U.S. judges approve Nortel lawsuit settlement

Last Updated: Wednesday, December 27, 2006 | 11:05 AM ET

CBC News

Two U.S. district judges have approved a $2.45-billion US settlement between Nortel Networks and shareholders who sued after the company revised its 2001-05 financial results.

The package was initially worked out in February for lawsuits in Canada and in the United States. Canadian courts in Ottawa, Quebec and British Columbia have yet to rule on the settlement.

To cover the settlement, Nortel will pay $575 million US in cash and issue almost 628.7 million shares — roughly 14.5 per cent of its equity. The settlement will also include $228.5 million US from Nortel's insurers.

The lawsuits originated in April 2004, when Nortel fired former CEO Frank Dunn and several other senior executives, and revealed it would have to restate financial results going back to 2001.

Reuters reported that the settlement will include half of any money recovered by the company from lawsuits against Dunn and the other fired executives.

"We're very pleased with the progress we're making in settling the lawsuits and we look forward to putting them behind us," said Nortel spokesman Jay Barta.

The settlement does not contain an admission of wrongdoing by Nortel.

It covers two separate class-action lawsuits.

The lead plantiffs in one suit included the Ontario Teachers' Pension Plan Board, along with the State of New Jersey. OPTrust, the administrator of the Ontario Public Service Employees Union Pension Plan, was the lead plantiff in the other suit.

The two suits were overseen by two U.S. judges, who both issued written decisions on Tuesday.

In her part of the lawsuit, U.S. District Judge Loretta Preska said the settlement was "fair, reasonable and adequate" for investors who bought Nortel shares or sold options on the company's stock between April 24, 2003, and April 27, 2004.

In the other part, Judge Richard Berman approved a deal that covers up to 1.4 million investors in Nortel between Oct. 24, 2000, and Feb. 15, 2001.