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US and Canadian regulators have charged Frank Dunn, Nortel’s former chief executive and other former executives with repeatedly manipulating earnings to meet Wall Street expectations and creating the false appearance that the company’s finances had stabilised.
Nortel, North America’s largest communications equipment maker has struggled to regain investor confidence since accounting irregularities surfaced five years ago. Since then the Toronto-based company has been forced to restate results on four separate occasions and pay $2.45bn in cash and stock to settle investor lawsuits.
The US Securities and Exchange Commission alleged that Mr Dunn, Douglas Beatty, a former finance chief, and Michael Gollogly and MaryAnne Pahapill, both former controllers, colluded to massage earnings between 2000 and 2004. The Ontario Securities Commission filed similar allegations against all but Ms Pahapill.
The former executives allegedly accelerated sales revenue, hid hundreds of millions of dollars in excess reserves and released them to help the company meet earnings targets.
The SEC’s complaint also claimed the company lied to investors about the reasons behind a 2003 restatement.
An attorney for Mr Dunn, 53, who served as chief executive from November 2001 to April 2004 and finance chief before that, said he was “disappointed” by the parallel cases. “The Canadian authorities are fully capable of addressing these important issues,” said Larry Iason. Ms Pahapill, 46, who is representing herself, and attorneys for Mr Beatty, 52, and Mr Gollogly, 48, did not return phone calls.
A Nortel spokesman said it was continuing to “co-operate” with the regulatory authorities. The SEC is seeking civil penalties and to bar the four from serving as officers or directors of US-registered companies.
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