Nortel Networks Executives Facing Financial Fraud Charges

by Glen Shapiro, LawAndTax-News.com, New York

14 March 2007

The US Securities and Exchange Commission on Monday announced that it had filed civil fraud charges in the US District Court for the Southern District of New York against four former senior executives of Nortel Networks Corporation, for repeatedly engaging in accounting fraud to bridge gaps between Nortel's true performance, its internal targets and Wall Street expectations.

Nortel is a Canadian manufacturer of telecommunications equipment.

Named in the Commission's complaint are Frank A. Dunn, Douglas C. Beatty, Michael J. Gollogly and MaryAnne E. Pahapill.

The complaint alleges that these individuals engaged in the aforementioned misconduct while serving as top corporate executives of Nortel between September 2000 and January 2004. During that time, Dunn served as Chief Financial Officer and Chief Executive Officer; Beatty as Controller and Chief Financial Officer; Gollogly as Controller; and Pahapill as Assistant Controller and Vice President of Corporate Reporting.

"The fraudulent conduct at issue here was egregious and long-running. Each of the defendants betrayed Nortel's investors and their misconduct gave rise to billions of dollars in shareholder losses," explained Linda Thomsen, Director of the Commission's Division of Enforcement.

She continued:

"The action we take today sends a strong message that officers of US-filing foreign corporations will be held to the same standards of accountability that are required of all participants in the U.S. financial markets."

The Commission acknowledged the assistance of the Ontario Securities Commission, which conducted its own separate, parallel investigation, and on Monday also filed a complaint against Dunn, Beatty and Gollogly.

The SEC investigation is ongoing.

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