Wednesday, July 6, 2011

Us Trustee

The US Justice department has a group called the US Trustee. The people in that department have the mandate to oversee bankruptcy cases and make sure that the law is properly followed. The US Trustee intervened in the Nortel case when Nortel attempted to cut off retiree medical and other benefits in 2010. The Trustee was able to stop Nortel's petition and as a result Nortel had to withdraw their petition at that time. Nortel has reinitiated their plan to reduce or eliminate the medical and other benefits. However, this time they are going through the proper bankruptcy procedure by requesting that the court approve the formation of a 1114 committee. This process is currently underway and the US Trustee will be keeping a close eye on it to make sure it is per the bankruptcy codes.

It is good to know that some government agency has the retirees benefits in mind, even if it is only to ensure the courts follow the right process.

I am not sure if such an agency exists in Canada, but I would think that it would certainly be a good thing for Canadian retirees if a government agency was able to step in and have a say regarding the dispersion of the Nortel Canada Assets. Since the government there has practically thrown the retirees to the dogs by avoiding to provide pension insurance or protection, perhaps they could take some pro-Canadian steps to ensure that the Nortel Pension Fund receives payments from the assets, instead of handing large sums over to the UK and other European agencies who are trying to by-pass Canadian law to get their hands on a bigger share of the Nortel assets than they should be.

Since Nortel UK declared bankruptcy then the the UK claims should be placed against the Nortel UK assets, not the Candian assets, nor the US assets. If Canada and the US allow the UK claims and EMEA claims to be made against the Canadian and US estates it will circumvent the normal bankruptcy process in our countries and generate a precedent that will have worldwide implications. The US trustee, and if there is an equivalent in Canada, needs to get involved to make sure the proper process is followed regarding those foreign claims which have already been denied by both the US and Canadian courts. Otherwise all claims will become global and everyone will start claiming on company divisions in every countrynof operation resulting in total stalemate.

Along the same lines, both countries need to get involved in the asset allocation process. The UK and EMEA have been arguing forcefully that they should have more assets allocated to them since they have such large claims. This is simply another tactic to get their hands on a bigger piece of the pie. Their argument should be overruled. The dispersion of sold assets should not be based on claims but on other more relevant factors related to company presence, funding, sales, employees, ex employees, R&D etc.... Not claims.

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