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Sarbanes-Oxley News & Developments
Quest Ex-Staffers May Face Civil Charges From SECProbe focuses on Purchase of Shares by Executives and Secret Sales Agreements.
> > The SEC is considering civil charges against more than 20 former executives and employees of Quest Communications International Inc.
The SEC is focusing on two issues, one is executives purchases of low-cost shares, prior to their initial public offering, from telecom-gear suppliers to Quest. The other issue is use of secret side agreements by Quest sales teams.
This case appears to be the first government crackdown on alleged misuse of share distributions, which sometimes were dubbed -friends and family- allocations. It was common for many new technology companies to allow executives of key clients to purchase shares in highly coveted IPOs. These shares often doubled or tripled in their first day of trsding.
People familiar with the matter said that investigators also are probing how Quests board oversaw the awarding of IPO shares from suppliers. Current CEO Richard Notebaert barred such practices in late 2002. Under former CEO Joseph Nacchio, employees could make investments as long as they received approval from Quests legal department.
Most serious would be a charge that Quest executives had accepted bribes to steer business toward equipment makers that offeres them pre-IPO shares.
Source: WSJ article by Dennis K. Berman & Scott Thurm dated May 1, 2003
Published:2003-05-01
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