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Business Services Industry

Wolf Haldenstein Commences Securities Fraud Class Action Suit Against Qwest Communications International, Inc

Business Wire, August 17, 2001

Business Editors/Legal Writers

NEW YORK--(BUSINESS WIRE)--Aug. 17, 2001

Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the District of Colorado on behalf of all purchasers of Qwest Communications International, Inc. ("Qwest" or the "Company") (NYSE: Q) securities between March 22, 2001 and July 23, 2001 (the "Class Period"), inclusive, against Qwest, Joseph P. Nacchio (Chairman and Chief Executive Officer), and Robin R. Szeliga (Chief Financial Officer since 4/18/01, Senior Vice President of Finance prior to 4/18/01, and Interim Chief Financial Officer from 3/01-4/18/01).

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If you would like to view a copy of the complaint filed in this action, please visit the Wolf Haldenstein web site located at http://www.whafh.com.

The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities. Specifically, the complaint alleges that on March 22, 2001, 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. On April 24, 2001, Qwest reported its financial results for 1Q01, including revenue growth of 12% and EBITA growth of 16%. Subsequent to these statements, Qwest's stock price increased, trading as high as $41.83 on April 30, 2001.

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

Inc. 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 earnings were better than expectations due to defendants' failure to properly "write-down" the value of Qwest's holdings in KPNQwest, which was materially overstated as a result; (c) Qwest's 1Q01 earnings were increased by $0.01-$0.02 due to its aggressive use of capitalization to classify tens of millions of dollars of interest and software development costs as assets rather than expenses, which would contribute to decreased earnings in future quarters; (d) there was no way Qwest's future earnings would be nearly as strong as represented due in part to the accounting manipulations defendants engaged in which would adversely affect future results, as expenses were being deferred to future quarters and years; and (e) Qwest's selling, general and administrative ("SG&A") expenses were only 22% of sales, not due to tight expense controls as represented, but to improper classification of SG&A expenses as cost of sales. Subsequently, on July 20, 2001, Qwest admitted that its classification of costs had been incorrect such that cost of sales had been overstated and SG&A expenses had been understated.

As a result of defendants' issuance of alleged material and misleading statements (including a false 1Q01 financial statement), Qwest's stock traded as high as $41.83 per share. The individual defendants took advantage of this inflation, selling 1,255,000 shares of their Qwest stock for proceeds of $49.5 million. Ultimately, on July 24, 2001, Qwest conceded that it recorded a write-down of over $3.1 billion, primarily related to its ownership in KPNQwest. Upon this admission/revelation, Qwest's shares dropped once again, trading below $27.

Plaintiff seeks to recover damages on behalf of all those who purchased or otherwise acquired Qwest securities during the Class Period. If you purchased or otherwise acquired Qwest securities during the Class Period, and either lost money on the transaction or still hold the securities, you may wish to join in the action to serve as lead plaintiff. If you purchased Qwest securities during the Class Period, you may, no later than September 25, 2001, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiffs." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Wolf Haldenstein, or other counsel of your choice, to serve as your counsel in this action.

Business Services Industry

Wolf Haldenstein Commences Securities Fraud Class Action Suit Against Qwest Communications International, Inc

Business Wire, August 17, 2001

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