Telecom equipment supplier Nortel Networks Corp. thinks it has put a final price tag on its 2001 accounting scandal.
Nortel announced that it has reached an agreement to pay nearly $2.47 billion in cash and stock to settle two shareholder class-action lawsuits for allegedly violating U.S. and Canadian securities laws after it issued revised financial expectations for the 2001 fiscal year.
Nortel said that it wants avoid being tied up in prolonged litigation. Under the proposed s ettlement, Nortel said that it would pay $575 million in cash, issue more than 600 million shares (about 14.5 percent of its current equity), and contribute half of any funds it recovers from former executives.
"Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process," chairman Harry Pearce said, in a statement.
The settlement must still receive approval from the courts, regulatory boards and stock exchanges. Nortel must also resolve other shareholder litigation involving its past financial guidance and restatement in 2003 and lay out a plan to increase its corporate governance and insurance plans.
Nortel fired its top three executives, including chief executive Frank Dunn, in April 2004, and that August, fired seven more of its finance executives for cause -- saying the company would seeking damages of more than $200 million.An independent review of Nortel's books found that Dunn and others endorsed the use of provisions that did not comply with U.S. accounting standards. In several quarters, that made the difference between a profit and a loss. Nortel is still the target of regulatory and criminal investigations.
