Toronto (Aug. 20, 2004) -- Amid probes into its accounting by U.S. and Canadian authorities and regulators, Nortel Networks Corp. announced that it fired seven more of its finance executives for cause and said that it will trim roughly 10 percent of its workforce, or about 3,500 employees, by the end of the year in an effort to cut costs.
Back in April, the company fired for cause its former president and chief executive officer, chief financial officer and controller. This week, it said that seven employees "with significant responsibilities for financial reporting at the line of business and regional levels" have also been terminated for cause, including four who were previously placed on paid leaves of absence in April.
"The board of directors found that each of these 10 individuals had primary, or substantial, responsibility for the company's financial reporting; that if not aware, each ought to have been aware that the establishment and/or release to income of such accruals and provisions were not in accordance with applicable generally accepted accounting principles; and that the improper application of generally accepted accounting principles with respect to these accruals and provisions misstated the company's financial statements," Nortel said Thursday.
The company noted that it will "demand repayment by these individuals of payments made under company bonus plans in respect of 2003, and will take further additional action with respect to these individuals, if appropriate."
The news comes on the heels of Nortel's disclosure this week that the Integrated Market Enforcement Team of the Royal Canadian Mounted Police is opening a criminal investigation into the company’s financial accounting situation, which is already the subject of a criminal probe in the United States. Both U.S. and Canadian securities regulators are also investigating the firm in connection with its past financial restatements.
The company said that it expects to file final unaudited results for the first and second quarters by the end of the third quarter. It noted that an independent review by Nortel's audit committee focusing on the establishment, timing of, support for and release of accruals and provisions, is continuing.
-- WebCPA staff
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