quietly settles lingering lawsuits
Resolutions reached with investors over Nacchio-era losses
By Jeff Smith
Rocky Mountain News
Saturday, February 3, 2007
Qwest Communications has quietly settled several lingering
fraud lawsuits since late December, according to court
records. The settlements mark the latest step in the Denver
telco's continuing effort to clear the legal mess stemming
from the Joe Nacchio era.
They also come before the March criminal insider-trading
trial of former Qwest Chief Executive Nacchio, a trial that
could reveal additional embarrassing incidents about the
telco in 2000 and 2001.
The most recent settlements are with investor groups that
decided against participating in a $400 million class-action
settlement because they believed the recovery -- pennies on
the dollar -- was too low.
In general, all the lawsuits alleged that Qwest, under
Nacchio, misled investors and artificially inflated
financial results. Nacchio has denied wrongdoing.
As reported this week, the California State Teachers'
Retirement System, or CalSTRS, recently negotiated a $46.5
million settlement -- nearly 30 percent of its estimated
losses, many times better than what it stood to get from the
Qwest paid an undisclosed portion of the settlement, while
other payments came from former auditor Arthur Andersen,
several investment banks and Nacchio through an insurance
Federal court records show Qwest also has settled with the
New York City Employees Retirement System, which claimed
losses of $300 million, and with Stichting Pensioenfonds ABP
of the Netherlands, which alleged losses of more than $100
million. Terms of those settlements weren't disclosed.
The Teachers' Retirement System of Louisiana, which says it
lost $23 million, has a tentative settlement with Qwest but
hasn't filed the paperwork in court, according to the
group's attorney, I. Walton Bader.
Bader also represents the Shriners Hospital for Children,
which he said also suffered about $23 million in losses.
Bader said there have been settlement negotiations in that
case but that the sides still are far apart.
Qwest spokesman Bob Toevs has confirmed the CalSTRS
settlement, saying the company is happy to have resolved the
matter. But he declined to comment about the other
Nacchio's attorney, Herbert Stern, was quick to say this
week that Nacchio's $1.5 million settlement with CalSTRS
came out of insurance money rather than Nacchio's own pocket
and that there was no admission of guilt.
Steve Williams, a CalSTRS attorney, responded that what was
important to CalSTRS is that Nacchio not use Qwest money for
his portion of the settlement.
Williams added that "no one ever admits guilt" in such
Qwest also faces similar litigation in several state courts
around the country, and the status of those cases couldn't
immediately be determined.
It also was unclear whether Qwest has enough money in its
litigation reserves to cover the recent settlements or has
set aside additional money in the account.
Some of Qwest's recently
settled fraud lawsuits:
California State Teachers'
Retirement System, $46.5 million, Qwest's portion
New York City Employees
Retirement System, amount undisclosed.
Stichting Pensioenfonds ABP
of the Netherlands, amount undisclosed.
Teachers' Retirement System
of Louisiana, tentative settlement, amount
smithje@RockyMountainNews.com or 303-954-5155