Qwest is expected to announce as soon as today that it has reached a settlement in a large shareholder lawsuit connected to alleged accounting irregularities, several sources said Monday.
The Qwest board met Monday night by telephone and was expected to approve an agreement, according to two sources close to the company.
It was unclear if all parties to the suit would be included in the settlement. The California State Teachers Retirement System is one of the plaintiffs. No one there could be reached for comment late Monday.
The Associated Press reported late Monday that the settlement would be $400 million and could include other shareholder suits. The proposed settlement will cover Qwest, some former executives and its board of directors, but not former chief executive Joseph Nacchio and former chief financial officer Robert Wood ruff, the AP reported.
The Denver-based telecom is scheduled to release its third-quarter earnings today, and any settlements could be part of its announcement.
No one from Qwest would comment Monday on the lawsuit settlement.
Qwest spokesman Chris Hardman said last week the company has allocated money each quarter to settle shareholder- related lawsuits. In 2003 and 2004, the company set aside $750 million. Of that amount, $250 million was paid in 2004 to settle Securities and Exchange Commission charges. A breach of fiduciary duty lawsuit also was settled that year for $25 million, but that payment was covered by insurance.
In the suit expected to be settled today, investors allege that former Qwest executives, including Nacchio and former president Afshin Mohebbi, and certain board members made false and misleading statements and failed to disclose harmful information.
Plaintiffs in that suit include individual investors, New England Health Care Employees Pension Fund of Connecticut, the state of New Jersey and New York Attorney General Eliot Spitzer.
Seymour Tabacoff, an investor from Hartsdale, N.Y., who is a plaintiff, said Monday night that he’d be pleasantly surprised by a settlement if there was any positive result in it for him.
“It was a big fiasco for the stockholders. I was an individual dupe,” said Tabacoff, adding that he had not been told a settlement was imminent.
Tabacoff said he did not know how much Qwest stock he owned or how much it was worth, only that he had had stock in Qwest and its predecessors since 1949.
After Nacchio was ousted, Qwest hired Richard Notebaert, a former Ameritech chief executive, as its CEO. He has worked to stabilize Qwest, which was brought to the brink of bankruptcy under Nacchio and forced to restate billions in revenues and earnings. Settling the remaining shareholder suits is one of the remaining tasks of Notebaert’s turn-around effort.
Lerach Coughlin, a law firm that specializes in shareholder suits, represents the plaintiffs. The law firm has retained a Denver public relations firm, Connell Walsh Media Relations, to represent it on several Denver cases, including Qwest, for at least the next four months, said Cynthia Connell Storer, managing director.
Another outstanding lawsuit against Qwest, involving current and former employees who have accused Qwest of causing the company’s 401(k) retirement plan to plummet, is not part of today’s expected settlement, according to sources.
Qwest stock closed up 26 cents at $4.36 on Monday.
Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.
