Qwest investigated for suspect accounting

NEWS The accounts of US telecoms company Qwest are being investigated by the US Securities and Exchange Commission. The company admitted on Monday that the SEC asked it to provide information on how it classified certain types of revenues in its 2000 and 2001 accounts. Qwest said some of its revenues were generated by selling blocks of capacity to other telecoms companies. This kind of exchange is known as a "hollow swap" and is widespread in the industry, with many telcos arguing that exchanging capacity is a legitimate part of their
businesses. But telecoms carriers who swap capacity for little reason as a way of inflating their profits are the subject of a crackdown by accounting authorities. Earlier in March, the Accounting Standards Board (ASB) in the UK said it plans to investigate the practice. Companies such as Cable & Wireless, Colt, KPNQwest and Level 3 regularly lease capacity from each other, though the ASB reckons many such transactions may be accounted for illegally.