Qwest takes hit on home sale
house cost telco $1.8 million
By David Milstead
Rocky Mountain News
Saturday, April 5, 2008
Qwest lost $1.8 million in three months because of a deal it
reached to buy the
home of CEO Ed Mueller.
Qwest revealed the loss Friday in its annual proxy statement to
shareholders. The company said it bought the home from
Mueller in September for $8.9 million, which was the average of
two independent appraisals. It then sold the home in
December for just over $7.1 million.
Relocation agreements are neither new nor atypical.
Denver-based ProLogis revealed recently it lost 20 percent in
eight months on the Florida home of CEO Jeffrey Schwartz, which
it sold in November for $2.52 million.
What is new is a declining, not rising, residential real estate
market. Companies that bought homes for their executives
in a relocation program were more likely to make money than lose
it. Now that companies are posting losses on the sales,
they're disclosing the transactions for shareholders to judge
whether they're part of the company's executive compensation.
Qwest spokeswoman Diane Reberger said the agreement to buy
Mueller's home "was part of the employment agreement we had with
Ed when he was hired. We required him to relocate."
Qwest offers similar relocation benefits to all executives at
the vice president level and above, which is under 100
The agreement to buy Mueller's home was one of several perks
granted to the Qwest CEO in his first year of employment with
Mueller gets a $75,000 "flexible benefit payment" to spend on
what he chooses. Qwest paid $39,312 in legal fees he
racked up in negotiating his employment agreement; moving
and temporary housing expenses of $29,015; and other
perquisites of $5,416, including a health physical and expenses
relating to a home security system.
The company estimated Mueller's personal use of the corporate
jet was worth $281,182, based on Qwest's cost to fly the
aircraft. Mueller has a deal that allows his stepdaughter
to use the jet to travel to Denver
from her school in
All told, Mueller, who joined the company in August made $17.4
million, including stock awards Qwest valued at nearly $13.7
million. The combination of restricted stock and options
is performance-based, requiring Mueller to wait three years and
Qwest stock to rise to a certain level.
The awards have declined in value since the August award, along
with Qwest's share price.
Former CEO Dick Notebaert made $18.5 million in 2007, including
$7.4 million in stock awards he gave up when he retired.
The total figure includes $8.03 million in severance.
Qwest general counsel Richard Baer got a performance bonus of
$1,429,695, biggest of all the top executives. Baer, who
made a salary of $633,981, was recommended for the bonus by
Mueller. The Qwest proxy said Mueller felt "Baer was
instrumental in resolving several significant legal matters that
were pending against us and . . . (his) efforts amounted to
Mueller's $17.4 million
* Salary $470,769
* Bonus $946,849
* Restricted stock $5,062,400
* Options $8,602,790
* Pension increase $16,516
* All other, including perks $2,295,565
* Total $17,394,889