Judges Approve $2.45 billion Nortel Settlement

Dennis Faas's picture

Two U.S. Federal judges have approved a proposed $2.45 billion settlement in a case filed against Nortel by shareholders.

Judges Richard Berman and Loretta Preska issued their approval of the deal earlier this week. The settlement has Nortel paying $575 million in cash to shareholders. It also has the company issuing shares equal to about 14.5 percent of its current outstanding equity, or $1.64 billion based on Nortel's current stock value. (Source: hachinthebox.org)

The settlement will be paid to investors who purchased common stock or sold options between April 24, 2003 and April 27, 2004, or between October 24, 2000 and February 15, 2001. (Source: webcpa.com)

Although the settlement still needs to be approved in Canadian courts, Nortel is eager to put the mess behind them. The class action lawsuits stem from a 2004 accounting scandal, which led to the firing of CEO Frank Dunn and a handful of other senior executives. Nortel also revealed at that time that it would have to restate financial records for the past three years. (Source: cbc.ca)

Nortel has been trying to close the book on this issue for quite some time. Earlier this year, a Nortel spokesperson stated that putting the lawsuits behind them would allow the company to "remove a significant impediment to Nortel's future success and allow [new CEO] Mike Zafirovski and the Nortel team to move forward." (Source: lightreading.com)

Zafirovski does indeed have plans to move forward and get Nortel back on track. The CEO plans to cut expenses by a staggering $1.5 billion over the next three years. His effort will hopefully prove successful; the company needs to bounce back after a $2.58 billion loss in 2005. (Source: webcpa.com)

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