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Qwest Boss Likely To Be Indicted Soon

by Glen Shapiro,, New York

09 November 2005

Observers in the United States have suggested that former Qwest chief executive, Joe Nacchio is likely to be indicted on insider trading charges before the end of the year.

Late last month, the telecoms firm revealed that it had entered into a memorandum of understanding (MOU) with plaintiffs in the consolidated Qwest putative securities class action.

The settlement class consisted of those who purchased Qwest securities between May 24, 1999 and July 28, 2002.

Under the terms of the proposed 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.

Audit firm Arthur Andersen, which is a co-defendant, will be contributing $10 million to Qwest to settle the plaintiffs’ claims.

The contemplated settlement agreement and related documents are subject to a number of material conditions, including court approval. Additionally, Qwest revealed that 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 as a result of the MOU, all claims in the litigation would be dismissed against Qwest and all other defendants in that lawsuit except Robert S. Woodruff, Qwest’s former chief financial officer, and Mr Nacchio.

According to reports in the US media this week, prosecutors in the case are close to completing a three year investigation into the activities of Mr Nacchio and other senior Qwest executives.

The former CEO stands accused of masterminding a $3 billion financial fraud at the firm between 1999 and 2002, misleading investors regarding Qwest's true financial condition, and personally profiting from the company's artificially inflated share price during the period in question.

He is also facing civil fraud charges brought against him by the Securities and Exchange Commission.

Mr Nacchio has, however, repeatedly denied any wrongdoing.

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