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Nacchio, Qwest to split legal fees
The ex-CEO's contract required Qwest to pay for his defense.  He'll now have to foot the bill for his appeal attorney and her firm.
By Andy Vuong, Staff Writer
Denver Post
Tuesday, July 31, 2007

Former Qwest chief executive Joe Nacchio will have to pay some of his legal fees as part of an agreement with the company.

Qwest, which has footed Nacchio's legal bills since he was ousted in June 2002, said Monday it will not pay for his appellate attorney Maureen Mahoney and her law firm, Latham & Watkins.

Mahoney, regarded as one of the top appellate attorneys in the country, will lead Nacchio's anticipated appeal of his criminal insider trading conviction.

Qwest will continue to pay for Nacchio's defense against civil cases and for certain fees charged by Nacchio's lead attorney, Herbert Stern, connected to the appeal.  Those payments will be backed by a $6.5 million letter of credit from Nacchio.

The agreement settles a May lawsuit Nacchio filed after Qwest stopped paying his legal bills after his insider-trading conviction in April.

"We have dismissed the lawsuit because Qwest has agreed to pay all past legal bills and all future bills on the civil cases," Stern said Monday.

Qwest's corporate bylaws and clauses in Nacchio's contract and severance agreement require the company to cover legal fees that stem from his employment.

"Qwest has entered into a fair and reasonable settlement" that protects the interests of the company, said Bob Toevs, a spokesman for Denver-based Qwest.

The company has not disclosed how much it has paid to defend Nacchio against criminal and civil charges or how much has been covered by insurance.  Experts have said the final tab could run from $25 million to $75 million.

Nacchio was sentenced Friday to six years in prison for illegally selling $52 million in company stock in April and May 2001.  He was also ordered to forfeit the $52 million and pay $19 million in fines.

Nacchio still faces a Securities and Exchange Commission lawsuit that alleges he and six other former Qwest officials engaged in a $3 billion accounting fraud there from 1999 to 2002.  Two of the defendants have settled.  If Nacchio's criminal insider-trading conviction is upheld, Qwest could seek to recoup its money.

"We have agreed with Qwest to postpone final resolution concerning the parties' rights until after the criminal appeal is heard," Stern said.

Nacchio's appeal is expected to take one to two years.

During Nacchio's sentencing hearing Friday, Judge Edward Nottingham said a pre-sentencing report indicated Nacchio was financially stable enough to pay his $19 million fine.  Nacchio had already set aside $52 million for the forfeiture before sentencing as part of an agreement with prosecutors.

Nacchio made more than $250 million in stock sales, bonuses and salary during his five-year tenure at Qwest.

Also Monday, Nacchio's local defense law firm, Richilano & Gilligan, withdrew as his counsel, stating in a court filing that the firm's services were no longer needed.

$52 MILLION  -  Forfeiture of ill-gotten gains in stock sales

$19 MILLION  -  Fines, with six-year prison sentence

$75 MILLION  -  Potential legal fees, according to experts

Staff writer Andy Vuong can be reached at 303-954-1209 or