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September 21, 2005
Mimi Hull, President 
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 5, 2005, Qwest's legal counsel filed a formal request -- a motion for summary judgment -- asking the federal court to dismiss the pending case.  You can go to this URL and read a copy of the company's legal brief: 
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:  On September 16, 2005, Qwest's legal counsel filed a reply brief.  You can go to this URL and read a copy of the company's 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 and under the heading "ERISA Disclosure - Phelps v. Qwest" view all of the updates, the Complaint and other legal papers that have been posted.