By Mike Boyer
The Cincinnati Enquirer

Cincinnati Bell Inc. said Wednesday that it is investigating new allegations that its former broadband business improperly accounted for construction contracts to mislead investors.

The allegations are contained in an amended complaint filed last month in a 2-year-old shareholder class action lawsuit. The suit accused the company, then known as Broadwing Inc., of violating federal securities laws and misleading investors, who bought its stock between Jan. 17, 2001 and May 21, 2002.

Broadwing's shares plummeted 32 percent May 20, 2002, after the company disclosed that it booked $32 million in revenue from controversial swaps of leased capacity on its network with other carriers.

The new allegations maintain that the company improperly accelerated revenue from network construction contracts to meet quarterly earnings expectations of Wall Street analysts.

"For each quarter between the 4Q '00 and 3Q '01, the revenues for Broadwing's broadband segment were artificially inflated by approximately 10 percent,'' according to the amended lawsuit.

In a government filing Wednesday, Cincinnati Bell, which dropped the Broadwing name last summer after selling off the broadband business, said it was investigating the new allegations.

A spokesman declined further comment, but added, "we take such allegations seriously.''

The company has said it expects to succeed in defending the earlier allegations in the lawsuit.

Shares in Bell closed Wednesday at $5.59, up 24 cents.

Many of the allegations in the 112-page amended complaint rehashed claims contained in about a dozen individual class-actions suits, filed in late 2002 in U.S. District Court in Cincinnati.

The lawsuits accused the company and some executives, including former CEO Rick Ellenberger, who resigned unexpectedly in September 2002, and former chief financial officer Kevin Mooney, of making false statements to mislead investors about the company's prospects.

The individual cases were combined into a single consolidated complaint last October.

"All the claims are very serious because they accuse the company of not properly complying with securities laws,'' said Richard Wayne, co-lead lawyer on the lawsuit.

Wayne said the new allegations came out of information provided by unidentified former executives.

In one of the allegations, the suit says a former controller for Broadwing's Austin, Texas-based broadband unit "demanded that the Network Construction department create between $20 and $30 million in phony customer invoices at the end of each quarter between the 4Q' 00 and the 3Q '01 for work that (in many cases) was not even commenced.''

Just when the case could go to trial is unclear. No date has been set, and Judge Sandra Beckwith, who had been assigned the case, recently withdrew and no replacement has been named.

The company and other former executives named as defendants are slated to file a motion to dismiss the complaint by the end of this month, Wayne said.

E-mail mboyer@enquirer.com