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Nortel's pension mess threatens to remain a major problem even as the company is dismantled piece by piece.

The Ontario government faces a liability of up to $500-million as Nortel Networks Corp. is liquidated under a court-supervised auction, putting added pressure on a pension fund that is already broke.

Retirees and laid-off Nortel workers said Tuesday they fear they will get little from the sale of Nortel's assets, while the U.S. and British governments are taking a far more active role.

Even Federal Industry Minister Tony Clement suggested the Ontario government was trying to shift the problem to Ottawa.

The controversy over the pension mounted as U.S. and Ontario courts, in a joint hearing, approved the sale of Nortel's wireless assets to Sweden's Telefon AB LM Ericsson, ERIC-Q a deal which will likely spark a federal review under the Investment Canada Act.

“We're disturbed by the lack of government activity in the bankruptcy process,” said Tony March, a spokesman for the Nortel Retirees Protection Committee.

“There is no obvious Canadian government influence at all ... We may get out-gunned.”

Nortel has other assets for sale, and the company may be liquidated, although some remnant of the once mighty high-technology icon could remain.

The court decision comes amid growing pressure on Ottawa to block the sale of Nortel's assets to foreign buyers. In a statement late Tuesday, Research In Motion Ltd. said it remains interested in purchasing Nortel's assets, and called on the federal government to review the sale under the Investment Canada Act.

“The bankruptcy courts in the U.S. and Canada have no mandate or authority for considering Canada's national interests,” Research In Motion said.

The government has not decided whether to intervene, Mr. Clement said. He suggested Ontario was trying to avoid the pension liability when provincial Finance Minister Dwight Duncan urged Ottawa on Monday to find a Canadian buyer for Nortel.

“I find it curious that Ontario has raised the issue now,” Mr. Clement said. “It could have something to do with the fact that they're on the hook for the pension issue and what they're trying to do is offload the pension issue to us.”

The federal minister said his Ontario counterparts had not talked to him about Nortel's problem throughout the company's lengthy slide into bankruptcy protection and a court-supervised asset sale.

If Nortel's pension plan is liquidated, Canadian retirees would get $12,000 a year from the Ontario pension benefits guarantee fund, according to analyst Diane Urquhart, who works with the former Nortel employees groups. As a result, Nortel's failure would create a liability over several years of some $500-million, she said.

Ontario contributed to a multibillion-dollar bailout of General Motors of Canada Ltd.'s pension earlier this year, and Premier Dalton McGuinty has said the provincial fund – which did not cover GM – is broke.

Mr. Duncan said Nortel's pension issues and the nationality of the buyer of its assets are “totally unrelated,” adding Mr. Clement had delivered a “cheap shot” by suggesting some connection.

Ms. Urquhart said it is unclear whether pensioners and other former Nortel workers who are owed money would be better off if RIM succeeded in its highly politicized bid to overturn the auction process and purchase key Nortel assets.

In an interview, Ms. Urquhart predicted a Nortel liquidation could spark an international “pension war” as governments in Canada, the United States and the United Kingdom stake their claims to a share of proceeds.

The U.S. Pension Benefit Guaranty Corp. took over Nortel's U.S. plan earlier this month, and has been a member of the unsecured creditors group which has been influential in the U.S. and Ontario court decisions regarding the company's liquidation.

In contrast, Ontario has been virtually absent from the process, Ms. Urquhart said.

The Nortel pensioners are lobbying Ottawa to pass an emergency amendment to the federal Bankruptcy and Insolvency Act to give them status ahead of other unsecured creditors in Canada.

During the court hearing, Nortel's Toronto lawyer Derrick Tay said RIM's lawyers never showed up to object throughout the 22-day sale process for Nortel's wireless assets, and that its criticisms of the process were based on “misinformation and untruths.”

The lawyer rejected allegations by RIM co-chief executive officer Jim Balsillie that his company had been blocked from bidding by Nortel officials.

“No one was unfairly barred or refused,” he told the court, adding that RIM tried to “interfere by going to the media and politicians.”

Mr. Tay added that Nortel has 5,500 patents and that the wireless deal involves 125 patents.

Nortel will also continue to own the patents relating to its Long Term Evolution project, which involves developing a new high speed wireless system. Ericsson will licence the patents, he added.