| NORTEL'S NEVERENDING STORY |
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The Nortel story is reviewed Jan 04, 2012 by Ottawa Citizen writer Bert Hill. A tale of woe for Nortel employees and pensioners. NORTEL'S NEVERENDING STORY by Bert Hill of the Ottawa Citizen
Legions of creditors hope this will be a positive year as the windup of Nortel Networks assets enters a fourth year. It couldn't get much worse. More than 10,000 Nortel pensioners and disability recipients had health care and life insurance benefits slashed in January. Pensioners lost an average of 18 per cent of pensions in Ontario and 30 per cent across Canada in August. About 350 employees on disability benefits were cut off in January and got modest help from an emergency fund. Most have had to adjust lifestyles to survive on small government disability coverage. In June, Ontario Superior Court Judge Geoffrey Morawetz urged action, noting that "time is not on the side" of many pensioners. With an average age of 74 and pensions averaging about $2,000 a month before the cuts, the pain is real. At least 350 are over the age of 85 and some have passed the century mark. But nobody in power appeared to pay attention. Surviving spouses of pensioners and disability recipients will get only about 25 per cent of life insurance benefits averaging $25,000. The ever-helpful federal government, having botched pension and benefit regulation and reform, decided the lump sum life insurance payments could be taxed. The Canadian pensioners and former employees alone are owed $1.06 billion. Meanwhile, tens of thousands of Nortel pensioners in the U.S. and Britain have experienced little pain because they are protected by superior pension insurance plans and legal rulings that have postponed reductions. The big pension insurance schemes in those regions are fighting for a piece of Canadian assets. The U.S. government has a $2.1-billion claim against Canadian Nortel assets over an accounting scandal. If Nortel assets and liabilities are not settled equally around the world, as appears likely, the Canadian pain will be even worse. Hopes that a new mediator, Ontario Superior Court Chief Justice Warren Winkler, would bring peace to a global battle over $10.5 billion in assets by 14,000 claimants seeking $36 billion are still just hopes. The first attempts at mediation failed, probably because there were 125 lawyers involved representing contending interests. Winkler's work was postponed shortly after his appointment in July while a U.S. court considered a plea by Nortel U.S. creditors to reject big claims by Nortel Europe creditors on the assets. Despite a court hearing in October, the decision is still pending. Meanwhile, Nortel got another extension of court protection to April against creditor legal action. Meanwhile, the law firms, accountants and special advisers managing the global windup continued to rack up big fees. The tab for professional services hit $137 million in the U.S. alone during the year. Canadian bills were significant but undisclosed. The professionals are at least having some minor success, springing $9.8 million out of Nortel's big China operation. They expect to get several million more out of Japanese operations. Nortel still had about 400 employees on the payrolls in Canada, the U.S. and Europe winding up affairs. They have negotiated reduced but still substantial claims by giants like IBM, Flextronics, Right Management (which managed Nortel layoffs) and Global IP Solutions (which helped manage the sale of Nortel patents). But many other claims are still headed for lengthy arbitration or court hearings. One big issue is a $32-million investment plan that Nortel set up for top executives and sales people in the U.S. The former employees have launched suits to recover the money, which Nortel thinks should be divided among all creditors. With no end in sight, Nortel still has about 400 employees winding up affairs. It plans to pay up to $3.9 million in retention bonuses to 148 employees to the end of 2012. Meanwhile, the corporate world seems to have forgotten the sad Nortel story. Former Nortel chief executive officer Bill Owens was named to the Directorship 100 select group late in the year, a prized circle of the most influential people in the boardroom community, run by the National Association of Corporate Directors.
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