The defendants allegedly formulated a plan to have the company’s credit rating on its $4.1 billion debt raised from “B3” to “investment grade.” The action alleges that they were advised by Moody’s that if the company could improve its financials, its credit rating would be raised. Not only would this rating change have a positive impact on the company’s stock price but this would in turn further inflate its net income beyond alleged already-falsified accounting. By raising its credit rating, Nortel could refinance its debt at a preferable rate, thereby increasing its margins. The defendants also hoped that the company’s positive --albeit allegedly false-- Q4 2003 report would put pressure on Moody’s to raise its rating. By posting the false, but positive, Q4 results, the defendants and Nortel's top executives were rewarded with $30 million in bonuses. When they defendants’ scheme finally began to unwind, Nortel put its chief financial officer and controller on leave of absence pending completion of an investigation into the circumstances leading to the restatement.

On March 15, 2004, Nortel delayed filing its annual report and admitted it may have to restate results for a second time in six months while the timing of certain accruals and provisions in 2003 and earlier periods were re-examined. In response to this delay in filing, the price of the company’s shares fell. The defendants allegedly knew that as a result of their actions, Nortel’s lenders could demand early repayment of $3.6 billion of notes and convertibles bonds. As this leaked out into the market, Nortel's shares continued to decline.

If you purchased the securities issued by Nortel Networks Corporation, during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by May 17, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiff. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.