AUSWR
The Association of U S West Retirees
 

 

 

Sol's goodbye kiss
US West CEO got $72 million severance
By Jeff Smith, Rocky Mountain News
Thursday, August 3, 2006

Qwest Communications agreed to pay then-U S West CEO Sol Trujillo a $72 million golden parachute a day before the merger between the two communications giants closed on June 30, 2000.  The severance package, which included $5.5 million for the use of a corporate plane for 3 1/2 years, excludes the value of stock options that immediately vested and certain other long-term incentives.  Those potentially added tens of millions of dollars to his ultimate windfall.

Details of the package -- believed to be previously unreported and amended from an earlier severance agreement -- were recently found by a Denver attorney in court documents connected with a case involving shareholder dividends.

Qwest apparently wasn't required to file the last-minute arrangement with the Securities and Exchange Commission.

Just months before, Trujillo had decided not to stay on with the merged company because of style differences with then-Qwest CEO Joe Nacchio.  Trujillo reportedly left a four-year retention package worth $48 million on the table.  When the merger was completed, it was widely reported that Trujillo had received a compensation package of $36.9 million.

Over the years, Trujillo's severance has been reported in a wide range -- from the $36.9 million to as high as $230 million by a shareholder advisory group.

Curtis Kennedy, attorney for the Association of U S West Retirees and the one who discovered the documents, characterized Trujillo's severance agreement of June 29, 2000, as "outrageous."

"We're the little people, the retirees who built the company, and these big shots were taking care of themselves . . . greedy and gluttonous, lining their pockets," Kennedy said.

Trujillo is now chief executive of Telstra, an Australian communications giant.  He couldn't immediately be reached through Telstra media officials this week.

Lynn Turner, former chief accountant of the Securities and Exchange Commission and now research director for the shareholder advisory group Glass Lewis & Co., said the Trujillo arrangement is another example of why changes in executive pay disclosure were warranted.

"This type of payment to a departing CEO is why the SEC needed to significantly improve the disclosure of executive compensation arrangements," Turner wrote in an e-mail.  "Given the short tenure of Sol as CEO, one must seriously question what value or benefit was provided to investors by a $72 million payment for doing nothing but walking away."

Trujillo had a 26-year career with U S West, including a two-year stint as chief executive.

Turner lives in Colorado and has tracked Qwest and U S West for years.

The SEC approved new rules last week that require additional executive compensation disclosure.  The SEC has said the issue -- stoked by the public's anger over excessive executive compensation and the national scandal over the backdating of stock options -- has stirred more public interest than any other issue in the regulatory agency's history.

The $72 million payment to Trujillo, according to court documents, included a $36.9 million change-in-control payment, a $10 million payment to sign the agreement, a $13.7 million pension payment, the $5.5 million airplane allowance, $2 million worth of office space and administrative support, and nearly $1 million in perks.

The perks included memberships at Castle Pines and Glenmoor country clubs south of Denver, $100,000 worth of limousine services and more than $13,000 to attend the World Economic Forum.

In return, Trujillo pledged not to make any disparaging remarks about Qwest.

The agreement was signed by Frank Popoff, then chairman of the Qwest board's human resources committee.  Popoff, still a Qwest director and a former chairman and chief executive of Dow Chemical Co., couldn't be reached for comment.

Qwest declined comment, as did Nacchio's attorney Herbert Stern.  Nacchio separately faces 42 counts of insider trading in connection with selling $101 million of Qwest stock during the first five months of 2001. He denies wrongdoing.

Kennedy noted the amended agreement to Trujillo followed a testy exchange between Trujillo and Nacchio over U S West's plans to pay its stockholders one final dividend upon completion of the merger.

Nacchio believed the money would be better spent on investing in video services, wireless programs and customer-service improvements.

In a letter to Nacchio on June 2, 2000, Trujillo wrote that "our shareholders' interest and expectations are important to us, and we do not believe it would be in our mutual interest to surprise them this late in the game."  The U S West board approved the 53.5 cents-a-share dividend on June 5.

Replied Nacchio on June 6:  "U S West materially breached the merger agreement by declaring a $270 million dividend payable to shareowners of record at the close of business on June 30."

On June 7, U S West changed the shareholder record date from June 30 to July 10, effectively enabling Qwest to kill the dividend after the merger.

On June 21, U S West shareholders went to Denver District Court to try to force the phone company to set aside $273 million to pay the stock dividend.

On June 23, the motion was denied.  Trujillo's amended golden parachute agreement was dated June 23 and signed on June 29.

Last year, U S West shareholders won a $50 million class-action settlement on the dividend issue.  Kennedy ran across the Trujillo severance documents while preparing an appeal of the $16.3 million award to the plaintiff attorneys, a fee he has said is another example of "greed gone wild."

Trujillo's golden parachute

  Change-in-control payment:  $36.9 million

  Payment for signing agreement:  $10 million

  Pension payment:  $13.7 million

  Corporate airplane allowance:  $5.5 million

  Office space and administrative support:  $2 million

  Dividend equivalent award:  $1.5 million

  Other perks:  $943,441 (including Glenmoor and Castle Pines country club memberships, $100,000 in limousine services and $13,000 to attend the World Economic Forum)

  About 2 million stock options, which immediately could be exercised

http://www.southwest.com/ding/