3 Former Nortel Execs Charged with Fraud

The RCMP has charged three former Nortel (NT) executives - ex-CEO Frank Dunn, ex-CFO Doug Beatty and ex-controller Michael Gollogly - with fraud affecting public market, falsification of books and documents and false prospectus.

According to a press release, the charges “pertain to allegations of criminal activity within Nortel Networks during 2002 and 2003.″

Protecting and enhancing Canada’s economic integrity is one of the RCMP’s strategic priorities.” said National IMET Program Leader C/Supt. Stephen White. “This investigation demonstrates that although capital market investigations can be lengthy and complex, they are most effective when an integrated approach is used from the outset. We remain committed to working with our many partners nationally and internationally to prevent, detect and investigate serious capital markets fraud.

The RCMP alleges the Fraud Affecting public market charges [Section 380(1)] have to do with “Dunn, Beatty and Gollogly fraudulently misstated the financial results of Nortel. The RCMP IMET further alleges in regards to the Section 397 charges that Dunn, Beatty and Gollogly made false entries and omitted materials particular in the books and documents in regards to the financial results of Nortel. The Section 400 charges allege that Dunn, Beatty and Gollogly circulated or published a statement or an account whether or not it was written or oral, knowing that it was false in a material particular, with the intent to deceive or defraud the members, shareholders or creditors of Nortel Networks Corporation.

All of the charges pertain to the fiscal time period between January 1, 2002 and June 30, 2003, and allege that the financial statements of Nortel during this time period were misstated. This fiscal time period represents the fiscal year of 2002 and the First Quarter and Second Quarter of 2003.

Here are the charges against Dunn, Beatty and Gollogly:

Frank Dunn, age 54 of Oakville, Ontario, former CEO of Nortel;
Two counts under Section 380(1)(a) of the Criminal Code of Canada;
Two counts under Section 397(1) of the Criminal Code of Canada; and
Three counts under Section 400(1) of the Criminal Code of Canada.

Douglas Beatty, age 53 of Toronto, Ontario, former CFO of Nortel;
Two counts under Section 380(1)(a) of the Criminal Code of Canada;
Two counts under Section 397(1) of the Criminal Code of Canada; and
Three counts under Section 400(1) of the Criminal Code of Canada.

Michael Gollogly, age 49 of Oakville, Ontario, former Corporate Controller of Nortel;
Two counts under Section 380(1)(a) of the Criminal Code of Canada;
Two counts under Section 397(1) of the Criminal Code of Canada; and
Three counts under Section 400(1) of the Criminal Code of Canada.

More: There’s no lack of media coverage, including the Ottawa Citizen. Blog coverage includes Nortel Buzzboard. Reuters has a timeline of the key dates within Nortel’s accounting scandal.

Nortel has issued a statement about the RCMP laying charges against three former executives: Frank Dunn, Doug Beatty and Michael Gollogly:

Nortel has not been charged and was not the target of this investigation. The company has fully cooperated with the RCMP and will continue to do so. This is in relation to former executives of the company who were dismissed for cause in 2004.

Nortel is rebuilding a great Canadian company while upholding the highest standards of integrity and ethics. Incredible progress has been made in the last few years, and today a new Nortel is emerging under the leadership of a new management team with a proven track record. The company has restored a solid financial controls foundation, is gaining traction with customers and is focused on the future.

Nortel and its employees are highly determined to compete and win in the marketplace and today’s announcement by the RCMP does not distract the company from the work ahead.

Comments

[sunrises]

Would former executives work from '02-'03 roll over to the new management of NT? Even according to FM's Guy Adami, NT will have a nice upside in share price.

The company is doing well under the new management and succeeding with the given information above.