Lawsuit alleges Nortel covered up problems

Nortel Networks has been slapped with a class-action lawsuit that alleges top executives at the equipment vendor failed to disclose last summer how poorly the company was performing in the months leading up to its bankruptcy.

The litigation, filed by Coughlin Stoia Geller Rudman & Robbins LLP in the U.S. District Court for the Southern District of New York, names Nortel CEO Mike Zafirovski and CFO Pavi Binning as defendants. Coughlin Stoia was the sole lead counsel representing the interests of former Enron investors.

The lawsuit alleges Nortel failed to disclose sluggish demand for its products and that the company's financial results were overstated. In addition, the suit claims Nortel failed to report that its restructuring was not going well.

Nortel filed for bankruptcy in mid-January, and it has been widely speculated that the company may be split up and sold in parts.

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