Frequently Asked Questions
- What was this case about?
- Why did I receive a postcard?
- Who is eligible to participate in the SEC Fair Fund?
- If I purchased options to purchase Nortel common stock will I be eligible to participate in the SEC Fair Fund?
- Who is excluded from participation in the SEC Fair Fund?
- What is the amount of the SEC Fair Fund?
- What do I need to do to participate in the SEC Fair Fund?
- Do I need to submit a Proof of Claim Form if I was an approved participant in the Nortel Class Actions?
- What do I need to submit with my Proof of Claim Form?
- What is the deadline for submitting my Proof of Claim Form?
- How will I know when the Proof of Claim Form I submit has been received by the Distribution Agent?
- Will I be notified if my Proof of Claim Form is deficient?
- Can a financial institution that served as an advisor to numerous clients file Proof of Claim Forms on their behalf? Can we group all our clients together using this method?
- How much money will I receive if my claim is approved?
- Who is the Distribution Agent?
- Where can I obtain a Distribution Plan Notice and Proof of Claim Form?
- How do I get more information?
On October 15, 2007, the SEC filed its Complaint in this action alleging that Nortel Networks Corporation (“Nortel”) engaged in two fraudulent accounting schemes, one involving revenue recognition fraud and the other involving earnings management fraud, which enabled Nortel to meet the unrealistic revenue and earnings guidance that it had provided to Wall Street in 2000 and again in 2002 and 2003. Without admitting or denying the allegations in the SEC’s Complaint, Nortel and Nortel Networks Limited (together, the “Company”) consented to a Final Judgment entered by the United States District Court for the Southern District of New York (the “Court”) on October 25, 2007. As required by the Final Judgment, the Company paid to the Clerk of the Court disgorgement of $1 and a civil penalty of $35,000,000, which the Clerk deposited into an interest-bearing account with the Court Registry Investment System (“CRIS”).
In a related SEC action against former executives of Nortel, without admitting or denying the allegations in the SEC’s Complaint against them, certain defendants, Craig A. Johnson, James B. Kinney and Kenneth R. W. Taylor (the “Settling Officers”) consented to Final Judgments entered by the Court on May 2, 2008, which required them to each pay a civil penalty of $75,000 plus disgorgement including prejudgment interest in the amount of $88,031, $68,481 and $68,481, respectively, to the Clerk of the Court. The funds paid by the Settling Officers – in the aggregate amount of $449,993 – were deposited by the Clerk of the Court into the CRIS. As of October, 2011, the balance of the funds held with the CRIS was approximately $35.5 million. The SEC’s case against the other former executives was stayed by the court pending completion of a criminal action against three of the five former executives in Canada; the SEC’s case against these remaining executives will resume following the completion of the criminal action, which is slated to go to trial in January 2012.
The Final Judgments provided that the SEC may propose a plan to distribute the deposited funds, subject to the Court’s approval, pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. On October 29, 2009, the SEC submitted its Motion to Create a Fair Fund and Appoint a Distribution Agent, which was approved by order dated November 2, 2009 (the “Order”). The SEC Fair Fund consists of all of the funds paid by the Company and the Settling Officers which were deposited into the CRIS, plus accrued interest. The Order also appointed The Garden City Group, Inc. (“GCG”) as Distribution Agent to assist in developing a Distribution Plan pursuant to which monies in the SEC Fair Fund will be distributed to investors harmed by the violations alleged in the Complaints. The Order also authorizes the Distribution Agent to oversee the administration of claims and the distribution of the SEC Fair Fund pursuant to the terms of the Distribution Plan, in coordination with the staff of the SEC, and subject to oversight by the Court. The Court approved the Distribution Plan on October 5, 2011.
The Distribution Agent mailed two different postcards to potential claimants of the Fair Fund.
One of the postcards was mailed to investors identified as having a claim that was authorized in one or more class action settlements against Nortel. If you received this postcard, then please note that you are automatically deemed an Eligible Claimant for purposes of the Nortel Fair Fund with respect to those Nortel common stock transactions for which your claim was previously authorized in the class actions. If you did not submit a claim that was approved in one of the class actions or engaged in additional purchases of Nortel common stock (other than those approved in your class action claim), you must submit a claim to participate in the Nortel Fair Fund.
The other postcard was mailed to persons identified as having purchased or sold Nortel common stock during the period of October 24, 2000 through the close of the markets on February 15, 2001 and/or April 24, 2003 through the close of the markets on April 27, 2004 . The postcard you received is designed to notify you of the $35.5 million settlement reached in SEC v. Nortel Networks Corporation and Nortel Networks Limited, and a related case, and to inform you that you may be eligible to receive payment from the SEC Fair Fund.
You must have purchased Nortel common stock between October 24, 2000 through the close of the markets on February 15, 2001 and/or April 24, 2003 through the close of the markets on April 27, 2004 (the “Recovery Period”).
No. Options are not eligible. Only claimants who purchased Nortel common stock during the Recovery Period who have an Eligible Loss Amount, calculated pursuant to the Plans of Allocation, will be Eligible Claimants, as defined in the Distribution Plan.
You are excluded from participation in the SEC Fair Fund if you are:
- A current or former director or officer of Nortel or any of its past or present Affiliates (or any of his or her assigns, creditors, heirs, distributes, spouses, parents, children, or controlled entities) who served in such capacity during the Recovery Period;
- Any employee of Nortel or of any of its past or present Affiliates who has been terminated for cause in connection with the violations alleged in the Commission’s Complaint in this action or any related Commission action, or who was otherwise terminated or has resigned in connection with the violations alleged in the Commission’s Complaint in this action or any related Commission action (or any of such employee’s Affiliates, assigns, creditors, heirs, distributes, spouses, parents, children, or controlled entities);
- Any defendant in any action brought by the Commission or any class action lawsuit related to the conduct described in the Commission’s Complaint in this action or any related Commission action (or any of such defendant’s Affiliates, assigns, creditors, heirs, distributes, spouses, parents, children, or controlled entities), unless and until such defendant is found not liable in all such civil suits prior to the Claims Bar Date, and proof of the finding(s) is included in such defendant’s timely filed Proof of Claim Form;
- Any Person who, as of the Claims Bar Date, March 16, 2012, has been the subject of criminal charges related to the violations alleged in the Commission’s Complaint in this action, or any related Commission action (or any of his or her Affiliates, assigns, creditors, heirs, distributes, spouses, parents, children, or controlled entities);
- Any Person who assigned their right to obtain a recovery in the Commission’s lawsuit against Nortel;
- An assignee of another Person’s right to obtain a recovery in the Commission’s lawsuit against Nortel. You will not be excluded if you obtained such a right by inheritance or devise; or
- The Distribution Agent, its employees, and those persons assisting the Distribution Agent in its role as the Distribution Agent.
The SEC Fair Fund is approximately $35.5 million, plus interest earned less costs, expenses, and taxes.
Unless you were an approved participant in the prior Nortel class action settlements which were overseen by various courts, you must complete and submit a Proof of Claim Form, along with the necessary supporting documentation, to the Distribution Agent. The Proof of Claim Form (and supporting documentation) must be filed online or postmarked no later than March 16, 2012.
No. Under the terms of the Distribution Plan for the SEC Fair Fund, an investor whose claim was previously approved in the Nortel class actions is automatically deemed an Eligible Claimant with respect to the transactions in Nortel common stock for which a claim was previously approved in the Nortel class actions, so long as the approved transactions calculate to an Eligible Loss Amount under the Distribution Plan for the SEC Fair Fund.
If you had additional purchases of Nortel common stock during the Recovery Period, (i.e., the periods of October 24, 2000 through the close of the markets on February 15, 2001 and/or April 24, 2003 through the close of the markets on April 27, 2004), you must submit a Proof of Claim Form to be eligible to recover for those purchases so long as those purchases calculate to an Eligible Loss Amount under the Distribution Plan for the SEC Fair Fund.
You must document each transaction that you include on your Proof of Claim Form. Acceptable forms of supporting documentation include:
- Trade confirmation slips from brokerage firms that list the security name, the name of the beneficial owner, the type of transaction, the date of the transaction, the number of shares, and the total amount of the transaction, OR
- Monthly statements from brokerage firms that detail all account activity within a month.
Your claim form must have been submitted so that it was postmarked no later than March 16, 2012.
The Distribution Agent will acknowledge receipt of your Proof of Claim Form by regular or electronic mail within 60 days of receipt. Your claim is not deemed filed until you receive an acknowledgment postcard or e-mail. If you do not receive an acknowledgment postcard or e-mail within 60 days, please call the Distribution Agent toll free at 1 (888) 561-9182.
Yes. If your Proof of Claim form is deficient, you will receive a Claim Deficiency Notice setting forth the reason why the claim is deficient and advising you of the opportunity to cure such deficiency.
Yes, you may file on behalf of all your clients, provided you are authorized to do so and provide us with that valid written authorization. If you would like to file these claims together, you should file your claims electronically.
Please Note: Claims with 100 or more transactions or on behalf of 20 or more different accounts must be submitted electronically and in the required format. You can obtain the mandatory electronic filing requirements and file layout on this website or you may e-mail the Distribution Agent at eClaim@gcginc.com. Any submission not in accordance with the required electronic filing format may be rejected. Proof of authority to submit a Proof of Claim Form on behalf of any managed accounts must be submitted with any Proof of Claim Forms for such accounts.
Until all claims have been fully processed, it is not possible to determine the amount of any individual payment because the amount will depend on a variety of factors, including the number of valid claims processed, the amount of Nortel common stock that you purchased, and when you purchased and sold these shares. In addition, in order for a claim to be paid, it must equal or exceed the Minimum Payment Amount of $10. Claims that would result in a payment below that minimum distribution amount will not be paid.
For additional information as to how your claim will be calculated, please view the Plans of Allocation for the Nortel SEC Fair Fund Distribution Plan located on pages 20-24 of the Distribution Plan.
The Court has appointed The Garden City Group, Inc. to serve as the Distribution Agent.
You can obtain a Distribution Plan Notice and Proof of Claim Form by either downloading these documents from this website by clicking here or the Distribution Agent can mail you these documents if you provide your name and address by clicking here.
Additional information regarding the litigation and the SEC Fair Fund can be found on this website. You can obtain additional information or request copies of forms and notices by calling the SEC Fair Fund's toll-free hotline at 1 (888) 561-9182, or by email at Questions@nortelsecsettlement.com.