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
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
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
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
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
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
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
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
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
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
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
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
Trujillo's golden parachute
Change-in-control payment: $36.9 million
• Payment for
signing agreement: $10 million
payment: $13.7 million
airplane allowance: $5.5 million
space and administrative support: $2 million
equivalent award: $1.5 million
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