The chief executive officer of Nortel Networks Corp. told a House of Commons committee Thursday he was so sure Nortel would rebound last year that he had invested more of his family's money in the company's stock.

The Finance Committee had asked Nortel Networks, the Ottawa-based telecommunications equipment maker, to appear before the committee to explain why millions of dollars in bonuses were paid to executives at the company while the benefits owed to employees and pensioners were either delayed or erased.

About 5,000 of Nortel's workers have been laid off since November.

Mike Zafirovski, Nortel's CEO, told the parliamentary committee the he had heavily invested in Nortel stock last year because he was sure that the fallen technology giant was on track to recover its status.

Zafirovski said that several of the company's directors, him included, invested their personal money in Nortel stock last year.Nortel 3-month TSX chart

He said his family invested about $500,000 in the company's stock, including some money that had been earmarked for his three sons' college tuitions, because he was certain Nortel was on the rebound.

Then the "world turned upside down" and Nortel "hit a wall" with the global financial crisis last fall, said Zafirovski.

In January, he said, the company sought bankruptcy protection.

Many members of Parliament who heard the testimony, however, had questions about how Zafirovski and other executives at Nortel had accepted bonuses during such trying times for the company and its employees.

Nortel's CEO testified that the bonuses were necessary for the company to retain some of the talented people it has still been able to hold on to.

Conservative MP Daryl Kramp asked Zafirovski, "Do you really believe it was necessary to offer large bonuses simply to retain the people you have?"

Zafirovski said he did.

He also defended the company's decision to give retention bonuses to eight Nortel executives.

"It's a very volatile situation to be able to keep retaining motivated employees, to be able to stabilize the company to optimize the value for it," said Zafirovski.

"We've eliminated many benefits, but this is a special plan for 2009 to be able to allow the company to survive."

Nortel's shares are currently worth less than 20 cents each. A year ago, those shares were worth $10 apiece.

The committee had asked Zafirovski to testify about the way former employees were treated after the company had received court protection from creditors.