September 21, 2005
Mimi Hull, President
ASSOCIATION OF U S WEST RETIREES (AUSWR)
AUSWR Board Members and General Members
This update concern the Phelps v.
Qwest Employees Benefit Committee case
pending in Denver Federal Court (the
ERISA Disclosure case). As you know, AUSWR
Executive Director Nelson Phelps formally
demanded disclosure of the "investment policy
guidelines" and "proxy voting guidelines" in
order to help him and the retiree association
police the goings on with the Qwest Pension
Plan. Mr. Phelps was particularly concerned
about a complete loss of a $67 million "put
option" investment made with pension fund monies
in late 2001. Therefore, he asked for documents
in order to determine whether that highly
unusual investment was appropriate. Qwest's
response was to give Mr. Phelps the proverbial
'poke in the eye,' essentially displaying an
attitude by the company that 'its none of your
business and since we think ERISA doesn't
specifically force us to do so, we won't reveal
the requested paperwork.' Therefore, this case
involves one very narrow and technical
question: Is Qwest required to provide certain
documents to a retiree pension plan
participant pursuant to § 104(b)(4) of the
Employee Retirement Income Security Act of 1974,
29 U.S.C. § 1001, et seq. (“ERISA”)? Of course,
we believe the answer is
“yes.” Therefore, Qwest should be required to
disclose the requested documents and pay the
civil fine, as allowed by ERISA.
On August 25, 2005 I filed a
legal brief in opposition to the
company's position. You can go to this
URL and read a copy of the legal brief:
In this latest paper, defense
counsel go to great effort to try to justify
the $67 or $68 million "put option," almost
all of which money was lost. Defense
counsel even try to call it an "insurance
policy," instead of an
"investment." Nevertheless, almost all of
the money -- the put option investment --
was lost within a few months. But, that
isn't the pending legal issue in the
Phelps case. The pending legal issue
is whether or not the requested plan
documents should have been produced to Mr.
Phelps. In the reply brief, defense counsel
say nothing not already said in their
opening brief. We thoroughly addressed
everything in the opposition brief filed on
August 25. Interestingly, in the September
16 brief, Qwest's attorneys devote 4
pages arguing that, if the Court agrees with
Mr. Phelps and the retirees, the Court
should not fine the company $110 per day,
but limit the fine to perhaps somewhere in
the range of $10 to $30 per day.
Surely, defense counsel realize it
would have been more prudent for Qwest to
have simply given Mr. Phelps the requested
documentation. What harm could that
disclosure have caused, if nothing was
amiss? Plan sponsors, like Qwest, would be
wise to discard immediately the attitude
that, "ERISA doesn't require us to disclose
certain specific information, so we aren't
going to." While Qwest has been hanging on
to that stubborn notion, after a year or two
of litigation, we believe Chief Judge
Babcock will agree with Mr. Phelps and order
production of the requested papers
plus order Qwest to make payment of a $110
daily civil fine that keeps
accumulating. Chances are that Qwest may
have paid a great deal to prove its point --
both in attorneys' fees and
retiree goodwill.
The pending motion will
await a decision by the Denver
federal judge, Chief Judge Lewis T.
Babcock, who has a lot of cases
pending before him. But, perhaps,
we will get a ruling from him before
the end of this year. Nothing
further will happen in this case
until after this motion is ruled
upon. This case is one of first
impression. No other retired person
or retiree group has made such a
legal challenge. Certainly, there
has been no other case like this one
filed anywhere within the federal
courts making up the 10th Circuit
Court of Appeals (i.e., Colorado,
Kansas, New Mexico, Oklahoma, Utah
and Wyoming). The legal issues in
the pending Phelps case
are significant not only for AUSWR,
but for other retiree groups and
individual retirees who, too, want
to police their pension plan and,
therefore make written requests for
information concerning pension plan
operations. Therefore, I
suspect Chief Judge Babcock and his
law clerks will give this matter
some extra thought and allow a
public hearing before issuing his
ruling. I will let you know what
develops.
Meanwhile, to learn more, you
should visit the "Legal Developments"
page at the AUSWR website http://www.uswestretiree.org/legal2.htm
and under the heading "ERISA
Disclosure - Phelps v. Qwest" view
all of the updates, the Complaint and
other legal papers that have been
posted.