The Continuing Blackmail Con Game Redux

Nortel seeks court approval to pay bonuses to execs

Lawyers for Nortel Networks Corp. will be in court Friday, arguing for the right to award bonuses to a group of eight top executives at the telecommunications company.

The company, which has filed for bankruptcy protection, says the payouts are necessary to boost flagging morale at the floundering company.

Earlier in March, said BNN's Michael Kane, Nortel received approval from courts in Canada and the U.S., to pay US$23 million in payments to a group of about 84 employees.

The eight execs would receive a share of that bonus pool.

"The bonuses would be paid to managers who were successful in cutting costs in their department, in accordance with Nortel's restructuring plan," Kane told CTV's Canada AM.

The controversial proposal comes before the courts as insurance giant American International Group faces tough criticism in the U.S. over its plan to pay bonuses to top execs, after accepting billions in bailout money from Washington.

Diane Urquhart, an independent financial analyst, said the Nortel plan will eventually cost Canadian taxpayers, but the effect is less obvious.

"To cut costs you terminate employees and also to cut costs you don't pay those terminated employees severance pay. But clearly these employees still have monthly bills to pay and they're going to go on public employment insurance plans," Urquhart told Canada AM.

"Unlike in the AIG situation where there was American taxpayer outrage, this is a more subtle use of public funds that most people don't recognize is going on. However, we should be outraged. In this time economic stress, there are great strains on the employment insurance system of Canada."

Nortel's creditors wanted the high-paid executives excluded from the bonus plan and called for an earnings outlook for 2009.

Other lawyers involved have agreed with that viewpoint, or asked that the incentive payments will actually reward employees, not just keep them from leaving during uncertain times.

"Our clients take no objection so long as there is no incentive plan that rewards employees for simply staying with the company or that gives them an incentive to reduce benefits for former employees and retirees," Mark Zigler, a lawyer at the Koskie Minsky law firm in Toronto, which represents former employees of Nortel, told The Canadian Press.

Mohammed Nakhooda, spokesperson for Nortel, said the company has set out "goal-based" bonuses.

"This is in line with how other companies manage through a restructuring," he told CP in an email.

Nakhooda noted that the company had publicly said it was always planning to resubmit the proposal for executive pay.

Nortel has been under bankruptcy protection since January, and is required to try to get the most for its creditors. Those debt-holders include the carriers of US$4.5 billion in debt, former staff members owed severance pay and retired managers.

Separate bonus programs cover about 95 per cent of Nortel's employees, which award incentive payouts on a quarterly basis.

The details of that plan have not been made public.

AIG in lawsuit with govt. over millions in tax payments

Lost for the most part in the public furor over the AIG bonuses was the news that the insurance giant is already involved in a lawsuit with the federal government over hundreds of millions in tax payments, many of which were collected from offshore tax havens.

Though news of the lawsuit over $306 million in taxes AIG wants back was first reported on at the beginning of the month, the story didn't get much traction beyond the financial press and bloggers. But then the tsunami of outrage surrounding the executive bonuses hit and the story looks like it may now be getting more attention as can be seen with this Friday report by The New York Times.

AIG filed suit against the government in February in an attempt to get back tax payments, collected in large part, reports The Times, "from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens."

As the federal government has an 80 percent stake in the company, AIG is effectively suing its majority owner, notes The Times.

"The company is in effect asking for even more money, in the form of tax refunds," reported The Times. "The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year."

When AIG first filed suit, it was just one of many financial giants that had taken a handout from the federal government. But since the news last weekend that company executives in the same financial products division responsible for nearly taking the country to the brink of collapse last year would be receiving $165 million in retention bonuses, populist rage, fueled by harsh rhetoric from pundits and congressmen, has crested to new heights against AIG. Whether the company decides to continue its lawsuit in the face of that public anger remains to be seen.

Fear of lawsuits from AIG and other financial companies was what lead Treasury Secretary Tim Geithner to urge Sen. Chris Dodd (D-CN) to insert a loophole into legislation that limited executive compensation in companies receiving bailout funding from the federal government. That loophole exempted contractually obligated bonuses agreed to before Feb. 11 from the new restrictions.

On Thursday, the House of Representatives did away with that restriction, by overwhelmingly passing a bill that would tax 90 percent of any bonuses received this year of employees with incomes greater than $250,000 who work for companies getting $5 billion or more in money from the government's Troubled Asset Relief Program.

"Finally tonight, as promised, a Special Comment on the latest atrocity from the banks. The vast, engorged, gluttonous multi-national corporations. Whose sneezes can be fatal to our jobs. Whose mistakes can turn us into the homeless. Whose accounting errors can be so panoramic that they can make our economy tremble and force us to hand them billions after billions in a blackmail scheme that has come to be known as "bailout."

Five weeks ago Vikram Pandit, the chief executive officer of Citigroup, went back to Congress, tail seemingly between his legs, and, with entreaty dripping from his voice, announced "I get the new reality and I'll make sure Citi gets it as well."

In point of fact, as Bloomberg News reports today, what Mr. Pandit "got" was a new $10 million executive suite for himself and his key associates.

This is the same Mr. Pandit who said he would show his leadership by accepting compensation of $1 a year. In fact, he then "accepted" a total compensation package for 2008 of $38 million.

Enough!

Mr. Pandit, you're probably just a good actor and a damned liar and a con man. But I'll give you the benefit of the doubt and assume instead, that you just can't tell the difference between $1 and 38 million of them. That would certainly explain the maelstrom into which you, and your colleagues at Citi and your counterparts elsewhere, have gotten us, including the vast majority of us who are innocent bystanders.

Your bank says your new $10 million office is part of a global strategy of space reduction that will ultimately save billions. It seems entirely appropriate to remind everyone, sir, that this promise could be fulfilled by Citi saving $2 a year for a billion years.

God knows you guys have pulled off every other accounting trick every dreamt up by immoral man. You, Sir, and the other corporate pirates like you — those who are saved from your obsessive spending and greed and self-aggrandizement by the taxpayer — who then pretend to atone — who then publicly promise good behavior — and who then revert immediately to the rapaciousness that is your only skill.

You, sir, all of you, need to be fired.

Enough!

And Mr. Pandit's corporation should be cut up into little pieces. And when he and the other ultra-millionaires wonder what hit them, we should make sure they are easily reminded. Our representatives should entitle the legislation that ends their moral ponzi schemes, "The Punish Vikram Pandit Act of 2009."

The far right in this country, without the slightest provocation, screams "socialism," and the sheep who follow it, who do not know what the word means and do not know it is only being used because "communism" now rings laughably hollow. In this cry of fire in a crowded unemployment line, there is outrage.

But there is also license. They think this is socialism? There is a million miles of reform to go before we hit socialism but if they're going to call us names whether they apply or not let's give them real reform.

Break up the banks. Regulate the financial industries, to within an inch of their existences. Roll back corporate legal protections. Make liable the officers of corporations, for their debts, and for their deeds. Resurrect the rallying cry of a hundred years past: bust the trusts!

AIG gives "failure bonuses" to the cretins whose dalliances in derivatives brought the company and part of the nation to her knees? Spin off that division whose traders are owed the 165 million in bonuses, under fund it, and cause it to go bankrupt.

Enough!

Let those with bonuses owed, stand in line before a bankruptcy referee, and wind up — just as you and I would — with half a cent on the dollar. Northern Trust fires 450 employees in December. Then takes a billion six in bailout money. Sponsors a golf tournament. Flies hundreds of clients to Southern California for private Oscar Parties including the renting of an airplane hangar and the hiring of the group "Earth, Wind & Fire?"

Enough!

Fire the executives. And fire up the Justice Department to figure out just how much fraud was involved in asking for a billion-six in bailout money when Northern Trust said nothing as the checks were written, even though it knew in advance that millions could be saved by simply cutting the fluff and the trumpery.

Thirteen more companies that took bailouts, signed the mandatory documents that said they owed no back taxes lied turned out, per Congressman John Lewis of Ways and Means today lied — they owe, just among those thirteen firms, 220 million in back taxes?

Enough!

Have the IRS take these companies, immediately, to the tax courts to which the rest of us are liable. And strip those ancient, outdated laws of Corporation, so that the officers of the corporation are personally liable for their companies' debts, just as you or I would be. And if the monopolies of radio or television rear up to support the corporate structure, to say a contract is a contract, even though that isn't true for a union these days, only for an AIG Trader. Take the invisible, unused Sword of Damocles they still fatuously insist hangs over their heads, and make it real.

Enough!

Make sure both sides are heard. Re-regulate the radio and television industries to limit station ownership and demand diversity of management and product. Re-instate the old rules that denied one man all the voices in a public square. End all waivers of multiple ownership of television stations and networks and newspapers in the same market.

And, yes, if a voice of the privileged classes unfairly uses his cable platform to call our neighbors who are the victims of this, "losers" to insist he alone speaks for the real people.

Or if another, indicts without equal time for defense a particular elected official, and then offers himself as a candidate for that very official's seat, in violation of all canons of good or even fair broadcasting then tell the cable industry that the free ride is over and it is time that it too be regulated by the FCC.

Enough!

To all of you in the Corporate boardrooms.

Stop viewing the public's reaction to this naked, unhindered robbery of the public coffers, and your audacious, immeasurable sense of proprietorship and entitlement stop viewing our anger as some kind of brief impediment, some traffic delay that keeps you from your God-given corporate ballpark sponsorships, and perpetually remodeled offices, and the divine right of $38 million "compensation packages."

You, gentlemen and ladies, and not the good and long-suffering average people of this country, you are fomenting rage in this nation. You are the losers in this equation, and the people are the generous ones; they have not assembled in the streets with pitch-forks and flaming torches. You are the ones perceived — understood in a visceral and even transcendent way — as the committers of what is becoming class economic rape.

And heed this one word before these people grow weary of forgiving you, and instead decide to bring the "good life" — which you have built on their backs — crashing down on top of your heads. When the next boardroom needs re-modeling, or the next bonus paid, or the next jet purchased, remember that one word:

Enough!"