Nortel groups warring over estate

Story in the Ottawa Citizen.

Warring Nortel groups turn to mediator to tackle who gets what

By Bert Hill, The Ottawa Citizen October 13, 2010

Nortel Networks is sitting on about $6 billion in cash and assets from the sale of most product lines. However, with billions of dollars more in claims from creditors in Canada, the U.S., Europe and around the world, the battle over division of the modest spoils is intense. Protracted negotiations have failed to generate a settlement.

Now the warring parties are turning to a high-powered Los Angeles lawyer for help. Leyn Phillips, 58, has more than 15 years experience helping Fortune 500 companies find a route out this kind of problem. He is also a former U.S. Federal District Judge and Appeals Court judge whose services don't come cheaply: He gets $1,000 an hour and his Los Angeles firm has charged an upfront $101,250 retainer deal for preparation and five days of alternative dispute settlement magic.

The mediation starts next month, and, if it doesn't work, arbitration by a judge will likely be the final step.

Phillips has some other qualifications that might help in this challenging assignment. He was a top-notch tennis player in his youth who went to the University of Oklahoma on a tennis scholarship. He will be kept busy calling out-of-bound shots in a contest that is long on love (the wrong kind) and perpetual deuces. Watch out for flying racquets and trash talk.

Even if the Nortel assets are divided up, the process won't end soon. The U.S. bankruptcy court in Delaware is booking dates into the spring of 2011, well past the second anniversary of the original bankruptcy filing. One issue is what to do with the millions of pages of Nortel records. Nortel has hired another expensive set of consultants for advice on what to save and what to destroy.

Lawyers for Frank Dunn, the former CEO at the heart of an alleged accounting scandal that sabotaged the company, are objecting. They finally got 22 million pages of Nortel documents after the first batch proved unsearchable by computer, but they also found 30,000 cases of redactions -- removal of key information for privacy and other reasons -- that they want to test. They told the U.S. bankruptcy court that Canadian fraud trial "proceedings will commence in the fall of 2011.''


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