Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, March 12, 2007

SEC Charges Former Nortel Executives with Accounting Fraud

The SEC filed civil fraud charges 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 this 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.

According to the Commission's complaint, from late 2000 through January 2001, Dunn, Beatty and Pahapill altered Nortel's revenue recognition policies to accelerate revenue as needed to meet forecasts and, from at least July 2002 through June 2003, Dunn, Beatty and Gollogly improperly established, maintained and released reserves to meet earnings targets, fabricate profits and pay performance-related bonuses.

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