraud and other charges.
   
   * April 16: Walker and Treadway cleared of all charges. Jury acquits Graham on three charges, deadlocks on remaining eight. Also deadlocks on all 11 charges against Hall.
   

Salt Lake Tribune

-- Anonymous, April 19, 2004