Redback Exec Part of Criminal Probe

Joel Arnold is among those being investigated by federal prosecutors as part of a criminal investigation at Qwest

May 1, 2003

2 Min Read
Redback Exec Part of Criminal Probe

Redback Networks Inc. (Nasdaq: RBAK) says it won't comment on the fact that one of its top executives is a subject of a criminal investigation. Redback's senior VP of field operations, Joel Arnold, is the subject of a criminal investigation for securities fraud, according to a motion filed last month by the U.S. attorney's office of Colorado.

Arnold and several other former Qwest Communications International Inc. (NYSE: Q) executives are the subject of a Securities and Exchange Commission (SEC) civil suit that alleges they inflated Qwest's revenues by about $144 million in 2000 and 2001 in order to meet earnings projections and revenue expectations (see Prosecutors' Party at Qwest and Redback's Arnold Included in SEC Suit). Federal prosecutors are asking the SEC to shelve their case, for now, so that the criminal investigation can go forward.

In the filing, the U.S. attorney's office says that the SEC's civil case might lead to some crucial information in the federal case to be prematurely disclosed. More interestingly, the filing confirms that Arnold is part of a federal criminal investigation, an item that was not mentioned in the SEC's civil suit.

Redback CEO Kevin DeNuccio tried to downplay Arnold's troubles in a February email to employees, Light Reading has learned. "The charges brought against Joel by the SEC are civil charges, not criminal charges," DeNuccio wrote. "Joel is not one of the four individuals indicted in the criminal proceedings."

DeNuccio expressed his support for Arnold in that email and said that Redback's executive team is "fully supportive" of him. That was, of course, before it became apparent that Arnold is dealing with a potentially more troubling situation.

If Arnold is found innocent in the federal investigation, he would then have to contend with the SEC, which, as part of its civil action, is trying to permanently bar Arnold and the other former Qwest executives from acting as directors or officers of any publicly held company.

— Phil Harvey, Senior Editor, Light Reading

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