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Nortel pensioners protest on May 12, 2014, outside the Toronto courthouse where the Nortel bankruptcy trial was being held.Fred Lum/The Globe and Mail

It was once a true Canadian corporate champion, a seemingly invincible global behemoth worth $260-billion (U.S) with almost 100,000 employees around the world and a stock price that had nowhere to go but up.

But after more than a decade of stumbling, scandal and bankruptcy, all that is left of the once-mighty Nortel Networks Ltd. is the scramble to grab the biggest share of assets possible, like "jackals over the carcass," in the words of one lawyer on Monday.

After years of failed attempts to negotiate a deal among Nortel's creditors – and more than $1-billion in legal and other fees – an unprecedented cross-border bankruptcy trial launched on Monday to sort out how much money should go to the company's Canadian parent and how much to its U.S. and European subsidiaries. More than 40 lawyers packed a courtroom in Toronto outfitted with flat screens and cameras to allow a video link with a U.S. courtroom in Wilmington, Del. The joint trial, with two judges, will attempt to carve up the $7.3-billion (U.S.) gained from sales of the defunct telecom giant's assets.

The battle pits tens of thousands of Nortel pensioners against the company's bondholders and other creditors. When the trial broke for lunch, dozens of the telecom company's Canadian pensioners, whose benefits have been slashed by 30 to 40 per cent, stood outside wearing T-shirts with the slogan: "Bondholders Profit! Nortel Pensioners Suffer!" Many had been watching the trial in a special overflow courtroom equipped with a big screen.

Bill Graham, a former Nortel plant manager, said not only was his pension cut by 30 per cent, he also lost more than $4-million on the value of Nortel shares he amassed over a 35-year career. Mr. Graham said he was relatively fortunate because he had diversified his investments, and he knows many others who suffered more.

"People who put everything into Nortel, they're the worst cases," he said. "Nortel was such a strong company. Who would think we'd be standing here today?"

Earlier in the day, in an opening statement on behalf of Nortel's 36,000 pension plan members in Britain, U.S. lawyer Brian O'Connor told the Toronto courtroom via video link that the company's units had operated seamlessly together before the bankruptcy. He said it was bewildering to see them now so divided "while the debtors fight like jackals over the carcass."

He called the process a "morass," and "a proverbial Gordian knot."

Nortel's British pension plan had a $3-billion shortfall when the company filed for bankruptcy protection in 2009, and lawyers for the plan want a share of Nortel's asset sales to cover that hole.

Michael Barrack, a Canadian lawyer for the British pensioners, called for the proceeds to be distributed to all of Nortel's creditors on a "pro-rata" basis, which would give all creditors the same number of cents on the dollar.

He also characterized the proceedings as a "geographic tug of war." The key issue is how to divide up the $4.5-billion Nortel received from the sale of its patents.

In court submissions, lawyers for Nortel Networks Ltd., the Canadian parent company, argue all of that money should go to Nortel's Canadian estate, since it was the legal owner of all of the patents. Those lawyers are scheduled to address the court on Tuesday. But on Monday, lawyers for the British pensioners, the European Nortel companies and Nortel's U.S. arm argued the proceeds should be shared.

Lawyers for Nortel's European estate said many of the patents were developed in Europe. This was reflected in Nortel's tax arrangements and in previous asset sales, court was told.

"‎If you paid 50 per cent [of the cost of developing the patents], you get 50 per cent," said William Maguire, a U.S. lawyer for the European estate in Delaware. "You reap what you sow."

Sheila Block, a Canadian lawyer for Nortel's U.S. subsidiary, said the American wing agreed to the patent sale on the belief it could use the proceeds to repay its U.S. creditors, who are owed at least $5-billion. She said the U.S. division accounted for the bulk of Nortel's profits and so was "not some weak sibling or child" of the Canadian operation.

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