Nortel to pay $2.5b to settle legal headache

Network equipment maker Nortel will pay $2.5 billion to settle two shareholders' class action lawsuit over an accounting scandal in 2004, an Associated Press report said.


The report said the settlement would include $575 million in cash and payment of shares representing a 14.5% stake in Nortel.


The report quoted Nortel as saying that mediation had resulted in a deal with lead plaintiffs in two significant class action lawsuits pending in the Southern District of New York.


The Associated Press said the accounting scandal in 2004 resulted in the firing of major executives, including CEO Frank Dunn, several lawsuits, and regulatory investigations.


The company, according to the report, wanted to avoid being tied up in prolonged litigation.


Shareholders filed numerous lawsuits against Nortel for allegedly violating US and Canadian securities laws after it issued revised financial expectations for the 2001 fiscal year, the report said.