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Jan. 24, 2007

Nortel is getting closer to settling its shareholder class action lawsuit as an Ontario judge approved the company's $2.5 billion settlement offer on Jan. 19.

Judge Warren Winkler of the Ontario Superior Court of Justice approved the proposal that resolves seven lawsuits, claiming Nortel misled investors in the United States, Ontario, Quebec and British Columbia.

This news comes from a press release issued by Rochon Genova LLP, the lawyers representing all Nortel shareholders.

Nortel's settlement says that the company will pay $575 million in cash and will issue common shares representing 14.5 percent of its current equity, worth about $1.7 billion based on Nortel's current stock price. Nortel's insurers will pay $228.5 million.

Nortel Networks further agreed to fork over half of any funds it recovers from its litigations against its former senior officers who were terminated in April 2004 after the company's financial shenanigans surfaced.

To guard against similar problems in the future, Nortel agreed to implement certain corporate governance enhancements and to consider others.

Justice Winkler's decision coincided with Justice Groberman's of the Supreme Court of British Columbia, who approved the settlement on behalf of B.C. shareholders. Both Canadian decisions follow the December 2006 approval of the settlement in the two U.S. class actions by U.S. District Court Judges Richard Berman and Loretta Preska.

Final approval of the settlement now rests in the hands of the Quebec Superior Court. Rochon Genova said Justice Winkler concluded that the settlement was "fair, reasonable and in the best interests of the class (of Nortel investors) and provides "the maximum available amount for satisfaction of the claims in total, short of trial."

Joel Rochon, co-lead counsel for the Ontario national class, stated, "This settlement represents the largest securities class action settlement in Canadian history and will provide a measure of protection for Canadian shareholders in the future. We look forward to the rulings by the Quebec Superior Court and to an efficient and timely distribution of cash and shares to all class members thereafter."

Peter Jervis and George Glezos, co-counsel in the Ontario class action, added, "This decision confirms that Ontario courts will protect both the investing public and the integrity of the Canadian capital markets in Canadian securities class actions."

The Ontario Superior Court approval was given Jan. 18, and is one of a string of court backings that the settlement requires before it's finalized. The cases the settlement covers relate to whether Nortel, North America's biggest maker of telephone equipment, misled investors during two separate periods.

News of the judge's decision did little to stir Nortel's stock price on the New York Stock Exchange. Shares traded down 75 cents at $26.24 per share during midday trading.

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Source: Wireless Week