At its annual meeting, it revealed that its accounts, which had been expected at the end of September, would now probably be delayed until next year.
The company is currently embroiled in an accounting scandal. In October 2003, it announced that it was restating its financial results for the past three years. It had undertaken an independent review of the company’s figures after suggestions that losses were exaggerated during the industry downturn in 2001 and 2002 to give a misleading impression of the strength of its recovery in 2003.
In April, Nortel fired CEO Frank Dunn, former CFO Douglas Beatty, and controller Michael Gollogly after discovering that its financial results for the previous three years would have to be revised. Last month Nortel revealed that it had fired seven senior executives with responsibilities for financial reporting. All were terminated for cause.
New CEO Bill Owens said that the company will be seeking to recover approximately $10 million paid in bonuses to the ten executives who were fired.
Nortel also announced last month the axing of 3,500 jobs, or roughly ten percent of the remaining 36,000 workforce.
To make matters worse, the SEC and Ontario Securities Commission are currently engaged in probes into the company, and shareholders filed several lawsuits. One class-action suit filed in Ontario Superior Court last month claimed damages of CAD 250 million ($192 million). It alleged breaches of trust and fiduciary duty, oppressive conduct and misappropriation of corporate assets and trust property via the bonus system.
The Canadian police have also launched a criminal investigation into the financial accounting situation at Nortel. The decision by the Integrated Market Enforcement Team of the Royal Canadian Mounted Police to undertake a full-scale investigation suggests that allegations that the figures were massaged to exaggerate losses during the recession, and then overstate a recovery in order to enhance executive bonuses, are being taken seriously by the authorities.
