Like WorldCom's Scott Sullivan, former Qwest finance chief Robin Szeliga could play a crucial role in the government's 3-year-old effort...

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DENVER — Like WorldCom’s Scott Sullivan, former Qwest finance chief Robin Szeliga could play a crucial role in the government’s 3-year-old effort to punish anyone involved in the company’s multibillion-dollar accounting scandal.

Szeliga agreed last week to cooperate with federal prosecutors who have had poor luck so far in successfully prosecuting former Qwest managers.

Terms of the agreements with federal prosecutors and Securities and Exchange Commission (SEC) regulators were not disclosed so it is unclear how valuable Szeliga’s cooperation will be. But industry experts say she was in a position to know what executives knew and when they knew it, including former CEO Joe Nacchio.

“To have the cooperation of a CFO is critical, and it’s a coup for the government,” securities attorney Thomas Ajamie of Houston said.

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“Normally, you don’t take a CFO’s cooperation in order to get testimony and to further investigation against the guys in the copy room. It’s normally the people at the CFO’s level or senior.”

Telephone messages seeking comment from Szeliga’s attorney were not returned.

Marcia Horowitz, a spokeswoman for Nacchio, denied the former CEO was involved in anything illegal. “As Mr. Nacchio stated consistently in the past, he did nothing wrong during his tenure at Qwest,” Horowitz said.

In white-collar-crime cases, prosecutors often try to file charges against lower-level managers with the ultimate goal of gaining their cooperation against top executives, said Tony Leffert, a Denver attorney and former prosecutor in the Justice Department’s fraud section.

“The biggest issue there is deterrence,” he said. “It becomes important that you address any criminal conduct at the highest level wherever that might be.”

For example, Sullivan, a former WorldCom chief financial officer, pleaded guilty to his role in an $11 billion accounting fraud that brought down the company. He testified against former CEO Bernard Ebbers, who was convicted in March of fraud, conspiracy and false regulatory filings.

At Enron, former CFO Andy Fastow pleaded guilty last year to two counts of conspiracy. He is expected to be a key witness in the conspiracy and fraud trials of Enron founder Kenneth Lay, former President Jeffrey Skilling and former chief accounting officer Richard Causey. All three have pleaded not guilty.

Szeliga, 44, joined Qwest in 1998 and held various accounting positions before being promoted to CFO in March 2001. She stayed in that job until 2002, when Nacchio was replaced by Richard Notebaert who, in turn, hired Oren Shaffer as CFO. Szeliga became executive vice president of finance until she resigned in August 2003.

The government investigation into Denver-based Qwest began in February 2002. The SEC has said the fraud at Qwest occurred between April 1999 and March 2002, allowing it to improperly report approximately $3 billion in revenue that facilitated its 2000 merger with US West.

Among other things, the SEC said Qwest repeatedly booked revenue from one-time sales of equipment and fiber-optic swaps while falsely claiming to investors that the income was recurring. Qwest later restated earnings from 2000-01 to erase about $2.2 billion in revenue.

Qwest, the local phone provider in 14 Midwestern and Western states including Washington, agreed last year to pay $250 million to settle SEC charges of fraud in a deal that did not cover individual officers.

Szeliga initially was a witness during probes into Qwest, testifying before a House subcommittee and later at the conspiracy and fraud trial of four former midlevel Qwest managers.

Last week, Szeliga reached a tentative plea agreement with federal prosecutors on one count of insider trading for allegedly selling 10,000 shares of Qwest based on non-public information. Prosecutors said Szeliga earned a net profit of $125,000 on the sale.

They alleged she knew various business units would fail to meet revenue targets during the first two quarters of 2001, as had been promised to investors, and that the company improperly used nonrecurring revenue to meet those goals.

A change-of-plea hearing is scheduled July 14.