Nortel Town Hall Meeting Report

On October 21st, 2009, a Town Hall Meeting on the pension issues surrounding the Nortel bankruptcy was held, organized by the Ottawa West-Nepean Liberal Association and hosted by Liberal candidate David Pratt.

We are grateful for the assistance of the Marc Garneau M.P. and a number of community leaders for their assistance. A report on the meeting has been prepared, and can be viewed below.

Report on Nortel Meeting

Maki House, Crystal Beach, Ottawa – 19 October 2009

Introduction

The purpose of this meeting, organised by the Ottawa West-Nepean Liberal Association, was to:

(i) ensure that as many current, laid-off or retired Nortel employees residing in the Crystal Beach, Crystal Bay, Lakeview and Graham Park/Qualicum communities and affected by Nortel’s bankruptcy, were up to speed in terms of the efforts being made on their behalf by the Nortel Retirees Employees Protection Canada (NRPC);

(ii) discuss the kinds of legislative changes that need to be made to render private pension schemes more adequate and secure; and

(iii) keep this all-important issue in the public eye.

The meeting was chaired by David Pratt, Liberal candidate for the riding of Ottawa West-Nepean in the next federal election. In his opening remarks, Mr. Pratt stressed that the bankruptcy of Nortel was an important national issue that had serious ramifications for the Ottawa area but also for the country as a whole. Recent articles in The Globe and Mail have brought to the forefront the inadequacy of many private pension schemes and, more worrisome, the large number of workers who have no pension plans or inadequate savings for a secure retirement.

The event, attended by some 100 people, mainly Nortel retirees and laid-off employees (so far without severance benefits), took the form of a 5-member panel discussion, with each panel member making 10 minute presentations on a specific issue(s). This was followed by a brief question and answer period and an outline of forthcoming events to move the issue forward.

Highlights of Panel Presentations

1) Maged Beshai, retired Nortel Engineer (26 years) on “Why Nortel Went Down – A Worker’s View”

Dr. Beshai retired as Senior Advisor of advanced technology. Dr. Beshai indicated that in the decade of the 1980’s, Northern Telecom (NT) and Bell Northern Research (BNR), which were later integrated into Nortel, had become a Canadian and world innovation icon in the telecommunications sector. More specifically, Nortel developed the world’s first all-digital, feature rich, local telephony switch together with all-digital core switches, known as the “Digital Multiplex System” (DMS). In order to manage the evolution and growth of DMS, the then BNR developed a software management process that was most likely the world’s best.

Other significant achievements included the following products: (i) the “Nortel Meridian”, the industry’s first digital Private Branch Exchanges; (ii) cross-connectors (also known as SONET terminals in North America and SDH in Europe) which exchange spectral channels among interconnecting fibre-optic transmission lines; and (iii) third generation access networks. Nortel was awarded more than 6000 US patents and numerous Canadian, European and Japanese patents in various areas of the telecommunication sector.

One of the reasons given for the demise of Nortel was that in the early 1990’s, when the world was switching towards computer communications using packet switching, Nortel management looked for outside help instead of using the in-house innovative DMS team that held an impressive track record. Also, Nortel decided to purchase companies (at high prices) with technology perceived to have what Nortel needed. This decision proved not to be the case.

In the late 1990’s, Nortel made a second attempt to develop packet switches and formed another team which was aborted, possibly due to lack of funds. Nortel never recovered.

On a concluding note, Dr. Beshai pointed out that thousands of highly trained Nortel “graduates” are likely to be available to build another Canadian telecommunication giant, more specifically in developing a truly broadband Internet network.

2) Don Sproule, Chair, Nortel Retirees Protection Canada (NRPC)

Mr. Sproule provided the audience with an update on:

(i) what was happening in the insolvency hearings. Nortel is now in the process of selling assets and claims are being filed by legal representatives. Canadian Nortel pensioners are being pitted against foreign bondholders and governments. It was noted that pensioners in the US whose company has been granted bankruptcy protection are guaranteed $54,000 per year by the US government whilst in the UK, pensioners are guaranteed 24,000 British pounds per year by the UK government. In Ontario, the provincial government guarantees $12,000, although funds are now apparently depleted.

Mr. Sproule also indicated to Nortel pensioners that 69 percent of their pension was guaranteed. As for the remainder, he was worried about what the Canadian estate would receive perhaps only 3 percent of the 31 percent pension reduction. The same meagre settlement offer could possibly apply to long-term disability pensioners, as well as health and life insurance benefits, and severance pay benefits.

Apparently, not much support has been given to NRPC so far by the Ontario Government. As for the federal Government, lame excuses were given such as “pensions are a provincial responsibility”, “it would take too long to change the CCAA laws”, and “giving preferred status to Nortel pensioners would raise the cost of capital in Canada”. Mr. Sproule also noted that invoking the “Canadian benefits” clause of the Investment Canada Act could be a tool to ensure that the remainder of Nortel remains in Canadian hands. This action could be of benefit to Nortel pensioners.

3) Paula Klein, Director for Severed Employees, NRPC

According to Ms. Klein, there were some 1000 Nortel employees let go (600 in the Ottawa area) without severance pay. Nortel’s decision in February 2009 not deliver on the promise of severance pay has had a devastating impact on many employees. Ms Klein also indicated that former employees were not asking for a bailout from federal and provincial governments. Instead, they were asking governments to protect the interests of former employees just as US and UK governments are doing.

4) Marc Garneau, M.P., Liberal Critic for Industry, Science and Technology

Mr. Garneau noted Nortel’s leadership for many years in the telecommunication sector, both in terms of funding for research and development and in developing a critical mass of world-class researchers.

He also mentioned what is already known, i.e., that the Nortel Enterprise Business will be reviewed under the Investment Canada Act. The Liberal Party will press the Government to review also the sale of Nortel’s Internet network (a “jewel”, according to Mr.Garneau) under the Canada Investment Act, when it is placed for auction in November 2009.

Mr. Garneau also mentioned that the Liberal Party would like to see the remainder of Nortel remain viable. The Party will support the review of the Bankruptcy and Insolvency Act to protect the pensions of employees whose companies file for bankruptcy.

Finally, Mr. Garneau informed the attendance that Ms Judy Sgro, M.P., the Liberal critic for Seniors and Pensions will chair a Summit on Pensions on October 26.

5) Professor Bill Lawson (retired Carleton University)

Professor Lawson addressed a number of technical issues/questions when setting up a pension plan for employees. For example, who is in charge of the pension plan in the company; who has oversight on the pension plan, in particular for managing a pool of pension money; in the case of Nortel, what is the claim of pensioners on Nortel’s remaining assets?

He concluded by noting that a pension is essentially “a deferred compensation” and part of its value “is what pensioners have put in”.

Way Forward

There will be a massive demonstration on Parliament Hill on Wednesday, 21 October 2009. The NDP and the Bloc Québecois have asked to speak in support of pensioners. A closed door meeting will be held with the Liberals on the same day.

As mentioned above, Ms Judy Sgro, Liberal M.P., will chair a Summit on Pensions on 26 October 2009 and representatives of the Nortel Retirees Protection Canada (NRPC) possibly will be asked to make a presentation.

21 October 2009

(Report prepared by the Ottawa West-Nepean Liberal Association)