# Nortel executives continue drawing bonuses



## james4beach (Nov 15, 2012)

This story really surprised me:
Nortel executives continue drawing bonuses years after bankruptcy

Since 2009, there's been $190 million in bonuses paid out! This is while the company still owes millions to creditors and pensioners, not yet paid out.

Shameful, to cause so much destruction and then walk away with millions that belong to other people.


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## sags (May 15, 2010)

Scandalous and shameful aren't strong enough words.


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## carverman (Nov 8, 2010)

sags said:


> Scandalous and shameful aren't strong enough words.


From the CBCNews article above:


> "*It was a good company*. Unfortunately I don't think people can say that about the senior management," said Villeneuve, who attended the pension meeting in Ottawa Wednesday. "Hopefully this will be all wrapped up next year. People are tired of it."


I'm a pensioner with 25 years of service. Since Nortel's bankurptcy in 2009, my pension income and pensioner benefits has SHRUNK by 35% and my pensioner benefits, (drugs/dental,life insurance etc) was only continued for 1 year due to a court order,
in order for pensioners to find their own coverage. The individual policy coverage was too expensive at that point, so I am on my own for drugs/dental, and have no life insurance presently (which was a requirement of my divorce for compensatory support payments in 1998). 

Since the end of 2010, I have no life insurance and technically I'm in violation of the 1998 court order, but really can't
afford it at my age with my health being what it is these days.

It WAS a good company up until Walter Light ( the CEO before John Roth) retired. After that its CEOs and upper management and their own self serving greed, managed to kill the "Nortel Goose that was laying... (well up to at least year 2000)... golden eggs for both outside investors (stock issue doubling and stock value growth as well as for inside employees.

While the economic downturn of 2008 helped to seal the end of Nortel, when its customers either cancelled large orders or deferred them further down the road, there was a lot of turmoil already in the rank and file leading up to the critical years from 2000 to 2008.

I retired in 2002 (mid year) and still got a reasonable severance package, but unfortunately I decided to take the severance package as 136 payments from Nov 20023 (TRB) rather than as a lump sum and invest it in an RRSP. That was a serious mistake but my decision at that
time was largely influence by my divorce,the greed of my ex to take me to court for more "gold", and ability to pay compensatory support payments to her,which I'm still doing to this day even though she remarried in 1998. Such is the unfairness of our family justice system!
At the time (2002), I thought that the less of disposable income I had per month, the less possibility of the court seeing this lump sum (invested in an RRSP) as means to continue or increase support payments.

In hindsight, I should have taken the lump sum and run, when it was available for the taking. The TRB payments ran from November 2003 to December 2008 (62 payments instead of 136). 
About 4 years ago, I filed a claim against the Nortel estate for the rest of the outstanding payments, but the way it's going with the legal battles still going on, I may be gone before it's all settled. Well at least, they would have to pay the settlement (if any) to my estate.

At least for now, the most critical decision has been made.
I didn't go to the pensioners meeting this past Wednesday, because I chose the Annuity option, which will be at least a few dollars more than I'm getting now as the wound up Nortel pension, for my remaining years.

There really wasn't enough in my lump sum ($231K) to invest in a LIF to carry me beyond say..8 years,
especially if I drew the same monthly allowance as I'm drawing now as a pension. 

The other thing that worried me was that IF I chose the lump sum/LIF option,my pension payments would stop IMMEDIATELY and I wouldn't have enough to pay my obligations until the LIF was in effect. At least with the annuity, my pension continues uninterrupted until the annuity kicks in sometime next year.

Yes, Nortel was a good company to work for at one time. I started in 1980 and for 20 years, it was not a bad high tech company to work for.
However, greed, executive bonuses. unacheivable sales prospectus, too many employees working in areas where the product was not ready for market or the market not ready yet for the product,over expansion and rapid growth compared to sales to support that growth and so on ..
"killed the golden goose!"


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## sags (May 15, 2010)

Pensioners, employees and investors who trusted Nortel's reported financial statements.

I know several people who lost everything they had chasing Nortel stock all the way to the bottom. 

They "averaged down" into losing everything they had saved. Hundreds of thousands of dollars investing good money after bad.

There were a lot of losers in the Nortel saga..........but apparently top management weren't among them.

There were a some financial messages in the Nortel saga as well.

Averaging down isn't always a good strategy. Sometimes companies value has fallen for good reasons.

Never put complete trust in reported company financial statements. They can be full of misdirection and fraud.

Never put your job and retirement in the same basket if avoidable, because you may lose both.

And past performance or status is not always a good predictor of the future.


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## carverman (Nov 8, 2010)

sags said:


> Pensioners, employees and investors who trusted Nortel's reported financial statements.
> 
> I know several people who lost everything they had chasing Nortel stock all the way to the bottom.
> 
> ...


Easy to say I suppose, but for most large companies that have a board of directors, one would think that there was some control? 

Not so in Nortel in the later years (1998 to 2008) when there was hints of corruption amongst the top executives hired with big bonuses
to collect, based on their and the company's performance.
That was one of the greed aspects that led to the downfall of the company...paying out big bonuses and those entitled to those
big bonuses did everything in their power to continue to collect the undeserved bonus(es).

Even as the company started to teeter on the brink of financial collapse, long before the final nail (the US recession of 2008, where
most of Nortel's traditional markets (the US "Baby Bells" etc) evaporated , as they started to cancel or defer orders that were suppose to
be shipped over the next few months. 

As the company started to go into the red,the executives and the CFO decided to "cook the books" placing future tentative (but not firm )orders into the financial statements used as guidance for the stock investors, as if these were a "given".... in order to still collect their bonuses.
When the financial fraud was finally discovered, that was it!..the final nail was driven into Nortel's coffin. No room left for any more financial creativity/finagling for Nortel.Their credit line had dried up. 

It was time to dump the employees sometimes entire divisions, in waves of 1000 to 2000 or more, depending on what the local labour laws allowed for specific areas for dumping employees enmasse. The payroll cupboard was bare.

The great halls of Nortel were emptied very quickly once that started. You could turn around and instead of a head count, it was
empty workstations and middle management offices, as employees were summoned to turn in their badges to be escorted out the door.

It was a very sad day for many long term employees in those days. Iit happened on a regular basis, so nobody really felt like devoting
any extra hrs to their job to get anything finished as you wouldn't know when your turn was next.

Mismanagement, greed, the recession, lack of foresight in some cases, over expansion of product lines and a huge capital drain from company
revenues which were already down to support these product lines, and more.....who knows how many nails were driven into the coffin. 

it wasn't just one factor of greedy executives, or the recession that led to the downfall...but a combination of things over that last 10 years
of it's existence as a large corporation.

In the end..most employees and the investors lost out...however the greedy executives got away scot free. Cashing in their multi-million dollar stock options, making a small fortune for themselves before the stock prices bottomed out. 

Insider trading..there were accusations flying around and one CEO was investigated by the SEC after he "retired" himself and cashed in millions of stock options. 

There was even a lawsuit launched by the investors against the executives, but it didn't go anywhere..
not sure why..maybe the lawyers acting on behalf of the investors couldn't prove that it was a deliberate white collar fraud .but it had to be considered fraud to keep the stock prices up and pay themselves big bonuses.


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## steve41 (Apr 18, 2009)

Come on! How are they going to pay their housekeeper, gardener _and_ valet? Plus.... do you realise how much maintenance on a Ferrari costs?


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## james4beach (Nov 15, 2012)

Management is supposed to be held to account. These people make lots of money because they are in charge -- they are responsible. That means responsible for both successes and failures.

Nortel was a failure. It was riddled with accounting fraud. Management is supposed to be punished for this, not rewarded.


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## carverman (Nov 8, 2010)

james4beach said:


> Management is supposed to be held to account. These people make lots of money because they are in charge -- they are responsible. That means responsible for both successes and failures.
> 
> Nortel was a failure. It was riddled with accounting fraud. Management is supposed to be punished for this, not rewarded.


The failure was the result of nobody willing to step forward and blow the whistle when they KNEW what they were doing was cooking the books to keep up appearances as though the company was in the black when in fact it was teetering on bankruptcy long before the US recession of 2008.

When the top executives were accustomed to collect bonuses based on the company's performance, it set a precedence for all upper management to go along with the flow, just turn a blind eye to the fact that the company expenditures were going up at the same time as the profits were going down.

The CFO that came up with the idea of cooking the books to keep up the stock prices was promoted to CEO by the board of directors. 
Of course they were all in on it. Everyone was happy to collect their fat salaries and bonuses, that is, until the company ran out of money and it all came crashing down on them. 

All kinds of panic driven schemes followed such as buying back shares (issue 1 new share for 3 of the old shares) at the current stock price which plummeted quicker day by day than investors could dump their share holdings trying recoup what they had left. 



> Dunn, Beatty, and Gollogly were charged in June 2008 by the RCMP for criminal fraud related to their activities in 2002–2003.[35]


Long before even 2009, Nortel shares that* once traded over $100 each* was relegated to penny stock,taken off the TSE. 


> June 26, 2009 : Nortel shares are delisted from the Toronto Stock Exchange at a price of $0.185 per share


When the investors lost confidence in the company, with no market capitalization, the end came sooner than anticipated. The Nortel horse was lame already after 2002, it just took another 6 years and countless layoffs/downsizing to finally shoot it within the period of January to June 2009.



> Nortel also paid out US$575 million and 629 million common shares in 2006 to settle a class-action lawsuit that accused the company of misleading investors about the company's health.


read "*after the internet bubble*" to get a better idea of what kind of mismanagement was deliberately done after 2001
https://en.wikipedia.org/wiki/Timeline_of_Nortel


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## Jaberwock (Aug 22, 2012)

2000: John Roth (CEO) cashes in his own stock options for a personal gain of C$135 million
2000-2002: Nortel's market capitalization fell from C$398 billion in September 2000 to less than C$5 billion in August 2002, as Nortel's stock price plunges from C$124 to C$0.47.
2001: CEO John Roth retires, replaced by Chief financial officer Frank Dunn

Roth must have known, when he cashed in his options, that the whole thing was a house of cards about to collapse.


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## carverman (Nov 8, 2010)

Jaberwock said:


> 2000: John Roth (CEO) cashes in his own stock options for a personal gain of C$135 million
> 2000-2002: Nortel's market capitalization fell from C$398 billion in September 2000 to less than C$5 billion in August 2002, as Nortel's stock price plunges from C$124 to C$0.47.
> 2001: CEO John Roth retires, replaced by Chief financial officer Frank Dunn
> 
> Roth must have known, when he cashed in his options, that the whole thing was a house of cards about to collapse.


It was highly speculated that he knew all along and retired early to cash in his stock options just before the stock started it's downward spiral.

What happened from that point on was the biggest scam in Canadian corporate history, bigger than some of the US scams
like ENRON. 

The SEC investigated him after he cashed in those stock options, but they couldn't prove "insider trading" but it was a known fact amongst the rank and file of Nortel that *he did this on purpose knowing the stock would soon start crashing after that*. He pulled out
his money before the ship started sinking. 

What can be said. Big bonuses and stock options led to corruption as all the executives had much more to gain by fianagling to make the
company look profitable even though sales were drying up from 2000 onwards. The idea of "nutshell game" , including future orders that
that were not firmed up allowed them to pad the financial prospects better than they actually were. 
Auditors Deloitte and Touche caught this very early in their game.

2003: Independent auditor Deloitte & Touche advises audit committee chairman John Cleghorn and board chairman "Red" Wilson to look into the suspicious results, who promptly hired the law firm WilmerHale to vet the financial statements.[25]



> Investigators find about $3 billion in revenue was booked improperly in 1998, 1999, and 2000.
> 
> 2003: *temporary return to profitability resulting in $70 million in bonuses awarded to the top 43 managers*,[22] with $7.8 million going to Dunn alone,[23] $3 million to chief financial officer Douglas Beatty, and $2 million to controller Michael Gollogly.[24
> 
> ...


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## pwm (Jan 19, 2012)

Saw this in today's ROB:* Nortel settles fight to divvy up $7.3-billion from liquidation*

_Former telecommunications equipment company Nortel Networks Ltd reached an agreement with their various business units on Wednesday to divvy up the $7.3-billion raised from liquidating the failed company, paving the way for pensioners and creditors to get paid after a seven-year wait._

Carverman: Does this give you any hope?

http://www.theglobeandmail.com/repo...-73-billion-from-liquidation/article32346673/


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## carverman (Nov 8, 2010)

pwm said:


> Saw this in today's ROB:* Nortel settles fight to divvy up $7.3-billion from liquidation*
> 
> _Former telecommunications equipment company Nortel Networks Ltd reached an agreement with their various business units on Wednesday to divvy up the $7.3-billion raised from liquidating the failed company, paving the way for pensioners and creditors to get paid after a seven-year wait._
> 
> Carverman: Does this give you any hope?


Well, I hope that it is finally settled, and the pensioners like me (and former employees) get some financial relief before I'm gone. 
Lets say that one needs be optimistic that it will be settled someday very soon (maybe even next year). 
It's been going on for a few years now. I put my claim in 2012/2013.

Right now, I would settle on 35-45cents on the dollar of my claim , which was put in a few years ago for the balance of my TRA claim ($38,582) and the total claim $82,542 as confirmed by the legal firm for the pensioners and approved by the Nortel Monitor.
35% = about $13,500 taxable lump sum ; 
45% (if that is the percentage finally approved by the courts), would give me a lump sum (taxable) of $17,360 for the cancelled
TRA payments that were supposed to be paid out in 136 monthly instalments.

In my marginal tax bracket and medical/support expenses it would be a welcome relief for my remaining years. 

As far as my total claim of $82,500 ( cancelled pensioner benefits and TRA), I don't know how much my settlement will be from that total
amount of claim, as I have applied and received a *one time* hardship fund payment of $10k (taxable) this year, 
which will be subtracted from any future payout from the estate, based on the percentage allocated for payouts to the pensioners.



> The settlement still needs approval from U.S., Canadian, U.K. and French courts. If approved, this would clear the way for each business division to pay suppliers, pensioners, government agencies and other creditors.


I didn't realise that the French lawyers/courts were involved as well. The Nortel Canadian, US and UK operations were the big three that have trying to settle for since 2010-11 along with the bond holders resulting in a lot of court action.

Whether this latest news is a faint glimmer of hope remains to be seen, I guess.


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## Beaver101 (Nov 14, 2011)

carverman said:


> ...
> Whether this latest news is a faint glimmer of hope remains to be seen, I guess.


 ... and Canadian lawyers are ever so proud that thye handled the Nortel case. 

Within that ROB article:


> ... Legal and professional bills paid from Nortel's remaining funds topped $2.5-*billion* (Canadian) as of March, 2016, according to a review by independent analyst DU. The professional costs are the highest in a bankruptcy in Canadian history. ...


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> This story really surprised me ...
> Since 2009, there's been $190 million in bonuses paid out! This is while the company still owes millions to creditors and pensioners, not yet paid out.
> 
> Shameful, to cause so much destruction and then walk away with millions that belong to other people.


Agreed ... though I can also recall US bankruptcies where not only were the retained executives being paid salary/bonus money, 100% of it was being withdrawn from the DB pension as an IOU. When the pensioners launched a lawsuit, the judgement was that the trustee winding up the company didn't have to pay back the IOU from company assets.

Then there's the plan in Niagara Falls where the Canadian subsidiary closed the the shop due to bankruptcy then reneged on severance, benefits etc. The German parent didn't have any other business in Canada so they walked away.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Nortel was a failure. It was riddled with accounting fraud. Management is supposed to be punished for this, not rewarded.


From what I recall, the Nortal Annual Statement had buried in an appendix that despite CEO John Roth being forcibly removed, he was still being paid an annual salary in the millions for something like 18 months.


Cheers


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## carverman (Nov 8, 2010)

Eclectic12 said:


> From what I recall, the Nortal Annual Statement had buried in an appendix that despite CEO John Roth being forcibly removed, he was still being paid an annual salary in the millions for something like 18 months.
> 
> 
> Cheers


The "man of the hour" voted CEO of the year earlier; how quickly he fell from grace,but he certainly knew how to look after himself.

From Wiki:


> With the collapse of the Internet Bubble Nortel stock price collapsed. Market capitalization of Nortel Networks declined from $398 billion to less than $5 billion, and more than 60,000 people were laid off by the company. Roth was criticized after it was revealed that he cashed in his own stock options for a personal gain of $135 million in 2000 alone.[10] Unable to sustain the debt load incurred during Roth's tenure, Nortel filed for bankruptcy protection in 2009 and then sought to cease operations, selling off all of its business units.




From Macleans magazine: Jan 23, 2009, The month that Nortel declared bankruptcy. 
http://www.macleans.ca/economy/business/the-four-faces-of-nortels-descent/



> First, there was John Roth, w*ho was named Canada’s CEO of the Year by a Bay Street panel in the fall of 2000,* not long after Nortel’s stock hit its peak of $124 a share. A week after receiving the award, he turned in the first major dissapointment of his tenure: quarterly earnings fell short of analysts’ expectations, sparking a 25 per cent plunge in the stock price in a single day. Roth scrambled to assure the public that Nortel’s growth machine was still intact, and in December he forecast a 30 per cent rise in sales. Just 60 days later, he cut that growth forecast in half, and announced plans to fire 10,000 workers. We didn’t know it then, but Roth’s Valentine’s Day massacre was the beginning of the end. Within the year, Roth would retire, walking away with an estimated haul of $139 million in salary and stock options. Thanks to his mammoth personal windfall, the Roth era will always be associated with greed.
> Next came Frank Dunn, Roth’s trusted CFO, who was hailed as the man to return financial discipline to a company that had grown unwieldy. He led the company for 2½ years, during which the stock fell by half. He was fired for cause in April 2004, amid allegations that he had helped orchestrate a massive accounting fraud aimed at inflating profits.


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## sags (May 15, 2010)

White collar crime pays very well in Canada and is virtually free of any penalties.

Steal a loaf of bread from Loblaws and you go to jail.

Steal millions from investors, employees and retirees and you get millions in settlements and live in a mansion.


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## sags (May 15, 2010)

Carver, it looks like you may get 70% of your pension, when combined with Ontario's pension guarantee plan.

It also looks like the lawyers got as much as the employees and retirees.

http://www.theglobeandmail.com/repo...-73-billion-from-liquidation/article32346673/


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## carverman (Nov 8, 2010)

sags said:


> Carver, *it looks like you may get 70% of your pension*, when combined with Ontario's pension guarantee plan.
> 
> It also looks like the lawyers got as much as the employees and retirees.
> 
> Reference to previous linkl: "www.theglobeandmail.com/report-on-business/nortel-settles-fight-to-divvy-up-73-billion-from-liquidation/article"


Apparently not Sags. 

The paragraph quoted below, pretty much indicates that the *payout for claims against the Nortel estate for pensioners* will be lower than anticipated
*and about where I thought it would be*..about 45- 50 cents on the dollar of each claim (minus withholding, and income tax when I file on the remainder.

My claim is separate and not tied in with my pension entitlement which has already been settled and the Norter pension fund wound up now.
I decided to go for an annuity, because it pays a bit more than a LIF for me. 
The acturized lump sum available for me from the pension fund , would only last less than 10 years, if I continued to draw
from it at my present monthly rate. 
At least the annuity pays me the equivalent amount I'm getting now + a few dollars more, for the rest of my life.

My claim against the Nortel estate was for the TRA + pension benefits, that was supposed to be paid out as part of my retirement package after 25 years of service. 
The payments started on Nov 2003 and stopped on December 2008. (They went bankrupt in January 2009).

They paid out to me about 50 payments at $568 a month (after taxes)
However, the agreement I signed when I was retired by Nortel in mid 2002, was for 136 payments at that rate to my age 69.(2015).
With the other pensioner benefits it added up to a claim of $82,500. 

Now if this G&M article is accurate,that I only get about 44% of that $82K, it will be around $36k.
*They will subtract the $10k I got from the Nortel estate hardship fund this year from that.*

I'm figuring that will be around $25K at 44% (less taxes), but I won't see that probably until some time next year. 




> *The deal will see Canadian claimants collect a return of about 44 per cent on their claims*, he said, which is lower than the original 71 per cent return anticipated when a deal was struck last May in U.S. bankruptcy court in Delaware and Ontario Superior Court.
> 
> Zigler said it was a tough decision, but claimants in Canada and Europe had to make a “compromise” with U.S. creditors or a deal wouldn't have even been struck.


www.thestar.com/business/2016/10/13...for-73b-of-bankruptcy-liquidation-assets.html


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