IRS files $3B claim against Nortel

Just when I thought things couldn't get much worse, along comes the IRS to file a huge $3Billion claim against Nortel. If the judge allows this claim it would wipe out most of any assets left to divide among the rest of the creditors including those with non-qualified pension plan claims and severance claims. It's unclear why the IRS would have such a large claim since Nortel has been losing money over the last decade.

Could this have anything to do with Zafirovski's hurried departure from Nortel? I wonder.

The projected ratio of cash assets to claims with the sale of Nortel's business was estimated to be 50% or less worldwide before this bombshell so it looks like the return will be a lot less and will impact US claimants directly.

The details of the claim are uncertain but it is speculated that the claim stems from transactions between Nortel units in multiple countries and dates back to 1998 when Nortel was riding high on the internet wave. If this claim is upheld it will have a devastating impact on all other claimants.

Unfortunately there is no legal representation of ex-employees on the creditor's committee to fight the claim on our behalf (other than the PBGC), so once again we are at the mercy of the court in examining the validity of the claim to make sure that it truly represents what is owed.

The IRS has made large claims in many other bankruptcy proceedings and some of them have been reduced after negotiation and careful deliberation. Maybe the PBGC will step up to challenge the claim. Maybe not. In any event you can be sure we are once again being held over a barrel. First by Nortel, then the courts, and now by the IRS.