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Frequently Asked Questions about the Nortel Class Action Settlement

posting date Posted: February 8, 2006
Background

OPTrust announced the conditional settlement of a major U.S. securities class action against Nortel Networks. OPTrust was appointed by United States District Judge Richard M. Berman as sole Lead Plaintiff in this action, which is pending in Federal Court in the Southern District of New York (In Re Nortel Networks Corp. Securities Litigation, 01-CIV-1855).

Under the settlement, Nortel will pay financial compensation of approximately US$2.4 billion (based on current share prices), consisting of U.S.$575 million in cash and approximately 628 million common shares. Compensation will be shared equally between the members of the OPTrust class, which covers the class period October 24, 2000 to February 15, 2001, and the members of a subsequent class covered by a second securities class action for the period April 24, 2003 to April 27, 2004 (the "Nortel II litigation").

Questions & Answers
  1. Why did OPTrust sue Nortel?
  2. How much money did OPTrust lose on Nortel?
  3. Why does the class action limit the relevant period to the three months of October to February?
  4. I own shares in Nortel, how do I join the class action lawsuit?
  5. Does it matter if I purchased Nortel shares on the Toronto Stock Exchange or the New York Stock Exchange?
  6. Will OPTrust members and pensioners receive financial compensation as a result?
  7. Why did you not sue Nortel’s auditors, Deloitte, for their role in misleading financial reporting?
  8. Why did you litigate this case in the United States?
  9. Wasn’t this a first – a Canadian institution being named lead plaintiff in an action in the United States?
  10. How significant is this payout relative to other shareholder class actions?
  11. Are there other outstanding class actions or individual claims against Nortel?
  12. Can you tell me more about the allegations against Nortel in the suit?
 
Answers
  1. Q. Why did OPTrust sue Nortel?

    A. OPTrust’s class action lawsuit was initiated in the United States on behalf of all investors who purchased Nortel securities between October 24, 2000 and February 15, 2001. The suit alleges that over this period Nortel employed improper accounting practices and issued false and misleading statements to the investing public concerning its financial position and performance.

    In our role as lead plaintiff in this class action, OPTrust sought to recover damages suffered by all investors who purchased Nortel shares during this period. We pursued this suit as part of our responsibility to the members and pensioners of the OPSEU Pension Plan.

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  2. Q. How much money did OPTrust lose on Nortel?
    A. We incurred a loss of approximately $52 million (CDN) on the Nortel shares we purchased between October 24, 2000 and February 15, 2001.

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  3. Q. Why does the class action limit the relevant period to the three months of October to February?
    The class action complaint alleges, on the basis of the evidence available, that accounting and disclosure irregularities took place during these three months.

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  4. Q. I own shares in Nortel, how do I join the class action lawsuit?
    You are automatically included in the class action, if you bought Nortel shares during the class period from October 24, 2000 up to and including February 15, 2001. If you purchased shares during this period you should have received a "Notice of Pendency of Class Action" from the Nortel Securities Litigation group.
    The lead counsel for the Class is:

    Milberg Weiss Bershad Hynes & Lerach LLP
    One Pennsylvania Plaza
    New York, New York 10119-0165
    Tel: 1.800.320.5081
    www.milbergweiss.com

    A subsequent class action was launched covering the period from April 24, 2003 up to and including April 27, 2004. The lead plaintiff for this period is the Ontario Teachers Pension Plan.

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  5. Q. Does it matter if I purchased Nortel shares on the Toronto Stock Exchange or the New York Stock Exchange?

    A. The Class Action was brought on behalf of all investors who purchased Nortel's shares during the Class Period, regardless of whether they were purchased in Toronto or New York.

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  6. Q. Will OPTrust members and pensioners receive financial compensation as a result?
    A. No. Compensation will be shared equally between the members of the OPTrust class, which covers the class period October 24, 2000 to February 15, 2001, and the members of a subsequent class covered by a second securities class action for the period April 24, 2003 to April 27, 2004 (the "Nortel II litigation").
    While we actively pursued recovery of damages experienced by the Plan, these losses did not affect OPTrust's capacity to meet our pension obligations.

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  7. Q. Why did you not sue Nortel's auditors, Deloitte, for their role in misleading financial reporting?
    A. This action is focused on Nortel and the allegations deal with the conduct and disclosures made by Nortel.

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  8. Q. Why did you litigate this case in the United States?
    A. Nortel shares are listed on both Canadian and U.S. stock exchanges, and investors experienced losses on both sides of the border. The class action lawsuit that we're involved with happens to have been initiated in the U.S in February 2001. We stepped up to be the lead plaintiff when the opportunity arose in December 2001.

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  9. Q. Wasn't this a first - a Canadian institution being named lead plaintiff in an action in the United States?
    A. While it may not be a common occurrence, our lead plaintiff status is consistent with the law and with our role as a major institutional investor in Nortel, which is an international company. We invest all over the world and will go where we need to go to defend the interests of our pension plan, and its members and pensioners.

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  10. Q. How significant is this payout relative to other shareholder class actions?
    A. The total settlement would be one of the largest in class action history but well behind WorldCom Inc.'s record $6.12 billion settlement but nearly five times the size of the shareholder settlement reached in 2004 with Nortel rival Lucent Technologies Inc.
    What is significant though, is you have a large Canadian institutional shareholder demonstrating strong leadership in regards to shareholder rights and holding companies accountable for their conduct.

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  11. Q. Are there other outstanding class actions or individual claims against Nortel?
    A. Yes, the proposed settlement is conditional that a global settlement can be reached for all claims.

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  12. Q. Can you tell me more about the allegations against Nortel in the suit?
    A. Yes. Among the allegations in the class action is that between October 24, 2000 and February 15, 2001, Nortel used improper accounting practices and issued false and misleading statements to investors about its financial position and performance. The result, the suit alleges, was to artificially inflate Nortel's share price during this "class period."
    The class action aimed to recover damages resulting from these alleged irregularities on behalf of investors who bought Nortel shares at any point during this four-month period, including OPTrust. A subsequent suit (Nortel II) covers the period from April 24, 2003 up to and including April 27, 2004.

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Created February, 2006