Nortel receives final approval for payment in shareholder lawsuits

A $2.25 billion global settlement reached between Nortel Networks Ltd. and its shareholders was given final approval in federal court this week. The parties reached the agreement earlier this year to settle a pair of shareholder lawsuits filed after the company revised its financial results between 2001 and 2005.
“We’re very pleased with the progress we’re making with putting this matter behind us,” Nortel spokesman Jay Barta told RCR Wireless News.
The approval nearly concludes the settlement announced in February aimed at resolving a pair of class-action lawsuits in Canada and the United States that stemmed from the Canadian company’s accounting scandal.
“Basically we have one global class-action settlement” that needs to be approved by four courts, Barta said. With the U.S. court’s approval finalized on Tuesday, the company is still waiting on final approval from courts in Ottawa, Quebec and British Columbia. Barta said the company hasn’t yet received official word as to when those courts will make their final decision.
According to the settlement, which was approved by two U.S. judges, Nortel will make a payment of $575 million in cash and issue 628.7 million of its common shares, which represents approximately 14.5 percent of the company’s equity. The company also admits no wrongdoing, per the settlement agreement.
U.S. District Judge Loretta Preska approved the settlement to compensate more than one million investors who purchased common stock or sold options on Nortel stock between April 24, 2003 and April 27, 2004. U.S. District Judge Richard M. Berman approved a deal on behalf of as many as 1.4 million investors in the company between Oct. 24, 2000 and Feb. 15, 2001.
The settlement was originally agreed to after mediation by U.S. District Court Judge Robert W. Sweet, according to Nortel. The agreement stipulated that any settlement encompass all pending shareholder class-actions and proposed shareholder class-actions against the company.
Nortel hopes the final settlement will remove a significant impediment to Nortel’s future success and restore confidence in the Canadian telecom equipment maker after accounting scandals rocked the company, forcing it to restate years of financial results. Stories of falsely inflated sales and costs led to the ouster of many of Nortel’s executives when the scandal first surfaced.