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Nacchio sues Qwest, claims unpaid legal fees

By Jeff Smith, Rocky Mountain News
May 26, 2007

 

Joe Nacchio has sued Qwest Communications, claiming the Denver telco is balking in its obligation to pay legal fees.

Qwest's general counsel Richard Baer declined to commit to continue paying the fees during a recent conversation with Nacchio's lead attorney Herbert Stern, according to the complaint filed in the Delaware State Court of Chancery.

He told Stern that Qwest has engaged outside counsel to consider its obligations.

A Nacchio attorney claims invoices for legal fees and expert fees have been submitted but remain unpaid.

Nacchio, Qwest's former CEO, was convicted last month on 19 insider trading counts in connection with the sale of $52 million of Qwest stock in April and May 2001. He said he plans to appeal. He is scheduled to be sentenced July 27 and is expected to get roughly 10 years in federal prison.

Qwest and insurance have covered Nacchio's legal fees since he was ousted from the Denver telco in June 2002.

Qwest hasn't disclosed how much it has paid, but experts estimate the total to be in the tens of millions of dollars.

The Denver telco said immediately after Nacchio's conviction that it would consider the impact of the verdict on its obligation to continue paying legal expenses.

Qwest CEO Dick Notebaert told stockholders this week the company and its board of directors were still assessing "the correct path" based on Delaware law and corporate bylaws. There are "lots of lawyers involved as you can imagine," Notebaert said. Qwest is incorporated in Delaware.

Nacchio's complaint asserts Qwest is obligated to continue advancing the fees to his lead law firm Stern & Kilcullen.

"The advancement of fees, as required by the employment agreement and the resignation agreement, is essential for plaintiff to protect himself legally," attorney Kevin Abrams wrote in the complaint.

Qwest spokesman Nick -Sweers said Friday that Nacchio's complaint "is without merit and we'll defend ourselves vigorously."

Lawrence Hamermesh, a professor at the Widener Institute of Delaware Corporate Law, said Qwest is in a tough position.

"They may not have the running room they'd like, and I wouldn't be surprised to see a commitment (to pay the legal expenses) until the conclusion of the proceedings, until the final judgment" after appeals run their course.

But Hamermesh said he thinks it's a "terrific strategy" by Qwest not to advance the legal fees while it is assessing its legal obligation.