Nortel Creditors Reach Liquidation Deal

CBJ — A settlement has been reached to end a lengthy battle over the disbursement of US$7.3 billion raised in Nortel Networks Corp.’s bankruptcy liquidation of assets.

The former Canadian technology giant filed for bankruptcy in 2009 following a gigantic accounting scandal. At its height from 1999 to 2000, Nortel was worth nearly $300 billion and employed more than 90,000 people globally.

The deal follows years of courtroom battles over Nortel’s remaining assets, which mostly came from the sale of certain parts of the company when it folded.

Under the deal, Nortel’s Canadian debtors will receive about 57% of the sales proceeds, which amounts to about US$4.1 billion. U.S. debtors will get 24%, or about $1.8 billion, and the remainder is expected to be paid to debtors in Europe.

The settlement — which still needs approval in Canada, France, the United States and the United Kingdom — would clear the way for pensioners and other creditors to receive payment.

The decision could bring some certainty for about 20,000 Nortel pensioners in Canada who have seen their benefits dramatically reduced since the bankruptcy filing in 2009.

Three senior executives, CEO Frank Dunn, CFO Doug Beatty and Controller Michael Gollogly all stood trial in late 2012 and into 2013 for their part in the company’s downfall. However, Justice Justice Frank Marrocco found each of them not guilty of the serious criminal charges they faced. There are those who argue Nortel’s decline was already in full swing long before Dunn’s arrival as CEO, but it’s also true the prosecution laid out a very weak case. As example, the prosecution had failed to establish clear-cut illegality in the defendants’ alleged pilfering of Nortel’s remains. Yet the three accused clearly extracted an outlandish $12.8 million in bonuses when their efforts should have been focused on the company’s revival.

As crass as it may be, such behaviour is not illegal unless purposeful crooked manipulation of the books can be proved, and the prosecution failed to do so.

Those who followed Nortel’s demise most closely say it was actually the reckless conduct of the C-suite administration headed by former Nortel CEO John Roth in the late 20th century that was the catalyst for the company’s ultimate demise.  Roth had already exited the Nortel by the time it became obvious how deep the problems were. In fact, he emerged from the wreckage with more than $100 million in stock-option proceeds.

Originally known as Northern Telecom, the company began as a low-key phone handset subsidiary of Montreal’s Bell Telephone before Bell relinquished its majority ownership. From there the business was renamed Nortel, growing to the point of becoming North America’s biggest telecom gear maker during a massive fibre-optic network building boom in the 1990s.