A former Qwest Communications executive will pay $4.4 million for accepting lucrative initial public offering shares in exchange for his firm’s investment banking business, according to a settlement signed Tuesday.
The payment by Qwest founder and former chairman Philip Anschutz will be roughly equal to his profit from the practice of IPO “spinning” and will go to charity and an investor assistance fund, according to the settlement with New York Attorney General Eliot Spitzer.
Spitzer said the settlement marks the first time an executive has relinquished profits linked to “IPO spinning.”
Spitzer was considering charges for failing to disclose the IPOs as required under the state Martin Act, said Spitzer spokesman Darren Dopp.
In September, Spitzer accused Anschutz and four other corporate executives of receiving millions of dollars in hot IPO offerings from the Salomon Smith Barney division of Citigroup. Salomon Smith Barney provided the IPO shares as “an inducement or reward” for landing those firms as investment banking clients, Spitzer stated in his complaint. Spitzer had also accused Anschutz and the other executives of failing to disclose that they received the IPO shares.
When the shares were later public traded, they reaped millions of dollars in profits for the executives, Spitzer said.
Such spinning to personally benefit top corporate officers is now banned nationally under reforms of a $1.4 billion settlement in April following investigations by Spitzer, the Securities and Exchange Commission and other Wall Street regulators. The firms were charged with conflicts of interests in which stock analysts inflated values in order to help lure the firm as investment banking clients.
“Even though IPO spinning has been banned under the recent Wall Street accord, we continue to pursue appropriate remedies against individuals who were enriched unjustly by the practices revealed in the course of our investigation,” Spitzer said Tuesday.
Anschutz didn’t admit or deny liability in the settlement with Spitzer.
Anschutz spokesman Jim Monaghan said, “We are satisfied that all necessary and appropriate disclosures were made.”
Monaghan said Anschutz’s Denver-based investment firm, The Anschutz Corp., “received a small amount of IPOs in relation to our overall portfolio and believe our conduct was proper in all respects.
“We never steered Qwest investment banking business to Salomon Smith Barney nor to any other investment banker in exchange for IPOs. Mr. Anschutz did not personally receive nor review IPO opportunities, as they were handled by our portfolio managers.”
“It is important to note that Mr. Anschutz was non-executive chairman of the board, never received any salary, or stock options and did not participate in the day-to-day management affairs of the company,” Monaghan said.
Anschutz’s attorney, Steve Kauffman of Manhattan, didn’t immediately respond to a request for comment.
The cases against the other four executives continue, Spitzer said.
From March 1996 through June 2001, 57 IPO offerings were made to executives of Qwest Communications, including Anschutz, according to Spitzer. Anschutz stepped down as chairman in June but remains on the company’s board of directors.
The settlement will provide $3.2 million to 32 nonprofit agencies in $100,000 donations to Girls Scouts, the American Museum of Natural History, the Legal Aid Society and other health and civic groups. The settlement will also provide $1.2 million to fund securities arbitration clinics at six law schools from Buffalo to Brooklyn to help investors file claim for losses.