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Qwest Seeks To Settle Accounting Fraud Class Action

by Glen Shapiro, LawAndTax-News.com, New York

03 November 2005


US telecoms firm, Qwest Communications International Inc. on Monday revealed that it has entered into a memorandum of understanding (MOU) with plaintiffs in the consolidated Qwest putative securities class action.

The settlement class will consist 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 that will be filed with the court 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 Joseph P. Nacchio, Qwest’s former chief executive officer, and Robert S. Woodruff, Qwest’s former chief financial officer.

However, neither Qwest nor the other defendants have admitted wrongdoing or liability.


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