Qwest Communications International Inc. 7/27/2001

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Company Name(s): 
Qwest Communications International
Case Name: 
Qwest Communications International Inc. 7/27/2001
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Case Status: 
Settlement Proposed
Case Status: 
Settlement Approved
Affected Securities
NYSE: Q
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
07/27/2001
Class Period Begin: 
05/24/1999
Class Period End: 
07/28/2002
Court of Filing: 
U.S. District Court for the District of Colorado
Date Settled: 
01/05/2006
Settlement Amount: 
$45,000,000
Deadline to Participate in Settlement: 
03/10/2009
Summary: 

A news article dated August 7, 2008 stated that Qwest Communications has agreed to pay an additional $40 million to settle a lingering, 7-year-old class - action securities fraud lawsuit, according to a regulatory filing Wednesday. Former Qwest CEO Joe Nacchio and former CFO Robert Wood ruff would contribute a total of $5 million out of insurance proceeds. The stipulation involving Qwest and Nacchio/Woodruff, which needs federal court approval, was signed Monday and disclosed in Qwest’s second quarter report with the Securities and Exchange Commission. Federal Judge Robert Blackburn approved a $400 million class-action settlement in the fall of 2006. But Nacchio and Wood ruff were excluded from the settlement and appealed, arguing Qwest was required contractually to indemnify them from civil lawsuits. In January, a three-judge appellate panel ordered Blackburn to more fully explain why he decided it was fair to leave Nacchio and Woodruff exposed to further litigation. Qwest spokeswoman Diane Reberger said Wednesday that the telco is “settling this matter to resolve the risks it presents and allow the prior settlement to go forward without further delay.”
According to an article dated January 17, 2008, an appellate court has rejected a $400 million class action settlement between Qwest Communications International Inc. and its shareholders because objections by two of the telecommunications company’s former executives were not properly addressed. In a 2-1 decision, the U.S. Court of Appeals for the Tenth Circuit remanded the case back to a Colorado federal court to clarify its ruling on objections to the settlement filed by former Qwest executives Joseph P. Nacchio and Robert S. Woodruff. The settlement included Qwest and 11 of its officers, but not Nacchio and Woodruff, who argued that the deal interfered with indemnity agreements under which Qwest agreed to cover their legal expenses as former directors or officers of the company.
According to an article dated October 31, 2007, Qwest Communications has closed the book on another securities suit alleging the company intentionally inflated its share price, agreeing to pay $411 million to bring an end to the litigation. The company revealed the settlement during its third quarter conference call on Tuesday. The settlement, to be paid on or before June 30, will benefit shareholders that opted out of an earlier class action settlement. “A number of persons, including certain large pension funds, were excluded from the settlement class at their request, and filed lawsuits or otherwise pursued claims against us similar to the claims asserted in the consolidated securities action,” the company said in an SEC filing. “In the aggregate, those persons contended that they incurred losses resulting from their investments in our securities in excess of $1.9 billion. We have entered into settlement agreements with all of those persons. In connection with those settlements, we have agreed to pay up to an aggregate of approximately $411 million, including applicable interest, on or before June 30, 2008.” Qwest CEO Ed Mueller told analysts that the company was eager to resolve the pending litigation. “Putting this uncertainty behind us is a significant milestone for Qwest,” Mueller said during the call. As a result of the settlement, Qwest recorded a $353 million charge for the third quarter of 2007. In addition, the company said it had deposited $400 million into a settlement fund earmarked for the consolidated shareholder class action suit filed against Qwest and several of its executives in 2001. The suit includes 12 separate actions alleging that “defendants issued false and misleading financial results and made false statements about our business and investments, including materially false statements in certain of our registration statements,” according to the company. Qwest first reached the settlement in November 2005. The company deposited $200 million into the fund in 2006, and the remaining $200 million in January 2007. The funds include $10 million contributed by now-defunct accounting firm Arthur Anderson LLP.
According to a press release date January 31, 2007, the California State Teachers’ Retirement System Wednesday evening said it has reached a $46.5 million settlement with Qwest Communications International Inc. and the telecommunications firm’s former chief executive.The suit accused Denver-based (Q) of misrepresenting its financial wellbeing by artificially inflating its stock price in 2001, leading to financial restatement and shareholder losses of more than $1.5 billion, according to CalSTRS. “We pursued this case not only to recover losses to the fund that directly affect the financial futures of our members, but to reinforce our commitment to good corporate governance for the benefit of all shareholders,” said Jack Ehnes, CalSTRS chief executive, in a statement. As part of the settlement, Joseph Nacchio, former Qwest CEO, will pay $1.5 million, while the company, its accountants and banks settled for the other $45 million. The case included the settlement of claims against Citigroup Global Markets (C ) , Lehman Brothers (LEH) , J.P. Morgan Securities Inc. (JPM) , Bank of America Securities LLC (BAC) , Merrill Lynch & Co. (MER) , and Arthur Anderson LLP. CalSTRS, which controls a $157.8 billion investment portfolio and is the second-largest public pension fund in the United States, noted that it had opted out of federal class action lawsuits against Qwest. As of late October, Qwest was also facing fraud suits from groups such as the State Universities Retirement System of Illinois, the Teachers’ Retirement System of Louisiana and the State of New Jersey. Those plaintiffs have alleged that Qwest engaged in fraud. Qwest shares closed Wednesday at $8.15, down 0.73%.
According to a press release dated June 21, 2006, Qwest Communications International Inc. has lost a bid to withhold 220,000 pages of documents from shareholders in a civil securities fraud lawsuit. Qwest attorneys had argued the documents were protected by attorney-client and work-product privilege, but the 10th U.S. Circuit Court of Appeals on Monday upheld a lower court’s decision that the company waived its privilege when it gave the documents to the Securities and Exchange Commission and Justice Department. Qwest spokesman Bob Toevs declined comment Tuesday. Many shareholders involved in the lawsuit have reached a $450 million class-action settlement with Qwest, but claims are pending against former Chief Executive Officer Joseph Nacchio and former Chief Financial Officer Robert Woodruff.
In a press release dated April 19, 2006, three weeks after opting out of a securities fraud class action against Qwest Communications International, Inc., New York State Comptroller Alan G. Hevesi announced today that, as the sole trustee of the New York State Common Retirement Fund, he has filed an individual suit against the company and its auditor, Arthur Andersen claiming that the Fund sustained $250 million in losses as a result of phony accounting that artificially inflated the company’s stock price.
In a press release April 6, 2006, a large pension fund has withdrawn from a $400 million class-action shareholder settlement with Qwest Communications, but it’s unclear whether any others will follow suit.
In a press release dated November 1, 2005, Qwest Communications International Inc. (NYSE:Q) has entered into a memorandum of understanding (MOU) with plaintiffs in the consolidated Qwest putative securities class action. Under the terms of the contemplated settlement agreement, Qwest would pay a $400 million cash settlement in three installments: $100 million would be paid within 30 days of receiving preliminary court approval of the settlement; $100 million would be paid within 30 days of final approval of the settlement; and the remaining $200 million would be paid by January 15, 2007, plus interest at 3.75 percent on the $200 million between the date of final approval of the settlement and the date of payment. Arthur Andersen, a co-defendant, will be contributing $10 million to Qwest to settle the plaintiffs’ claims. The contemplated settlement agreement and related documents that will be filed with the court are subject to a number of material conditions, including court approval.
Additionally, the settlement agreement can be terminated under certain circumstances, including in the event that the SEC elects not to distribute to the putative class members the $250 million penalty that Qwest has already committed to pay to the SEC ($125 million of which has already been paid and the remaining portion to be paid in December, 2005), and if securities purchasers claiming losses of a specified amount seek exclusion from the settlement class.
If a final settlement agreement is concluded pursuant to the MOU, all claims in the litigation would be dismissed against Qwest and all other defendants in that lawsuit except Qwest’s former chief executive officer and Qwest’s former chief financial officer.
According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2005 , twelve putative class actions purportedly brought on behalf of purchasers of publicly traded securities of Qwest between May 24, 1999 and February 14, 2002 have been consolidated into a consolidated securities action pending in federal district court in Colorado. The first of these actions was filed on July 27, 2001. Plaintiffs allege, among other things, that defendants issued false and misleading financial results and made false statements about Qwest’s business and investments, including making materially false statements in certain Qwest registration statements. The most recent complaint in this matter seeks unspecified compensatory damages and other relief. However, counsel for plaintiffs has indicated that the putative class will seek damages in the tens of billions of dollars. Further, a non-class action brought by Stichting Pensioenfonds ABP (”SPA”) (described below under “SPA action”) has also been consolidated with the consolidated securities action.
Another class action complaint was filed on February 21, 2002, in the United States District Court for the District of Colorado, civil action number Z-0333, on behalf of all persons or entities who purchased Qwest Communications International Inc. common stock between April 19, 2000 and February 13, 2002, both dates inclusive. The Complaint alleges that defendants violated Section 10(b) of the Securities and Exchange Act of 1934 by issuing a series of materially false and misleading statements about the Company’s financial results announced during the Class Period. Defendants engaged in transactions designed to misleadingly increase the Company’s revenues and decrease the Company’s debt. The Company sold assets paid for by means of funds categorized as “capital expenditures” and then categorized the proceeds received from the sale of those assets as “revenues,” so that debt was understated and revenues overstated and the stock sold at a higher price than if the truth had been disclosed.
The original complaint filed on July 27, 2001 charges Qwest and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that on 3/22/01, defendants Joseph Nacchio and Robin Szeliga appeared at a UBS Warburg hosted senior management meeting where they falsely claimed that they would legitimately achieve 1Q01 and FY01 EPS of $0.11 and $0.59, respectively. On 4/24/01, Qwest reported its financial results for 1Q01, including revenue growth of 12% and EBITA growth of 16%. Subsequent to these statements, Qwest’s stock price increased, trading as high as $41.83 on 4/30/01.