Court Dockets 2205 and 2207 on NNI claim for $2B against NNL

Dockets # 2205 and 2207 filed on Dec 23 2009 and recorded on the Epiq site (See column on right hand side) contain the information on the IRS claim and their settlement with NNI as discussed in the Ottawa Citizen story in the previous post. This complicated situation could have huge impacts on the amount of money left in each country when Nortel ceases operation. The agreements between the IRS the Canada Revenue Agency, NNL and NNI include the Final Canadian Funding Agreement.

The motion is that NNI will pay NNL $190M to continue operations until the final wrap up of Nortel. The motion will only be approved contingent on a number of complicated deals. First that NNI and NNL agree that NNI overpaid NNL by $2Billion during the 2001 to 2005 period for R&D and other charges. That means that NNI's profits were understated and they will have to file amended tax returns for those periods with extra revenue and profit. It also means that NNL will have to re-file in Canada with less revenue and profit and will have tax owed to them by Canada. (Good luck getting anything back from them.-- where are they anyway?)

The agreement under an IRS APA ( Advanced Pricing Agreement) has to be agreed to by both NNI,NNL, IRS and CRA to make this all work. If that happens then NNI will pay the IRS $37.5 M and the IRS will extinguish its liens and also will no longer look for the claims filed earlier. In return the IRS will also allow the $814M tax credit claims that NNI has to help offset taxes owed from 2001 to 2005 as a result of the extra $2B income. What is Canada doing to help the NNL side of this mess?

There are a large number of other whats, ifs, and buts in the deal however it looks to me that it will probably happen and the Canadian group will end up with enough money to keep going until the wind up sometime in 2010. At that time however the $2B claim by NNI may wipe out any gains made in Canada from the sale of assets This is truly a huge FUBAR. The Canadian government is nowhere in sight as the IRS virtually dictates how the assets will be divided with their APA claims. Considering that both the IRS and the CRA were supposed to be involved at each step of the way from 2001 to 2005 during this APA process something smells really fishy to me.