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October 15, 2007 11:51 pm

Nortel in $35m settlement with SEC

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Nortel Networks, the Canadian telecommunications equipment group, sought to put an accounting scandal behind it Monday when it agreed to pay $35m to settle regulatory claims that it defrauded investors by manipulating earnings between 2000 and 2003.

The payment settles a civil suit filed by the Securities and Exchange Commission in New York alleging that Nortel’s previous management engaged in two fraudulent accounting schemes, one involving earnings and the other revenue.

Last year, Nortel agreed to pay $2.4bn to settle a shareholder suit, the fifth-biggest class-action settlement of a securities fraud case.

“Nortel’s fraud was long-running, intentional and pervasive,” said Christopher Conte, an SEC attorney overseeing the case in Washington.

“The settlement reached today reflects the seriousness of the company's past activity.”

However, the penalty was criticised by SEC commissioner Paul Atkins as “a public relations gesture”.

He said it failed to take account of the restitution already paid in the $2.4bn private action.

“As with all costs imposed upon a corporation, the . . . penalty will be paid by Nortel shareholders, many of whom were victims of the financial fraud.

“If we return the money to them through a distribution of the penalty, we are engaging in a circular exercise at the shareholders’ expense.”

Nortel settled the SEC's complaint without admitting or denying the allegations.

Additional reporting by Jeremy Grant in Washington

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