Sprint settles shareholder lawsuits for $50 million

Wednesday, March 19, 2003 | 11:17 a.m.

SUN WIRE REPORTS

Sprint Corp., the third-largest U.S. long-distance telephone carrier and the main local phone company in Las Vegas, today agreed to pay $50 million and appoint an independent director to oversee the company's board to settle two shareholder lawsuits.

Sprint named board member Irvine Hockaday as lead independent director, the company said in a statement. Sprint also agreed that two-thirds of its board would consist of independent directors by next year's annual meeting. The company said it will set term limits for outside directors and will revise its code of ethics.

One of the suits alleged Sprint manipulated shareholders into approving the sale of the company to WorldCom Inc. so executives and employees could exercise stock options valued at $1.7 billion.

The merger was rejected by U.S. regulators in 2000. The other lawsuit claimed Sprint investors were misled into buying the shares from October 1999 to September 2000.

Shares of Overland Park, Kan.-based Sprint rose 3 cents to $11.88 at 12:51 p.m. in New York Stock Exchange composite trading. The stock is down from a high of $75.94 in November 1999.

Also today, ending a leadership crisis at Sprint, Gary Forsee took over as chief executive after an arbitrator gave him the green light to run the company.

The arbitrator ruled that Forsee, vice chairman of Atlanta-based BellSouth Corp., could replace William T. Esrey as chief executive officer of Sprint, subject to restrictions.

"It is a pleasure to a part of this great company again," Forsee, a former Sprint executive, said in a written statement issued Tuesday night by Sprint.

Forsee also becomes a member of Sprint's board of directors. Esrey will continue as chairman during an unspecified transition period.

The arbitration ruling by William Webster, former director of the Central Intelligence Agency and the FBI, ended a lingering management succession crisis at Sprint. The corporation had been stymied in its attempt to hire Forsee, the No. 2 executive at rival BellSouth.

In a 15-page ruling late Tuesday afternoon, Webster found that Forsee's agreement to protect BellSouth trade secrets, while enforceable, did not preclude his accepting employment at Sprint.

"The evidence shows that Mr. Forsee is a man of integrity who maintains secrets to which he is entrusted," Webster wrote. "There is no evidence that Mr. Forsee has ever abused or inappropriately disclosed any confidential information from a source."

Webster, however, directed Forsee to abide by the conditions in his confidentiality agreements with BellSouth and Cingular Wireless, and to submit sworn affidavits every three months stating that he had done so. Forsee was also chairman of Cingular, a joint venture between BellSouth and SBC Communications Inc.

Forsee, 52, was the choice of Sprint's outside board members to succeed Esrey, who has been Sprint's chief executive since 1985 and chairman since 1990.

Esrey, who is undergoing treatment for lymphoma, is being forced out over tax shelters he used to avoid taxes on more than $100 million in paper stock option gains. The tax shelters were recommended by Ernst & Young, Sprint's outside auditor.