The federal government turned down Nortel Networks when it asked for help to stave off bankruptcy, the fallen technology giant’s CEO told members of Parliament Thursday.
Mike Zafirovski told a parliamentary committee that meetings with Industry Minister Tony Clement and Finance Minister Jim Flaherty went nowhere.
The telecom equipment vendor filed for bankruptcy protection in January.
Zafirovski wouldn’t say how much financial help Nortel wanted from the federal government and wouldn’t say exactly why the government refused to help. He did say there were concerns about the viability of the company and its industry as a whole.
Zafirovski, who joined Nortel as its CEO in late 2005, was grilled about a controversial decision to pay $45 million in bonuses for executives after refusing severance pay for thousands of employees.
Dianne Urquhart, an independent financial analyst who has studied the Nortel situation, said she believes the company went into protection in order to avoid paying the severance bill, even though it had $2.5 billion US in cash on hand.
“Management likely perceived that not paying the severance would lengthen the time period it could operate before exhausting its … cash,” Urquhart said.
Zafirovski defended the bonuses as an effort to hang on to vital executives in an effort to maximize the company’s worth.
The CEO also said Nortel’s lawyers told him the bankruptcy court would never have approved millions in severance payments. MPs were skeptical of that.
