Current insolvency laws are devastating thousands of Canadians’ retirement income security. You must insist that the Companies' Creditors Arrangement Act and Bankruptcy and Insolvency Act be amended now to fairly protect those with no leverage in the bankruptcy process and reduce the tax burden for all Canadians.
On April 30, 2009, after 18 years of very dedicated service, I was terminated. My salary and benefits were halted immediately. I did not receive a penny of severance. I scrambled to survive. I paid the penalty to refinance my mortgage, halted payments to my three daughters' RESPs, halted payments to my RRSP, and could no longer hold life or health insurance. I became a full-time job seeker and received EI for the first time.
The CCAA is being exploited and manipulated by restructuring lawyers and junk bond holders to allow corporate executives to avoid legal obligations at the expense of the most vulnerable in the process. Bondholders are inducing bankruptcies for large profits, lawyers are making millions, and executives are receiving the obscene bonuses. Everyone wins except past employees, the shareholders, and the taxpayers.
CCAA negates the provincial Employment Standards Act. I and thousands of others severed will be lucky to someday get 15¢ on the dollar for our legally entitled severance and pension deficits. Apparently it is true that the more outrageous and extraordinary the transgression the easier it is to commit in clear view.
The Nortel bankruptcy is one of the most complex international insolvency cases in history. You must release the auditors and forensic accountants onto this case to determine the truth.
I am an average Canadian who tried to do all the right things. I worked myself through university, received an engineering degree, and joined a blue-chip company with a defined benefit pension plan, five days after graduation. We worked very hard creating products and patents and building the equity in the company.
Times were good. Nortel was Canada’s darling, with huge profits and skyrocketing stock. Then executives got greedy, twisted the rules, lined their pockets, and started the downward spiral. Nortel's stock price plunged, evaporating retirement savings of thousands of Canadians.
The CEO was fired with cause in 2004 and was charged with fraud affecting the public market in 2008, but by that time the damage to Nortel's reputation and operations proved unrecoverable.
You must strengthen Canada’s ability to investigate, enforce, and deter white-collar crime. These nefarious crimes are too costly to too many innocent people to be allowed to continue.
I received 69% of the commuted value of my pension and have not recovered RRSP room. I emptied my TFSA and watched my debt grow. Saving for retirement, or in fact retiring at all, became a dream, not a plan. Keeping the house became the priority. Thousands of Canadians, from hundreds of companies, are in the same situation.
Initially I believed the law would ensure all creditors would fairly share the proceeds from the sale of Nortel's assets. But all creditors are not created equally, even if they have equal priority.
The suppliers have leverage. Their goods and services are still needed. They sit on the creditors committee and they use their leverage to line-jump. For example, Airvana already received $40 million in payments related to outstanding invoices it had with Nortel.
Bond holders are investors assuming risk as a part of doing business. Yet they are able to use credit default swaps to insure their credit losses in bankruptcy. These hedged junk bond holders influence the bankruptcy process through the unsecured creditor committee and benefit from liquidation, with large profits.
It is legal, and it's happening now. But wait, there's more.
Nortel's Canadian estate is being depleted by foreign creditors who are controlling the process at Canada’s expense. There are many examples. First, the Carling campus was mortgaged to the U.S. estate to continue Canadian operations. You must ensure the Canadian court is equipped to fight foreign estates from extracting money from Canada and hoarding it in their estate. There are provisions in NAFTA to enforce equalized payments.
There is still more.
The pensioners, severed, and LTD are represented collectively by a law firm approved by the corporation. This law firm is responsible to a single person from each group, and that representative is biased to suppress information and limit consultation with the people they are supposed to represent.
The pensioners, severed, and LTD quickly realized the inequity in the laws and began lobbying to change them. Our only leverage was the possibility that the government would correct these archaic laws. The creditors understand that the laws could and should be changed and negotiated a deal with our representatives, taking away our faint hope that you would address these injustices.
Our representative ignored our opposition to accepting the lopsided deal that eliminated all our bargaining power. The group of LTD are appealing this devastating deal. The largest voting group was divided and conquered by our own representation.
Please explain the rationale for keeping these maleficent laws. They are being exploited to make some very rich, while plunging hard-working Canadians into financial ruin and destroying their ability to retire.
A recent plan will pay Nortel's CSO a $4-million bonus, while thousands will never receive employment standard minimums. Timely severance would have provided a means for these people to avoid drastic actions for survival and keep their retirement dreams alive.
There are 34 other countries that have preferred or better status for employment claims in bankruptcy laws along with functioning credit markets. All the studies I have seen indicate that the negative effect on the cost of capital is a myth.
Bankruptcies are costing taxpayers. The government downloading cost in the case of Nortel alone is estimated at $355 million, plus the $500 million the Ontario government put into the pension benefits guarantee fund.
The right path is clear: amend the BIA and CCAA immediately, and have the amendments retroactively apply to all current CCAA and BIA proceedings.
I ask you to consider the following. Voters many have a short memory for the proroguing of a government and become complacent with the opaqueness of a promised transparent government, but they will never forget the actions or inactions of a government that allowed, and keeps allowing, the destruction of their financial security and retirement dreams.
Protecting Canadians' retirement income will require more than specific programs to help workers save money. It will require a constant and unwavering oversight by all Canadian ministries and strong laws to protect Canadians’ dreams of retiring.
However, you can make one positive step in the right direction today. You can protect the hard-working Canadians that build the companies and wealth in this country by amending the CCAA and BIA, and by taking steps to ensure that the Canadian estate is protected from international insolvencies. You have the power, the mandate, and the responsibility to make this change now. Listen to your constituents and do the right thing and stop this great injustice.