The Ontario Superior Court has acquitted Nortel’s CEO, Frank Dunn, its former CFO, Douglas Beatty, and its former controller, Michael Gollogly of fraud charges in a case dating back to 2002 and 2003.
Nortel posted significant losses in 2001 and 2002 and downsized its work force by nearly two-thirds. Later 2002 and 2003, Nortel published financial results that made it appear as though the company was recovering faster than in actuality. The three former executives were charged with manipulating the company’s financial statements so as to appear more profitable and garner bonus payments for themselves. The defendants argued that their accounting methods were approved by the company’s outside auditor, Deloitte & Touche.
- In June 2008, the Royal Canadian Mounted Police (RCMP) formally filed criminal charges against Frank Dunn, the former CEO of Nortel; Douglas Beatty, the former CFO of Nortel; and Michael Gollogly, the former Corporate Controller of Nortel. The charge alleged the three men made false entries and omitted materials particular in the books and documents in regards to the financial results of Nortel.
- In January 2005, Nortel released key findings of an extensive, independent review, which found that its former corporate management (terminated for cause) and former finance management (also terminated for cause) in the company’s finance organization endorsed, and employees carried out, accounting practices relating to the recording and release of provisions that “were not in compliance with U.S. generally accepted accounting principles (“U.S. GAAP”) in at least four quarters, including the third and fourth quarters of 2002 and the first and second quarters of 2003.” In three of those four quarters – when Nortel was at, or close to, break even – these practices were undertaken to meet internally imposed pro-forma earnings before taxes (“EBT”) targets. Nortel posted significant losses in 2001 and 2002 and downsized its work force by nearly two-thirds. The doctored results from 2002/3 made it look as though the company was recovering faster than in actuality.
- On 27-April-2004, Nortel fired Frank Dunn “for cause.” Nortel Networks also fired its former chief financial officer, Douglas Beatty, and former controller, Michael Gollogly, both of whom had been placed on paid leave of absence by Nortel Networks on 15-March-2004.
