The Association of U S West Retirees



Nacchio sues Qwest over fees

By Al Lewis
Denver Post Staff Columnist

May 25, 2007


Qwest is balking at Joe Nacchio's legal tab after the former chief executive was convicted on 19 counts of illegal insider trading last month.

Nacchio filed a lawsuit Thursday in Delaware Chancery Court demanding that Qwest keep the funds flowing for his legal defense.

These bills could total $75 million before his appeal on criminal charges, his answer to civil charges from the Securities and Exchange Commission and several lawsuits are concluded.

Qwest officials declined comment, except to say that they would challenge the lawsuit.

Nacchio's employment contract, as quoted in the lawsuit, indemnifies him "against all liabilities and reasonable expenses ... in any threatened, pending or completed action, suit or proceeding, whether civil, criminal or administrative or investigative."

This is a typical contract for an executive at a Delaware-based corporation, said Lawrence Hamermesh, a law professor at the Widener University School of Law in Wilmington, Del.

Corporate boards love to assure executives that they are covered for anything, until it comes time to pay the bills. That's why Delaware courts have seen this sort of lawsuit before.

"The record for companies debating this isn't so hot," Hamermesh said.

The promises of indemnification are fairly straightforward. Where they get muddled are in cases involving criminal convictions. Delaware law prohibits companies from indemnifying executives who are found guilty of crimes.

Qwest may be balking because Nacchio was convicted on 19 counts, but he also was acquitted on 23 counts, which may leave Qwest on the hook to at least pay the legal tab for those. Additionally, Qwest is on the hook to pay for Nacchio's appeal unless it proves unsuccessful.