U.S. judges OK $2.25-billion accord in Nortel accounting case

Two federal judges in New York gave final approval Tuesday to a roughly $2.25-billion global settlement reached between Nortel Networks Corp. and its shareholders after the Canadian company revised its financial results between 2001 and 2005.

U.S. District Judge Loretta Preska said the settlement reached this year was “fair, reasonable and adequate” to compensate people or entities who purchased common stock or sold options on Nortel stock between April 24, 2003, and April 27, 2004.

U.S. District Judge Richard M. Berman said a similar deal reached on behalf of as many as 1.4 million investors in the company between Oct. 24, 2000, and Feb. 15, 2001, was fair and adequate.

The investors had complained of various accounting manipulations, such as inflating revenue from fiber-optic equipment contracts.

Berman wrote that the $1.14 billion represented by his half of the litigation in Manhattan was about 10% of the lead plaintiff’s original $10-billion estimate of maximum possible damages facing the Canadian telecommunications company.

Preska wrote in her opinion that the settlement benefits would come from a cash fund of $370 million that was earning interest and 314 million Nortel shares that would be issued to some of the more than 1 million investors eligible to make claims in the portion of the case she oversaw.

The money was part of a roughly $2.25-billion agreement announced this year as Nortel reached tentative settlements in Canadian and U.S. lawsuits.

Courts in Canada must still rule on the settlement.

In the U.S. suits, Nortel said it would pay $575 million in cash and issue about 629 million common shares -- about 14.5% of its equity -- as a major part of its compensation to shareholders.

The settlement contained no admission of wrongdoing by the Brampton, Canada-based company or any of the other defendants.

“We’re very pleased with the progress we’re making in settling the lawsuits and we look forward to putting them behind us,” Nortel spokesman Jay Barta said. Several plaintiffs’ lawyers could not be reached for comment.

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Bloomberg News was used in compiling this report.