The spotlight is beating down on




The big Denver telco said in its 10-K filing Monday that the staff of the

Securities and Exchange Commission

recommended an action against the company over its failure to include a statement of GAAP earnings in its year 2000 financials, made public Jan. 24, 2001.

It isn't clear whether the full commission concurred or whether the agency has decided how to proceed; the SEC doesn't comment on current investigations. For its part, Qwest believes any action would be without merit. But clearly the recommendation of the SEC staff indicates mounting displeasure on the part of regulators over how companies put their best feet forward in earnings reports.

The company presided over an early evening conference call with analysts and investors to discuss the 10-K and other issues, but CEO Joe Nacchio declined to offer details beyond those offered in the filing. The company did note that it plans a goodwill writedown of $20 billion to $30 billion in the second quarter to take care of an accounting change, but observers don't expect that announcement to have much effect on the stock. The charge, related to Qwest's acquisiton of U S West, is similar to big writedowns at companies like



AOL Time Warner

, all of which proved to be nonevents from an investing standpoint.

The SEC staff's apparent beef with Qwest lies with the company's decision to provide for 2000 only pro forma data that excluded one-time items resulting primarily from Qwest's acquisition of U S West. Some investors have criticized Qwest for its treatment of that transaction, claiming that Qwest made its own results look better by emphasizing pro forma numbers that excluded a host of costs. Qwest has said its accounting is proper.

The U S West deal isn't the only matter that has regulators and investors taking a second look at Qwest's accounting. Some observers say the company engaged in network-capacity swap deals over the last year that boosted financial results without offering significant business value; Qwest has said it considered all business alternatives before entering any deal.

examined a particularly heavily scrutinized deal last month.

Qwest shares have fallen over the last year and a half as investors have increasingly come to question the company's financial underpinnings as well as its disclosure practices. Monday, Qwest fell 22 cents to $8.