Former Nortel exec seeks $1B protection from lawsuits
A former Nortel CEO who took millions with him when he left the company in 2001 wants Nortel to cover up to $1 billion of his costs if he loses a series of class action lawsuits filed by former employees.
John Roth, who was in charge when the company's stock soared in 1999 and 2000, filed a U.S. creditor claim in a U.S. bankruptcy court on Dec. 1 seeking a $1 billion U.S. indemnification from Nortel of his personal assets with respect to those lawsuits. When he left the company he took $130 million with him.
Essentially, Roth is seeking insurance to cover him in case U.S. courts decide he must pay an award to the plaintiffs.
U.S. Nortel employees and former employees filed the lawsuits around four years ago against Nortel and those at the company who were responsible for managing the company-sponsored investment plan.
One of them claims that the defendants were "intimately familiar with the company's ailing finances" in the preceding five years but still helped and encouraged plan participants to invest in the company "despite the unsuitable nature of such an investment."
Diane Urquhart, an independent financial analyst who is helping some former Nortel employees, said the plan, known as a 401(k) plan, is similar to Canada's Registered Retirement Savings Plans.
The lawsuits would have been stayed when Nortel filed for bankruptcy protection this past January, Urquhart said.
"But John Roth must be concerned that there is merit," she added. "It is his own personal assets that are at stake."
Good target: analyst
She added that Roth is a "good target" for the lawsuits because he left the company in 2001 with more than $130 million in stock options, bonuses and retirement benefits.
Urquhart has been providing financial analysis services to help former Nortel employees who are fighting for the severance, pensions and disability benefits that the company owes them. She has taken up similar causes in the past.
Melanie Johannik, who was laid off from Nortel this past year and is still looking for a job, chairs a group called the Nortel Bankruptcy Justice Committee, which is also lobbying on behalf of laid off, retired and disabled Nortel workers.
She wasn't impressed by the news of Roth's latest court filing and has been wondering where all Nortel's money went.
"All now all of a sudden you can get lawyers and insurance to help claim for another billion dollars in insurance," she said. "It just doesn't make sense."
Nortel filed for bankruptcy protection in January and has been selling off units ever since. The company is expected to cease operations once that process is complete.
Laid-off and retired Nortel workers are considered unsecured creditors and are at the back of the line to receive payouts from bankruptcy proceedings, including severance packages, pensions and disability. That means they would have to fight with other creditors for a share of whatever is left of the company in the end.
Roth, who lists an address in Orangeville, Ont., on his court filing, first joined Nortel as a design engineer in 1969. He was named president and CEO in 1997 and presided over the company as its stock price soared in 1999 and 2000.
The company's fortunes began sliding in 2001, and Roth retired that year.