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Ontario-based Nortel Networks was once among the biggest makers of telecommunications equipment in the world, with 93,000 employees and a market capitalization of $250-billion at the height of the 1990s technology bubble.DAVE CHAN/The Globe and Mail

Two former chief executives of Nortel Networks Ltd. have reached deals to settle their claims against the long-defunct technology company, with John Roth receiving $19-million and Mike Zafirovski agreeing to an $8.5-million (U.S.) payout.

Mr. Roth stepped down as Nortel's CEO in 2001, but was being paid a pension under the company's supplementary executive-retirement plan at the time Nortel filed for bankruptcy protection in January, 2009. He filed a claim with Nortel's Canadian division to cover the loss of his pension payments, and his $18.9-million (Canadian) claim was approved in court on Thursday.

Mr. Zafirovski was Nortel's CEO when the company filed for bankruptcy protection in 2009, but left the company in August of that same year. He initially sought a payout of $12.3-million (U.S.), saying he was owed the total under the terms of his separation agreement.

Nortel's Canadian monitor, Ernst & Young, disagreed with parts of his claim, however, and negotiated a payment of $8.5-million, which was also approved by the court on Thursday. Ernst & Young said in a court filing that it believes the final payout is "fair and reasonable."

The company still has not reached a settlement deal with former CEO Frank Dunn, who headed the company from 2001 until he was dismissed in April, 2004, amid concerns of improper accounting treatments. He and two other former Nortel executives were later charged with fraud but were all found not guilty.

At a claims hearing last August, Mr. Dunn sought an award of $377-million (Canadian), including wrongful-dismissal damages and a claim for defamation.

The claims officer who heard the case, former Ontario associate chief justice Dennis O'Connor, rejected most of the amount, but awarded Mr. Dunn $11-million and a potential further amount for his supplementary-pension claim of $6.2-million. Mr. Dunn is still appealing the claims decision.

The settlement deals with Mr. Roth and Mr. Zafirovski come as Nortel's Canadian unit moves closer to concluding Nortel's affairs.

Ernst & Young reported on Friday that it has received a transfer of all the money it was allocated under a deal to distribute Nortel's remaining $7.3-billion of sales proceeds from its liquidation. The Canadian unit was allocated 57 per cent of the assets remaining in the company, totalling $4.16-billion (U.S.).

The final distribution means each of Nortel's main divisions in Canada, the United States and Europe can start making payments to unsecured creditors, including bondholders, former employees and pension plans. Ernst & Young said it expects to start making payments to creditors of the Canadian division, where Nortel was headquartered, in late June or early July.

Creditors with Canadian-dollar claims will receive between 45 cents and 49 cents on the dollar for their claims, Ernst & Young said, while those with U.S.-dollar claims will get between 41.5 cents and 45 cents on the dollar.

Holders of Nortel's common and preferred shares, which rank below unsecured creditors in claims on the company, will get no payout.

Ernst &Young also recently provided an update on the total fees it billed as Nortel's monitor, reporting total costs of $216-million (Canadian) and $33.6-million (U.S.) for services provided from January, 2009, until May of this year. At current exchange rates, the monitor's total costs were more than $260-million (Canadian) before applicable taxes.

Of the pre-tax total, $116.3-million went directly to Ernst & Young, while its Canadian law firm, Goodmans LLP, earned $93.7-million. Most of the remainder went to the monitor's U.S. law firms, Allen & Overy LLP and Buchanan Ingersoll & Rooney PC.

Nortel has become the most expensive bankruptcy in Canadian history, with total professional fees estimated to be in excess of $2-billion. The money was paid from Nortel's estate, with the bulk paid to lawyers representing bondholders and other creditors, who spent years fighting over how Nortel's remaining assets should be distributed. The parties finally reached a negotiated settlement deal last year.

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