Qwest investors still wait for settlement cut
By Jeff Smith
Rocky Mountain News
Thursday, July 19, 2007
The wheels of justice for Qwest shareholders have been turning
slowly. While their attorneys have been paid tens of millions
of dollars, Qwest stockholders from the Joe Nacchio era still
are waiting for their cut of a $400 million class-action civil
settlement agreed to in late 2005 and approved by a federal
judge last fall.
And they will have to wait at least several more months because
a legal challenge by former Qwest CEO Nacchio and former Chief
Financial Officer Robert Woodruff won't be heard until this
The good news is that proceeds from Qwest's $250 million
settlement in the fall of 2004 with the Securities and Exchange
Commission will be distributed soon, along with more than $3
million from SEC settlements with former Qwest executives.
The slow pace of investor restitution is frustrating to many,
especially when Nacchio is responsible for holding up part of
the payments. The funds will return only a fraction of the
billions of dollars investors collectively lost during the
"I think it's really unfortunate that one individual who already
has been convicted and is going to be sentenced can, in effect,
hold up payment to shareowners who have been waiting for at
least some retribution," said Nelson Phelps, executive director
of the Association of U S West Retirees.
Nacchio is scheduled to be sentenced July 27 on 19 charges of
insider trading. Prosecutors are seeking a seven-year prison
Also frustrating for Qwest shareholders is that the lead law
firm in the class-action case, Lerach Coughlin Stoia Geller
Rudman & Robbins, has been paid its $60 million in fees,
according to Curtis Kennedy, attorney for the retirees' group.
Kennedy, who was instrumental in getting Lerach's fee slashed
from $96 million, said Lerach put a provision in the settlement
agreement to get paid right away. A Lerach attorney didn't
return a phone call for comment.
Nacchio and Woodruff are challenging the settlement because they
have been excluded from it, meaning Lerach plans to pursue them
and their money separately.
U.S. District Judge Robert Blackburn denied their challenge, but
Nacchio and Woodruff appealed to the 10th Circuit Court of
Appeals. Their case is scheduled to be heard in the October
session, according to the appellate court docket.
The SEC joined the class-action fund so the money could be more
efficiently distributed at one time. But the SEC isn't going to
wait for the class-action case to be resolved, said Mary Brady,
SEC assistant regional director in Denver.
"We are moving forward with our distribution, still aiming for a
midyear 2007 distribution," Brady said. "It's fairly imminent."
She said Gilardi & Co., the distribution agent, is working out
the final details of the distribution. Some investors have
opted out of the settlements and are pursuing their own legal
The other bit of good news for Qwest shareholders waiting for
payback: At least the money has been earning interest.
smithje@RockyMountainNews.com or 303-954-5155