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Qwest takes hit on home sale

CEO's California house cost telco $1.8 million

By David Milstead, Rocky Mountain News (Contact)

Published April 4, 2008 at 3:22 p.m.
Updated April 4, 2008 at 11:53 p.m.

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Ed Mueller

Ed Mueller

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Qwest lost $1.8 million in three months because of a deal it reached to buy the California home of CEO Ed Mueller.

Qwest revealed the loss Friday in its annual proxy statement to shareholders. The company said it bought the home from Mueller in September for $8.9 million, which was the average of two independent appraisals. It then sold the home in December for just over $7.1 million.

Relocation agreements are neither new nor atypical. Denver-based ProLogis revealed recently it lost 20 percent in eight months on the Florida home of CEO Jeffrey Schwartz, which it sold in November for $2.52 million.

What is new is a declining, not rising, residential real estate market. Companies that bought homes for their executives in a relocation program were more likely to make money than lose it. Now that companies are posting losses on the sales, they're disclosing the transactions for shareholders to judge whether they're part of the company's executive compensation.

Qwest spokeswoman Diane Reberger said the agreement to buy Mueller's home "was part of the employment agreement we had with Ed when he was hired. We required him to relocate."

Qwest offers similar relocation benefits to all executives at the vice president level and above, which is under 100 employees.

The agreement to buy Mueller's home was one of several perks granted to the Qwest CEO in his first year of employment with the company.

Mueller gets a $75,000 "flexible benefit payment" to spend on what he chooses. Qwest paid $39,312 in legal fees he racked up in negotiating his employment agreement; moving and temporary housing expenses of $29,015; and other perquisites of $5,416, including a health physical and expenses relating to a home security system.

The company estimated Mueller's personal use of the corporate jet was worth $281,182, based on Qwest's cost to fly the aircraft. Mueller has a deal that allows his stepdaughter to use the jet to travel to Denver from her school in California.

All told, Mueller, who joined the company in August made $17.4 million, including stock awards Qwest valued at nearly $13.7 million. The combination of restricted stock and options is performance-based, requiring Mueller to wait three years and Qwest stock to rise to a certain level.

The awards have declined in value since the August award, along with Qwest's share price.

Former CEO Dick Notebaert made $18.5 million in 2007, including $7.4 million in stock awards he gave up when he retired. The total figure includes $8.03 million in severance.

Qwest general counsel Richard Baer got a performance bonus of $1,429,695, biggest of all the top executives. Baer, who made a salary of $633,981, was recommended for the bonus by Mueller. The Qwest proxy said Mueller felt "Baer was instrumental in resolving several significant legal matters that were pending against us and . . . (his) efforts amounted to extraordinary performance."

Mueller's $17.4 million

* Salary $470,769

* Bonus $946,849

* Restricted stock $5,062,400

* Options $8,602,790

* Pension increase $16,516

* All other, including perks $2,295,565

* Total $17,394,889

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