Toronto (April 29, 2004) -- Nortel Networks Corp., which is under investigation by U.S. and Canadian securities regulators in connection with its past financial restatements, has fired three of its top executives, including its chief executive, and said it will restate results as far back as 2001.
The company said its CEO and president Frank Dunn and its former chief financial officer Douglas Beatty and former controller Michael Gollogly -- both of whom had been on paid leave since March -- have been terminated for cause.
Nortel named one of its directors, William Owens, as president and CEO. Owens, a Nortel director since February 2002, was chairman and CEO of satellite communications company Teledesic LLC.
The appointments of interim CFO William Kerr and interim controller MaryAnne Pahapill, made in March, were made permanent. Kerr, a chartered accountant, first joined Nortel in 1994 as controller and held several senior positions in the company’s finance organization before he left in 2001. Pahapill, a chartered accountant who joined Nortel in 1999, previously served as assistant controller and most recently as assistant treasurer.
The firm's audit committee has been conducting an ongoing review of the circumstances that led to the restatement of Nortel's financial statements for 2000, 2001 and 2002 and the first and second quarters of 2003. The board also announced that four "senior line of business finance executives" during the periods under review were placed on paid leave pending further progress of the review. The audit committee also expanded the period being covered by the review -- which has focused on management’s practices regarding accruals and provisions -- to include all of 2003.
The audit committee said the firm's previously announced unaudited results for the year ended Dec. 31, 2003, will need to be revised, and that it will need to restate the results reported in each of its quarterly periods of 2003 and for earlier periods including 2002 and 2001.
Nortel estimates that the restatements and revisions will reduce previously announced net earnings for 2003 by about 50 percent. It said the amounts will largely be reported in prior periods, reducing its previously reported net losses for periods including 2002 and 2001. It further said it would report a net loss for the first half of 2003, instead of the net earnings previously announced for that period, and that there would be no material impact to prior-period revenues or to its cash balance as of Dec. 31, 2003.
The company said it will continue to cooperate with regulatory authorities in connection with their investigations.
-- WebCPA staff
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