DENVER -- Attorney General John Ashcroft announced criminal indictments against four former midlevel Qwest executives Tuesday and the Securities and Exchange Commission announced eight civil complaints in the same probe.

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Ashcroft Explains Qwest Indictment

The Denver-based communications company has been the subject of a nearly yearlong investigation by federal prosecutors and the SEC amid allegations that Qwest had overstated its value and entered into risky business arrangements.

Ashcroft, in an announcement at a news conference in Washington, said arrest warrants were issued for Grant Graham of Evergreen, chief financial officer for Qwest's global business unit; Thomas Hall of Englewood, a senior vice president in the global business unit; John Walker of Littleton, a vice president in the unit; and Bryan Treadway of Atlanta, an assistant controller.

The four were indicted on 12 counts by a federal grand jury in Denver. The counts include conspiracy, securities fraud, filing false reports with the SEC, making false statements to accountants, and wire fraud.

The four are accused of devising a scheme to create more than $33 million in revenue by wrongly reporting a purchase order with the Arizona School Facilities Board, in violation of SEC rules.

The government said Qwest sold equipment including materials to create Internet access to the statewide school computer network, billed the customer and then held the merchandise for later delivery. In violation of SEC rules, they booked the revenue before the project had been complete.

"The defendants devised a scheme to recognize falsely more than $33 million of additional revenue for the second quarter of 2001, a business quarter in which Qwest was experiencing weak sales. As charged, the defendants sought to fill a gap in revenue for the company's global business unit by immediately, but improperly, reporting millions of dollars from a purchase order with the Arizona School Facilities Board. The indictment also alleges that the defendants then sought to hide their fraudulent actions by falsifying documents and engaging in securities and mail fraud," Ashcroft said.

If convicted, the defendants could face up to 10 years in prison and fines of $1 million.

"As we continue our efforts to battle corporate fraud, our message is clear. We will protect the integrity of our markets by punishing those who falsify financial information out of sheer greed," Ashcroft said. "No boardroom is beyond the reach of the law. No executive is above the law."

Besides the criminal indictment there is also the civil fraud suit that the government is pursuing.

In the civil suit, the SEC said eight current and former Qwest employees inflated revenues by about $144 million.

The SEC said Qwest's global markets unit was falling short of revenue projections so the eight executives allegedly "cooked the books" to improve their numbers. The Arizona deal accounted for $33 million and in another deal with a company called Genuity, revenues were pumped up by about $111 million, the SEC said.

The SEC is asking for tough punishment. Besides the usual fines and money penalties, it is asking for the salaries, bonuses, stock and other compensation made during the 1½ years they were allegedly involved in fraudulent activities.

It also asked that four of the eight be prevented from ever again working as an officer or director of a publicly held company.

The civil case named the four former executives included in the criminal indictment (listed above) and four other former and current Qwest executives, including Joel Arnold, the former senior vice president of global business; Douglas K. Hutchins, a former director of global business; William Eveleth, currently the senior vice of financial planning and analysis and Richard L. Weston.

"Simply put, the defendants couldn't make the numbers work, so they cheated," said Bill Donaldson, the newly appointed chairman of the SEC. He spoke following Ashcroft during a joint news conference.

The Justice Department said Tuesday that its investigation was continuing, along with the separate SEC investigation.

Qwest issued the following statement after the indictments were announced: "Qwest continues in its efforts to cooperate with the government in connection with the investigations. Fundamental to the spirit of service is complete integrity in all we do. As a company and as individual employees, we hold ourselves to the highest ethical standards as we conduct our business."

The indicted executives have 48 hours to report to authorities.

"They are rounding up the midlevel people to try and collect more information on the top guys. It's the same strategy used in the WorldCom case," said a source quoted by CNN, who declined to be identified by name.

Qwest is the local phone company for 14 states extending from Minnesota west to Washington state and southwest to Arizona and New Mexico. It bought US West, one of the Baby Bells created from the breakup of AT&T, following a bidding war with Global Crossing.

Qwest employs roughly 50,000 people -- 13,000 of them in Colorado and many of them extremely upset with top managers that their retirement accounts have been virtually wiped away because of poor earnings.

Qwest executives are charged with cashing out millions of dollars in options before the stock fell.

Qwest has had to restate its earnings twice and has lost close to $2 billion.

The company fired Arthur Andersen LLP, the auditing firm that was convicted of obstruction of justice in the Enron collapse, and brought in KPMG LLP in June to look at its books.

Shares of Qwest were slightly lower in midday New York trading following the announcement.