Panel orders judge to explain Qwest ruling

'Illumination' into $400 million settlement sought

By Jeff Smith, Rocky Mountain News (Contact)

Published January 17, 2008 at 12:32 a.m.

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An appellate panel on Wednesday ordered a U.S. district judge to provide a "more extensive explanation" for his decision to approve a $400 million shareholder class-action settlement involving Qwest Communications.

The panel is specifically ordering federal Judge Robert Blackburn to explain why he decided it was fair to exclude former Qwest CEO Joe Nacchio and former CFO Robert Woodruff from the settlement.

"We need to know what path the district court followed," said the 10th Circuit Court of Appeals panel in a 2-1 ruling. Judges Paul Kelly and Bobby Baldock asked the court to "illuminate" its decision to overrule Nacchio's and Woodruff's objections.

Nacchio's and Woodruff's exclusion from the settlement means shareholders would be able to pursue separate legal claims against the two.

Qwest's shareholders, including large pension funds, sued the Denver telco six years ago, alleging securities fraud during Nacchio's era.

The $400 million settlement was approved in fall 2006, but appeals by Nacchio and Woodruff have held up payments to shareholders.

Appellate Judge Mary Beck Briscoe dissented, saying that Blackburn's analysis, "while not perfect," was more than adequate.

She said asking for further explanation provides a "needless delay in a case already more than six years old."

Qwest shareholders separately have received payouts from a $250 million settlement by Qwest with the Securities and Exchange Commission.

Nacchio and Woodruff had agreements requiring Qwest to indemnify them for reasonable lawsuit costs. According to court documents, Nacchio and Woodruff were advised by the plaintiffs in the class-action case that they wouldn't be included in the settlement unless they paid personally into the settlement fund. They refused.

The plaintiffs believed Nacchio and Woodruff especially were responsible for Qwest's misdeeds and shouldn't be allowed to join a settlement in which only Qwest would pay.

In a separate criminal proceeding, Nacchio was convicted in April on 19 counts of insider trading in connection with selling more than $50 million of Qwest stock in April and May 2001.

He was sentenced to six years in prison, fined $19 million and order to forfeit $52 million, but is free on bail pending appeal.

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