Nortel News: SEC Lawsuit, Executive Share Purchase Plan

'Accounting Problems Were Mistakes'

Ex-Nortel (NT) CEO Frank Dunn and ex-CFO Doug Beatty claims the accounting problems that hobbled Nortel and led to extensive restatements were caused by mistakes rather than fraud.

In a response to a civil fraud lawsuit filed by the U.S. Securities and Exchange Commission, Dunn claims credit for saving Nortel after the telecom boom collapsed in 2000.

“In this challenging business environment, Frank Dunn rescued the company by implementing a painful and massive company-wide restructuring plan,” he said in his filing.

Beatty, meanwhile, described the SEC’s allegations as “ludicrous”. “Every CFO of a public company understands that any restatement of financial results is highly likely to draw the scrutiny of the SEC,” he said in his filing.

These are interesting - but not surprising - statements given they’re being made more than three years after Dunn and Beatty were fired by Nortel for “cause” amid allegations they and other Nortel executives, including ex-controller Michael Gollogly, cooked the books to trigger a lucrative bonus structure.

If this civil case, goes to trial, it will be fascinating to hear Dunn and Beatty’s side of the story about what actually happened.

Check out the Globe & Mail for more details.

Share Purchase Plan

Nortel’s board of directors has approved a share purchase plan that will let “certain Nortel executive officers to purchase common shares from Nortel to satisfy share ownership guidelines”.

All shares issued under the plan will be sold for fair market value determined by reference to the volume weighted average trading price of the shares for the 5 consecutive trading days on which at least a board lot of shares trades on each of the TSX and the NYSE, commencing on the day that a purchase order for shares is submitted under the plan, on either the TSX or the NYSE, whichever is higher.

What I want to know is whether these “certain executives” have to cough up the dough, or whether Nortel will help them out with a loan, and whether that loan could be forgivable over time.