Lawyers siphoning off Nortel assets

Every day or so I look at the Epiq web site on Nortel to see if there are any developments that might affect us. Most of the time all I see are applications for compensation by lawyers who are skimming the remaining cash that Nortel retains.

It must be quite a sum by now that has been paid to all those lawyers. I wonder what they have been doing to warrant those payments. It's not like they are cheap. Most of them charge hundreds if not thousands of dollars per hour. Are they really worth that? I certainly haven't benefited by their work. If anything their efforts have reduced any potential payout I might ever see on my US claim. I really don't understand what their value or contribution is.

When this is all over we retirees and ex-employees will be poorer than we were when Nortel was still active, but all the lawyers involved will have pocketed a nice sum and will just pick up their bags and move on to the next victim.

What a nice racket they have going.

Support bill C-501 moving through the Canadian Parliament

The following message appears on the NRPC website and urges you to write to the Canadian parliamentary ministers to help establish a new bankruptcy law that will provide better protection for retirees.

The time for strong action has arrived. This is one of the most important times affecting our future that requires your active participation and that of your family members and friends.

The second reading on C-501, an Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), has begun in order for it to be voted into a committee. This bill would increase claims for former employees above the unsecured status during restructuring and bankruptcy. There is support by the three opposition parties, the only holdout is the CPC government. They are influenced by the very active and well financed bank and junk bond holder lobbyists both from Canada but predominantly from the USA, to prevent changes to the status quo.

Please write Prime Minister Harper, Minister of Industry, Tony Clement, and Minister of Finance, Jim Flaherty, with copies to opposition leaders Layton, Ignatieff, and Duceppe. Keep your letter simple and just indicate your need and your support for the bill to be referred to a committee. Ask all parties to put their differences aside for justice in bankruptcy to prevail. Do not forget to ask it to be retroactive to January 13, 2009 in order for it to be relevant to us. At this stage, what counts is the volume of the letters and the rapidity of your reaction. We need thousands of letters to go the trio Harper-Clement-Flaherty offices during the period of this debate over the next couple of weeks. Please also ask your riding MP to vote in favour for the bill to go to committee study.

The following are emails and addresses for the ministers. These e-mail addresses are protected from spam bots, so you need JavaScript enabled for them to view it

Prime Minister Stephen Harper:Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone:(613) 992-4211 Email: HarpeS@parl.gc.ca

Minister Tony Clement: Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone: (613) 944-7740 Email: ClemeT@parl.gc.ca

Minister Jim Flaherty:Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone: (613) 92-6344 Email: FlaheJ@parl.gc.ca

Mr. Michael Ignatieff (Leader of the Opposition, Lib.): Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone: (613) 995-9364 Email: IgnatM@parl.gc.ca

Hon. Jack Layton: Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone: (613) 995 7224 Email: LaytoJ@parl.gc.ca

Mr. Gilles Duceppe: Post: House of Commons, Ottawa, Ontario, K1A 0A6 Phone: (613) 992-6779 Email: DucepG@parl.gc.ca

Sample email or letter proposed by the NRPC.

As a Nortel Pensioner, I am urgently asking for your positive support of Bill C-501. to amend the outdated Bankruptcy & Insolvency Laws in Canada.

I am asking for your cooperation in setting aside any other differences you may have with the Opposition Parties in Canada and/or any influences that are being brought upon you by outside sources. YOU are the Ruling Government and we are confident you will feel obligated to support the people you represent. The amendment of this Bill would come at NO expense to you or to the taxpayers of Canada.

Justice in bankruptcy must prevail in Canada for our future and the future of our generations to come.

It is our sincere request and our urgent need that this Bill be made retroactive to January 13, 2009 for the sake of those of us who now face bankruptcy ourselves without your intervention.

Sincerely,

Five more months of full Canadian pension

My Canadian pension check for April 2010 was deposited in full (after tax) into my bank account. That was a relief given all the debate and discussion on the Canadian Settlement over the last couple of months. Now I can look forward to five more months of pension payments until the plan is wound up September 30th.

In the mean time I hope that our lawyers, Koskie Minsky, and the NRPC are working with Nortel and the Ontario administrator to determine more detail on the transition, and to explain to us all what the impact will be. We are all concerned with the trust fund solvency ratio and want to know about that as soon as possible. It won't be well received if we don't find out about that until October 1st. Knowing what the reduction on our pensions will be is very important to us all, and at this point we only have an estimated year old figure which is close to a guess.

In the last K.M. FAQ document they said that the fund is now 30% in stocks and 70% in bonds. I hope that there are well informed people looking after the fund since the bond market may now be reaching a peak and could face a bubble situation like stocks did in 2008. Since it's our money, I would like to see some better method of control that would give us updates and explanations of how this money is being invested and distributed.

For those of us who worked in multiple provinces and are living outside Canada, there are other implications which we need additional definition on. Will the Ontario Pension Insurance apply to us, even if partially, and if so how much? Will we be able to take advantage of the Quebec approach to orphan pension funds if Ontario does not implement such a process? Will there be any impact on us by the CRA review of pension calculation methods using foreign service? We are left hanging with all these questions and have only received fluffy answers so far. I hope that there is some more clarity soon so that we can at least move forward with informed concern rather than worries about the unknown.

US Claims tax implications

Some time ago I wrote a post about my queries to the IRS regarding the status of our US claims against Nortel. I asked two basic questions. (1) Can we roll over any payments made against pension based claims to a tax deferred account? (2) Can we claim a loss on our tax filings for any amount of claim that is not paid back to us from Nortel's US assets?

I have so far received two phone calls regarding this query. The latest call indicated that my questions had been turned over to tax experts at the IRS and that I would be contacted in May with an update.

At least I received a response and have not yet been brushed off. When I receive further information I will post it.

Foreign Service update on NRPC site

The following information was posted on the NRPC site on April 13th. Additionally I spoke personally to a Koskie Minsky representative regarding the potential impact of the CRA review of foreign service impacting pension calculations. It appears that the only people impacted to this point are those who have just requested a pension from Nortel.

Pensioners who are aleady being paid pensions have not been brought into this discussion. At least not yet. Since these calculations have been carried out for many decades in this manner, and in fact the pension plan contains references to foreign currency conversion, and the fact that the plan has been submitted and reviewed by the CRA every year, it seems very suspicious to me that the method should come into question at this point in time.

If the result of discussions between K.M. and the CRA are negative we could be severly impacted. In that event those of us in the USA and other countries who have a foreign service component in our pensions, need to organize legal action to defend our pensions.



Update on Foreign Service Pensions NRPC web site.
Tuesday, 13 April 2010
Koskie Minsky LLP have had preliminary consultation with the CRA regarding the issue around Nortel's method of calculating pensions for those with foreign service. KM have posted the following somewhat encouraging update on their website:

The CRA has been consulted regarding the foreign service earnings issue and the preliminary response was positive. The CRA is open to discussing the matter and to receiving written submissions. We are encouraged by CRA's willingness to listen and are hopeful that ultimately it will agree that foreign service earnings can be included in determining your pension from Nortel's registered pension plan. However, there is no certainty at this point concerning resolution of this matter. We expect to meet with the CRA in May and will provide a further up-date after that meeting.

Koskie Minsky Charts update and FAQs

A set of charts has been placed on the KOskie Minsky website with details on the webinar held today as well as frequently asked questions. You can find them at:

http://www.koskieminsky.com/Case-Central/Overview/Status-Of-Case/?rid=107

Vacation

I will be away until April 22nd and may not be able to update the blog until then. Look for more posts on events and implications when I return.
Tom

CUPE president presses Canada's Finance Minister on pension reform

CUPE, the Canadian Union of Public Employees represents 600,000 working women and men across Canada. Their president met with Canada's Finance Minister Jim Flaherty on the saubject of pensions. The following is a press release from CUPE:

Apr 12, 2010 09:16 ET
CUPE to Flaherty: Expand CPP, Toughen Laws to Protect Pensions

WINNIPEG, MANITOBA--(Marketwire - April 12, 2010) - At a roundtable discussion on pensions with Finance Minister Jim Flaherty today, CUPE National President Paul Moist will call for reforms to Canada's pension system so that more Canadians can retire with an adequate pension.

"More than 11 million Canadian workers have no workplace pension plan. Well over a million seniors are living below the Statistics Canada poverty line. And in the absence of tougher laws to protect workplace pensions, people are learning that their pensions are not as secure as they once thought," said Moist.

"In Canada, we have a great tradition of taking care of each other. Now is the time to honour that tradition, and reform our retirement income system so that more Canadians can retire with dignity."

Moist says Canada's pension system can be fixed with an expansion of the Canada Pension Plan (CPP), an increase to the guaranteed income supplement (GIS), and stricter laws to protect workplace pensions from bankruptcy, high-risk investments and employer underfunding.

"Last year's market meltdown only emphasized what many of us have known for years - individualized private investments like RRSPs can't provide adequate retirement security. The CPP, which requires mandatory contributions, is a proven success story. Unfortunately, current CPP benefits are not enough. By doubling the CPP, we could improve retirement security for the 93 per cent of working Canadians who contribute to the plan."

Moist is also asking for the government to amend the federal Bankruptcy and Insolvency Act so that employers and pensioners are better protected when a company fails.

"What Nortel workers and pensioners have gone through is devastating. Workers should not have to pay for employer bankruptcies with their pensions."

To learn more about CUPE's plan for fixing Canada's pension crisis, visit: www.cupe.ca/pensions/campaign

For more information, please contact
CUPE
Media Relations
613-852-1494

Major impact on PBGC if GM goes bust

From the NY Times:

April 6, 2010
Automaker Pensions Underfunded by $17 Billion
By NICK BUNKLEY

DETROIT — The pension plans at General Motors and Chrysler are
underfunded by a total of $17 billion and could fail if the automakers
do not return to profitability, according to a government report
released Tuesday.

Both companies need to make large payments into the plans within the
next five years — $12.3 billion by G.M. and $2.6 billion by Chrysler —
to reach minimum funding levels, according to the report, prepared by
the Government Accountability Office. Whether the companies will be able
to make the payments is uncertain, the report concluded, though Treasury
officials expect the automakers will become profitable enough to do so.

If either company’s plan must be terminated, the government would become
liable for paying benefits to hundreds of thousands of retirees. The
effect on the government’s pension insurer, the Pension Benefit Guaranty
Corporation, would be “unprecedented,” the report said. The agency
manages plans with assets totaling $68.7 billion, less than the $84.5
billion in G.M.’s plan alone.

The carmakers’ pension plans were jolted by the downturn, increased
liabilities and other factors. G.M.’s plan was overfunded by $18.8
billion in 2008, and was then underfunded by $13.6 billion last year,
the report said. Chrysler’s plan was overfunded by $2.9 billion in 2008
but underfunded by $3.4 billion last year.

The plans cover about 650,000 people at G.M. and 250,000 at Chrysler.

The Treasury Department owns 61 percent of G.M. and 10 percent of
Chrysler as a result of the emergency loans the carmakers received last
year. The government spent $81 billion bailing out the companies and
others in the auto industry.

The report issued Tuesday said Treasury officials were confident that
G.M. and Chrysler would earn enough to allow the government to gradually
sell its stakes. But the report warned that the government could push
the companies out of business, consequently terminating their pension
plans, if their recovery efforts failed.

“In the event that the companies do not return to profitability in a
reasonable time frame, Treasury officials said that they will consider
all commercial options for disposing of Treasury’s equity, including
forcing the companies into liquidation,” the report said.

In addition, the report said the government’s interests as a shareholder
of G.M. and Chrysler could clash with those of pension participants and
beneficiaries. “For example, Treasury could decide to sell its equity
stake at a time when it would maximize its return on investment, but
when the companies’ pension plans were still at risk,” the report said.

President Obama has said he wants to sell the government’s stakes in the
two companies as soon as is practicable. G.M. executives have said that
a public stock offering could happen this year but that the company
would need to be profitable and meet other criteria first.

G.M. is scheduled to release its financial results for 2009 on
Wednesday. Chrysler plans to provide an update on April 21.

Alice Campbell Nortel LTD passed away April 2nd 2010

The following is a Memorial for Alice Campbell from the "Rights for Nortel Disabled Employees"

Saturday, April 3, 2010, 1:00 P.M.

Words seem inadequate to express the sadness we feel about the passing of Alice Campbell on April 2, 2010 at 6:00 P.M.

Alice Campbell is a fellow Nortel long term disabled employee, who spoke to CBC National News on November 26, 2009 about the injustice of Nortel not honouring her disability income and medical benefits.

When Gillian Finlay of CBC asked Alice what she would say to Nortel's John Doolittle, she said: "Quit being so greedy. You know. There's a lot of us people in the world. They want to have the whole world for themselves. These people get so greedy. But, they're taking their share and our share. It's not right!"

Alice started the journey with the group of 37 Nortel long term disabled employees, who oppose the Nortel settlement even though it pays for our medical costs for the next nine months, because this settlement forces us to live in poverty for the rest of our lives. Our group believes the effect of Justice Geoffrey Morawetz approving this settlement on March 31, 2010 is:

(i)to deny us the right to sue parties responsible for an alleged Breach of Trust involving Nortel not making required employer contributions into the Health and Welfare Trust (HWT) for many years and the HWT loaning Nortel $37 million. This results in a total shortfall within the HWT of an estimated $112 million for payment of the LTD wage loss replacement income, medical, dental and life benefits; and

(ii) to attempt to prevent a BIA amendment for preferred status of long term disability claims to be applicable to us.

Peter Burns says: "In memory of Alice Campbell, our group will not give up the fight to have our long term disability benefits paid from the Nortel bankruptcy estate on a preferred basis. The missing money in the HWT is ours, not theirs, and we want it back now."

Our future is in the hands of the Ontario appeal court to overturn J. Morawetz's decision, that asks us to accept living in poverty for the rest of our lives.

Josee Marin says: "We urge the Conservative Senators to join their Liberal colleagues in the vote for Senator Art Eggleton's Bill S-216, which gives preferred status for long term disability claims over other unsecured creditor groups. It is a question of human dignity to be able to get the benefits we paid for, it is what we need in order to survive."

"Our lives and our ability to live independently are in the hands of Industry Minister Tony Clement, Finance Minister James Flaherty and Parliamentary Secretary of Finance Ted Menzies, who are examining the matter and will report to Parliament shortly. Our group is not asking for "Special Rights" or government handouts. We simply wish our courts and our Federal Government to ensure fairness in bankruptcy proceedings, such that a Breach of Trust of the disabled is remedied in full to enforce the obligations of employers providing long term disability benefits," says Arlene Borenstein.

Nortel's Directors and governance committees for the HWT could have put the missing money back into the trust for the disabled prior to its bankruptcy filing, since the company had $1.8 billion of available cash world-wide at that time. The bankruptcy law amendment for Nortel's disabled would have incremental cost of less than 2% of the Nortel world-wide estate, which has projected cash of $6 billion for disbursement to world-wide creditors later this year or in 2011. While the Canada Estate has estimated cash of only $134 million at April 24, 2010, it will be getting a future share of the projected $4 billion cash in the lock box from Nortel's business sale proceeds.

The disabled should not be forced into poverty when there are billions of dollars in bankruptcy estates and executives are being paid millions of dollars in bonuses. It s not a Special Right to have quality of life and peace of mind for the most vulnerable people in Canadian society.


For more information contact:
Peter Burns--- snrub.retep@rogers.com
José Marin--- marin.josee@sympatico.ca (Bilingual)
Arlene Borenstein (Plante)--- arleneplante@hotmail.com

Foreign Service Earnings pension Impacts update

The question regarding foreign service earnings impact on pensions came about when a number of people living in the US applied for their Canadian pensions in the last few months.

Because of the impending wind up situation, Canada Revenue some how or other was involved with the pension regulator in reviewing the applications which were subsequently put on hold until this foreign service earnings issue is resolved.

For as long as I have been in the USA (since 1985) the calculation of Canadian pensions by Nortel used the Canadian years of service that we transferees had, and the final average earnings calculated on the year the pension was requested. The FAE was determined in US dollars then converted to Canadian dollars, and used to calculate the amount of pension we are due.

In fact I have a number of Nortel reports sent to me over the years showing this calculation quite clearly. So why it is now an issue I don't understand since the pension has been registered in Ontario for decades and Nortel has submitted hundreds of reports to FSCO for approval over many years.

If this is not resolved to our benefit, we retirees in the USA stand to lose a huge chunk of our pensions, in addition to the cut we expect from Nortel's underfunding of the trust fund.

Foreign service impact on pensions

The following comment was made on the NRPC website regarding the method of calculating pensions for former employees of Nortel who have foreign service.This rather disquieting comment has no further detail. A similar comment is contained within the body of the latest Koskie Minsky news report. As further details become available I will provide information as I find out what it may mean to those of us living in the US and receiving a Nortel Canada pension.



This issue may apply to some people living in Canada but it is probably applies mostly to those former employees who are living outside of Canada. The Canadian Revenue Agency has raised concern about the method that Nortel has used for calculating pensions for those people who have foreign service. See the April 5th newsletter on the Koskie Minsky website using the KM Newsletters link at the top of the page. Our legal representatives are working with Nortel and the Monitor to resolve the issue and hopefully any impacts will be only temporary. Individual letters are being mailed to those who may be caught up in this review.

John Rafferty thinks Bill C-501 may pass

Pension bill likely to pass MP John Rafferty (NDP), Thunder Bay - Rainy River
2010-April-01 at 15:36

This past week I was happy to table a new Private Members’ Bill that will help secure the pensions of workers at companies that enter bankruptcy proceedings or undertake supervised restructuring.

Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts, has the potential to secure tens of thousands of pensions across Canada and I am optimistic that it will pass.

When AbitibiBowater filed for bankruptcy protection last year, many hard working employees were left to wonder what would come of their jobs and their pensions. In townhall meetings that I hosted throughout the riding last year I began to hear from workers about a rumour that there was financial shortfall in their pension plan. Sure enough, when the books were finally opened in the fall it was found that the pension plan was significantly underfunded and that the workers stood to lose up to 40 percent of their pension and retirement income.

At about the same time of the discovery of the pension plan shortfall at AbitibiBowater, my New Democrat caucus colleague Wayne Marston (Hamilton East – Stoney Creek) was in the process of tabling a pension protection bill (C-476) to assist the former employees of Nortel. I approached Wayne to see if his bill could also help secure the pensions of workers at AbitibiBowater, and he indicated that this was in fact the case. However, C-476 would not be eligible for debate until late 2011.

It was agreed that I would table a shorter version of his bill so it could be debated and voted on sooner. The early consideration of one of my bills is a result of sheer luck, as I drew a lower number than Wayne (66 to 195) in the lottery that determined the order of consideration for Private Members’ bills. I have been notified that my turn will come up in mid-April.

As it stands now, pension plans are pretty much at the back of the line when it comes to settling debts and dividing assets among the various creditors of insolvent companies. Pension plans are behind the government, unpaid suppliers, banks, and other lenders in the pecking order.

To correct this problem, C-501 would move pension plans from the back of the line of creditors to the middle; somewhere ahead of the banks and just behind government and the suppliers of goods of services who have not yet been paid.

In nearly every bankruptcy case in recent memory, C-501 would have eliminated pension plan shortfalls when the assets of insolvent companies were sold off and divvied up among creditors.

While C-501 will be voted upon before the end of the year, I am optimistic that this timeline could be shortened with the support of the other parties.

The Liberals and Bloc have already indicated in the Finance Committee that they are likely to support it, and more than one Conservative has said in private that they don’t see anything that would stop them from doing the same.

If all parties agree to support the bill early on, then it could be ‘fast-tracked’ through the House debates and right into the Industry Committee, or right into the Senate if things go well.

Since I first heard from those AbitibiBowater workers at the townhall meetings last year, a tentative settlement has been reached between the creditors of that company that would eliminate the $1.3 billion pension plan shortfall.

This is of course great news, but I want to assure those workers that I heard their concerns and am doing everything in my power as their Member of Parliament to secure their pensions in case this deal falls through or their company faces similar difficulties in the future.

Article in Ottawa Citizen says LTD people may appeal the Canadian Settlement

Extracted from an article publishedin the Ottawa Citizen on March 30th.


By Bert Hill, The Ottawa Citizen March 30, 2010 10:11 PM


The deal could be challenged in higher courts because some believe it hurts certain groups more than others and surrenders the right of Nortel pensioners and others to benefit from any changes to federal bankruptcy law that might give them a bigger share of Nortel assets.

Koskie Minsky, the law firm representing up to 20,000 Nortel pensioners, long-term disability recipients and other former employees, said the $57 million in benefits could have been cut off or drastically reduced as early as Thursday without the new deal.

That would have hit medical, dental, life insurance and income support for 12,000 Canadian pensioners, 400 long-term disability recipients and the $3,000 severance packages to about 1,200 Canadian employees dismissed in the last 15 months.

In return for extending the benefits to the end of December, Nortel retains the commitment given under the original deal, that the pensioner and employee groups won’t sue over the fact the pension and health and welfare funds are underfunded.

The package was thrown into doubt by an Ontario Superior Court ruling rejecting a condition that would have allowed Nortel pensioners and others to benefit if their political campaign to change bankruptcy laws succeeds.

The court said the right was unfair to other creditors which include major U.S. banks, bondholders and major suppliers.

Under the deal negotiated in Toronto, representatives of pensioners and disabled employees dropped the critical clause.

A representative of many unhappy long-term disabled recipients said they were not able to win any concessions in return for dropping the clause concerning future government action on pensions.

Diane Urquhart, an adviser to some of the 400 disabled recipients, said they will appeal the settlement “because it is an agreement negotiated under duress which gives nine months of benefits but condemns the LTD group to a life of poverty.”

She said the Nortel employee group is in danger of surrendering just as their lengthy campaign to change federal bankruptcy law is gaining traction on Parliament Hill.

“The laws may change but it won’t be any use to the Nortel pensioners. Their leaders are giving up the rights.”

Mark Zigler, the Koskie Minsky lawyer, said opponents are “naive and are being led down the garden path by people who believe that this federal government would ever change legislation to recognize special rights.”

He said there were no other changes or concessions to the employee group in the revised deal.

“This is a very good deal which provides $57 million in benefits to the end of the year, a period that is much longer than in most such cases.

“The judge recognized it was a very good deal. The problem for him was that it was too good because it was not fair to other creditors.”

Zigler said that while others may exercise their right to appeal, it does not make sense. “The alternative is having benefits cut off immediately in order to embark on lengthy and very risky litigation.”


© Copyright (c) The Ottawa Citizen

Diane Urquhart You Tube Video

You tube video of Diane Urquhart speaking on pension reform and the proposed to the CCAA and BIA


http://www.youtube.com/watch?v=fY260Dt6LhQ

Monitor's 42nd report filed

Ernst & Young, the Canadian court appointed monitor of the Nortel Bankruptcy, has filed its forty second report.

The report which can be seen on the E & Y site (see right hand column), is the amended settlement agreement which was approved by Judge Morawetz yesterday.

The settlement agreement is identical to the original except that clause H2 has been removed.

Clauses E1 and H1 still remain in the agreement. These clauses basically waive the rights of pensioners and LTD people to obtain priority in the CCAA or subsequent insolvency process. We will be simply unsecured creditors like the (insured) bondholders and others. We also have given up any right to sue Nortel or directors over their poor funding and management of the pension and HWT trust funds, except in the case of obvious fraud.

So we have basically bought 6 months of continued pension and other benefits at the expense of forgoing a possible higher payout on our claims against Nortel Canada.

The decision to support this agreement has been made by the court appointed representatives of the NRPC who proceeded to these negotiations without first obtaining prior majority support by the full membership of the NRPC. In fact the agreement was obtained in secret and there was no discussion of it with the members until after it had been proposed. The only subsequent discussions were uni-directional and there was never any formal corrective mechanism for the agreement by obtaining feedback and guidance from the people being represented.