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Nortel Networks, the Canadian telecommunications equipment maker that soared with the 1990s bull market then crashed after an accounting scandal, moved to put its troubled past behind it on Wednesday with a $2.46bn settlement of two class-action lawsuits from shareholders.

The settlement, if approved, would be the fifth-largest US securities class-action agreement, although significantly less than the $6.1bn WorldCom settlement, and the largest in Canada. Ongoing class-action lawsuits against Enron, the bankrupt energy company, are expected to surpass WorldCom.

The $3.2bn accounting fraud, revealed in 2003, included the improper booking of contracts and the artificial boosting of sales, and forced Nortel to restate four years’ of results.

The agreement would see Nortel pay the plaintiffs $575m in cash and 14.5 per cent of equity, from the issue of 630m new shares, plus half of all recovered proceeds from legal actions against former executives.

Harry Pearce, Nortel’s chairman, said implementatio of the settlement would “remove a significant impediment to Nortel’s future success”.

Plaintiffs in the suits had to consider that “they will be very substantial shareholders on the company and it was in their interest to see the company survive and thrive,” said Max Berger, of Bernstein Litowitz Berger & Grossman, the firm representing the lead plaintiffs.

Some analysts lowered their earnings forecast for Nortel due to the settlement’s potential impact.

Investigations by US and Canadian securities regulators are not covered by Wednesday’s agreement, which is subject to approval by both countries’ regulators, stock exchanges and courts. It also requires Nortel and the plaintiffs, which include public pensions funds in Ontario and New Jersey, to agree on governance procedures and some insurance issues.

“Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process,” Mr Pearce said.

Nortel’s shares fell 3.3 per cent to $2.92 in New York on Wednesday afternoon.

Additional reporting by Andrew Parker in New York

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