KPN/Qwest's debt suit

Why is it a turkey?
As CenturyLink (NYSE: CTL) and Qwest (NYSE: Q) move ahead with their merger plans, it looks like Qwest has a skeleton in its closet that goes back to the heady days of former Qwest CEO Joe Nacchio's reign: the joint venture between Dutch service provider KPN and U.S. telco Qwest.

For anyone that remembers that far back, KPN/Qwest was a joint venture that was set on building a 13,000 km European optical and IP network that would serve both European carriers and enterprises.

But like many of the late 1990s ambitious ideas to emerge in the telecom industry, KPN/Qwest didn't garner enough critical mass and eventually filed for bankruptcy when the telecom bubble burst in 2002.

It's been almost 10 years since the joint venture folded. Now, KPN/Qwest is back in the headlines this year as investors of the former venture are seeking $5.7 billion in unpaid debt from both telcos and other executives.

With rumors of mismanagement and misleading information for investors, the Dutch enterprise court began an investigation into the KPN/Qwest bankruptcy in 2006. This investigation could determine how much KPN/Qwest investors receive.

At this point, neither KPN nor Qwest would comment on the lawsuit.

Interestingly, one of KPN/Qwest's players, Eelco Blok, who is going to take over as KPN's CEO next April, was also named as a defendant in the 2002 bankruptcy case.

What effect this suit will have on Qwest's merger with CenturyLink is uncertain, but it is bad timing for this ghost to emerge from Qwest's storied past.

KPN/Qwest's debt suit