Nortel Networks has moved to settle two class action shareholder suits which arose following the accounting scandal the company suffered in 2004.

The company was forced to re-state its earnings figures for the previous three and a half years and the subsequent plummet in the company’s share price angered shareholders who rightly felt they had not been kept informed.

Now the company wants to move on and although the settlement, believed to be the fifth largest of its kind ever, will severely impact the company’s financial position it will allow it to get on with business.

“Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process,” said Harry Pearce, chairman of the Board of Directors, Nortel. “A final settlement would remove a significant impediment to Nortel’s future success and allow Mike Zafirovski and the Nortel team to move forward.”

The proposed settlement is also conditioned on Nortel and the lead plaintiffs reaching agreement on corporate governance related matters and the resolution of insurance related issues.

Under the terms of the settlement Nortel would make a payment of US$575 million in cash, issue 628,667,750 of its common shares (representing 14.5% of its current equity), and contribute one-half of any recovery in the existing litigation by Nortel against the Company’s former executives who were fired over the scandal in early 2004.

The equity component of the settlement will result in a non-cash charge based on the fair value of the common shares issuable. Based on a closing price of US$3.02 as of February 7, 2006, this charge would be approximately US$1.898 billion and will impact Nortel’s financial statements over a period of time.

On an after-tax basis, and based on the February 7, 2006 share valuation, the Company expects to record a total charge of US$2.473 billion, or US$.57 per share. The Company expects it would fund its cash contribution to the settlement fund out of its then available cash balances.

The proposed settlement would contain no admission of wrongdoing by the Company or any of the other defendants and is still subject to final negotiations.