TORONTO - A spokesman for a group of Nortel pensioners and former employees was "shocked" Friday to learn that recently departed CEO Mike Zafirovski is seeking more than US$12 million from the insolvent Canadian technology company.
Zafirovski's claim, one of many filed with a U.S. bankruptcy court that's dealing with Nortel's restructuring, seeks "not less than US$12,250,543.48" - about half of it to pay for a life annuity pension benefit.
"I was amazed and I'm frankly staggered by his effrontery," said Tony Marsh, spokesman for a group called Nortel Retirees and former employees Protection Canada (NRPC).
Zafirovski's claims will be considered along with those filed by other former employees and pensioners, the company's suppliers and trade creditors, financial backers and governments.
However, not all claims will be paid in full. Some will be disallowed outright or reduced by the courts ,but even valid claims may not be paid in full. The company is currently selling its assets, with proceeds going towards paying creditors.
Nortel's decision to seek court protection under Chapter 11 of the U.S. Bankruptcy code, Canada's Companies' Creditors Arrangement Act and similar laws in other countries has outraged many former Nortel employees and retirees.
Former employees who were let go in a downsizing that began in late 2008, and others that were laid off since the court filing in mid-January, will have to fight to get severance payments that had been part of their separation packages.
In addition, Nortel has several pension plans that are in deficit - meaning their assets aren't sufficient to pay promised retirement benefits. Without an ongoing business to make up the difference, Nortel's pensioners in Canada stand to receive less in retirement than they had expected.
In light of that, claims on Nortel's assets by Zafirovski - who oversaw the bankruptcy filing in January and resigned in August - don't sit well with the company's other former employees.
"Of course, Canadian (Nortel) pensioners will be paying for this, along with the other creditors, and the only word that comes to my mind is effrontery. It's just an extraordinary thing to do, especially in view of the comments he made when he resigned," Marsh said in an interview Friday.
"He was talking about how much he was personally going to hurt, as a result of the bankruptcy."
Referring to Zafirovski's request for a US$6-million annuity, Marsh said, "Boy, if Canadian pensioners could even have a tenth of that, they'd be delighted."
Marsh said he believes Zafirovski and his fellow executives did "enormous damage" to Nortel and "now they're trying to claim something from the carcass of the company that they destroyed."
In question period Friday, NDP MP Paul Dewar asked the government what it's doing to help regular Nortel workers "who have been left out in the cold."
"Those who drove the company into the ground are pursuing massive payouts while rank-and-file Nortel workers are in danger of losing their own pensions," Dewar said.
The Conservatives responded that Nortel's pension issues are the jurisdiction of the Ontario government.
A group of pensioners, long-term disabled and former Nortel employees protested outside the Ontario legislature in Toronto on Wednesday and another demonstration at Parliament Hill in Ottawa is planned for Oct. 21.
Nortel, formerly Canada's biggest technology company and at one time a global leader in the telecommunications industry, has been selling off its global operations piece by piece after seeking court protection from creditors in January.
Most recently, Ciena Corp. (Nasdaq:CIEN) said it would offer cash and stock worth US$521 million to acquire a chunk of Nortel that includes some of its most prized businesses units, intellectual properties and employees.
The Ciena bid covers substantially all of the fallen Canadian technology giant's Optical Networking and Carrier Ethernet businesses, including the rights to technology that enhances the speed and capacity of current fibre optic networks by as much as 10 times.
However, there's no guarantee the deal announced Wednesday won't change, since Ciena's offer will be used as an opening bid for an auction by Toronto-based Nortel under supervision of courts in the United States and Canada.
Next week, Nortel will head to a U.S. bankruptcy court to make Ciena's offer an official "stalking horse" bid, which means that it establishes a price that could allow other bidders to enter the fray.
Nortel is in the process of establishing auctions for various other pieces of its business. The next in line is its next-generation wireless packet core network assets, which will be officially placed on the block on Oct. 16.
Last month, Nortel announced its Enterprise Solutions division would be sold to New Jersey-based Avaya for $900 million. Avaya had originally bid $475 million in July but then had to sweeten the offer to win an auction that began Sept. 11 and lasted several days.
Prior to that, LM Ericsson of Sweden agreed to pay $1.13 billion for Nortel's wireless network business, beating out a $650-million stalking horse bid put forward by Nokia Siemens, a joint venture between Finland's Nokia Corp. (NYSE:NOK) and Germany's Siemens AG (NYSE:SI).