It's hard to say what kinds of details the Justice Department is looking into. It declined to comment for this story. There are several instances where Qwest forged reciprocal relationships that may be of interest. These examples, culled from SEC filings and Light Reading reports, give some idea of the company's practices when working with up-and-coming startups or newly public companies.
- In early 2000, Qwest bought several different classes of Covad Communications Inc. (OTC: COVD) shares, representing an aggregate investment of $15 million. "Concurrently with these strategic equity investments, we entered into commercial agreements with... Qwest," Covad's SEC filings state. "These agreements provide for the purchase, marketing and resale of our services at volume discounts..."
- Qwest has told Light Reading that it helped CoSine Communications Inc. (Nasdaq: COSN) design, test, and analyze its equipment during the company's early days. In return, CoSine let some senior Qwest executives -- including former executive VP of corporate development, Marc Weisberg; executive VP and general counsel Drake Tempest; and executive VP and chief strategy officer Lewis Wilks -- buy "friends and family" shares before the startup went public. CoSine went public in 1999 and, in February 2000, it announced that Qwest had placed a multimillion-dollar purchase order for its gear (see Is Qwest Shunning Startups?).
- Qwest got warrants for agreeing to buy Tellium Inc.'s (Nasdaq: TELM - message board) gear. Qwest executives accepted some $10 million worth of stock options from the startup in exchange for being allowed into its network (see Tellium Lawsuits Allege Rigged IPO). Weisberg was one executive who enjoyed Qwest's cozy relationship with CoSine and other startups, landing a board seat at Tellium for a time (see Love Lost for Tellium).
- Sometimes, Qwest's relationship with kindred startups didn't fare so well. In 2000, it agreed to purchase some $150 million of equipment from Corvis Corp. (Nasdaq: CORV) within two years. Some months later, it lopped $110 million from the purchase order (see Corvis's Qwest Deal Reduced by $138M).
- In 2000 and 2001, Qwest bought more than $80 million worth of gear from Redback Networks. During that time, Qwest's Cyber Solutions group announced a five-year, $18 million contract with Redback to help the vendor with enterprise resource planning, customer relationship management, and manufacturing operations.
- Kleiner Perkins Caufield & Byers partner and Qwest board member Vinod Khosla invested in or served on the boards of several firms that had dealings with Qwest, including Redback, CoSine, Corvis, and Juniper Networks Inc. (Nasdaq: JNPR). Khosla, through a spokesperson, says he hasn't been contacted by the Justice Department regarding any of the Qwest investigations. He declined further comment.
— Phil Harvey, Senior Editor, Light Reading