Accounting & Tax

Nortel Closer to Resolving Litigation

Settling two Canadian lawsuits was a condition of the telecom's $2.5 billion settlement with U.S. plaintiffs, announced in February.
Stephen TaubJune 21, 2006

Nortel Networks has taken another giant step toward putting its massive accounting scandal behind it.

In February, the Canadian telecom giant agreed to pay nearly $2.5 billion in cash and stock to settle two class-action lawsuits in the United States. At the time, the company stated that the proposed settlement was conditioned, among other things, on the resolution of two related Canadian shareholder class actions.

On Wednesday, Nortel announced that it has reached agreements with the plaintiffs in those two Canadian actions. The company stressed that the various settlement agreements encompass most pending and proposed shareholder class actions brought against the company and certain other defendants following the Nortel’s restatement in 2001 and the company’s revisions of its 2003 financial results and restatement of other prior periods effected during the first half of 2005.

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Under the previously announced terms of the U.S. settlement, the company would make a payment of $575 million in cash, issue more than 628 million common shares representing about 14.5 percent of its equity. Nortel had also agreed to contribute one-half of any recovery in its existing litigation against Frank Dunn, Douglas Beatty, and Michael Gollogly, former senior officers who were terminated for cause in April 2004.

The company also stressed that it will continue to cooperate fully with U.S. and Canadian securities regulators and law-enforcement authorities in their ongoing investigations of the company’s accounting restatements. It also noted that the settlement does not relate to these ongoing investigations.