The financial wind down of once mighty Nortel continues in Toronto where one legal case came to a close and the debate over the bankrupt company’s $9 billion in assets resumes.

An Ontario judged on Monday dismissed a case against three former Nortel executives who were charged with accounting fraud at what was once North America’s largest telephone-equipment maker before its collapse in 2009.

Nortel at one time employed some 8,000 people at a campus in RTP.

Judge Frank Marrocco said the burden of proof was not met in fraud charges against former Chief Executive Officer Frank Dunn, former Chief Financial Officer Douglas Beatty and former Controller Michael Gollogly.

“I am not satisfied beyond a reasonable doubt” that the three executives “deliberately misrepresented the financial results of Nortel Networks,” Marrocco wrote in his 141-page ruling.

Each former executive faced two counts of fraud after being accused of participating in a book-cooking scheme from 2002 to 2003 designed to trigger $12.8 million in bonuses and stocks for themselves. They were fired in 2004 and pleaded not guilty when the case went to trial last year.

The men hugged and congratulated each other after the verdicts.

Greg Lafontaine, Beatty’s lawyer, said the decision was “fantastic.” The verdict “was bang on with what the evidence dictated,” he told reporters outside the court house. Beatty, standing next to his lawyer, smiled but said nothing. Beatty will now be “moving on,” Lafontaine said.

Dunn defended Nortel’s practices.

“For a very long time, integrity has been the foundation of Nortel Networks’ corporate governance and business practices. The documentary evidence and testimony re-affirmed this core value that I witnessed over my 28 years with the company,” he said in a statement. “I am looking forward to turning the page on this chapter of my life.”

Nortel was once the world’s second-largest telecommunications gear maker. During the 1990s telecom and Internet boom, Nortel had more than 95,000 employees.

At one point in 2000, it accounted for one-third of the market value on the entire Toronto Stock Exchange and had a market capitalization of $297 billion.

Asset Debate

Today, creditors of Nortel gather in Toronto to try for the third time to agree on how to split $9 billion in cash.

The weeklong mediation pits Nortel’s Canadian and U.S. entities and their creditors against the company’s European units and their creditors, who include retirees fighting to retain pensions. About 100 lawyers and financial advisers met briefly today at a hotel in downtown Toronto before breaking up for separate negotiating sessions, Peter Rehak, a spokesman for the Canadian judge overseeing the mediation, said in an e-mail.

The groups are fighting over a shrinking pile of cash that won’t cover all of the debts owed by Nortel and its units. Creditors have presented more than $36 billion in claims in Canada, according to a status report filed in a Toronto court in October.

Without a mediated end to the disputes, court fights could break out in Canada, the U.S., the U.K. and France with conflicting rulings by different judges, according to the mediator, Ontario Chief Justice Warren K. Winkler.

“This would be a catastrophic outcome,” Winkler wrote in April, when the current mediation effort started. The first two mediations efforts failed.

Separate Courts

Nortel, based in Mississauga, Ontario, filed for bankruptcy in Toronto, Delaware, the U.K. and France in 2009, with various units under the control of separate teams of lawyers and under the jurisdiction of different courts.

The Canadian and U.S. units have generally worked closely together, with the U.S. company liquidating Nortel’s most valuable assets. Those sales have generated about $9 billion adding to about $1.2 billion the company has from other sources.

The European units were placed under the control of court- appointed administrators. In 2011, those administrators filed a claim in the U.S. bankruptcy court, alleging that the parent company and the U.S. unit had siphoned money away from the European units for years, leaving them unable to pay pensioners and other creditors. The administrators have demanded about $10 billion.

Investors are betting that some of Nortel’s bonds will be fully repaid with interest. The company’s 10.75 percent bonds due in 2016 have traded above 104 cents on the dollar since July 2011, the month that Apple Inc. and Microsoft Corp. lead a group that paid about $4.5 billion to buy a portfolio of more than 6,000 Nortel patents.

[NORTEL ARCHIVE: Check out a decade of Nortel stories as reported in WRAL Tech Wire.]

(Bloomberg and The AP contributed to this report.)