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Judge Rules Nortel Management ‘Not Guilty’ Of Fraud

The court couldn’t prove that CEO Frank Dunn defrauded the company

On by Max Smolaks 0

On Monday, the Superior Court in Toronto dismissed charges against three former Nortel executives, ruling they were not to blame for the demise of the company.

Nortel’s CEO Frank Dunn, CFO Douglas Beatty and corporate controller Michael Gollogly were accused of defrauding Nortel and its investors between 2000 and 2004. All three have previously pleaded not guilty. If convicted, each would have spent up to 10 years in prison.

The aftermath

Nortel, the telecommunications equipment manufacturer with over 100 years of history, was once Canada’s most valuable company. At its peak, it had over 90,000 employees, and was worth nearly $300 billion.

Despite this, Nortel wasn’t able to survive the Dot-Com crash. The company’s stock dropped by more than 99 percent by 2002, and when it went down, it took a wide swathe of Canadian investors and pension funds with it.

Dunn had been Nortel’s chief financial officer before his promotion to CEO in 2001. He managed the company in the times of crisis, but was fired along with Beatty and Gollogly in 2004, after suspicious accounting practices were uncovered by several board members.

The three executives had been accused of arranging $12.8 million worth of bonuses for themselves in 2002/2003, while Nortel descended into bankruptcy. According to the prosecution, they would also alter the company’s financial records, in order to hide the losses.

Dunn, Beatty and Gollogly were facing up to 10 years in prison. However, Justice Frank Marrocco said the court couldn’t prove they “deliberately misrepresented the financial results of Nortel Networks”.

“The accused are presumed innocent. The burden is on the prosecution. It was entirely appropriate that we go through this process to find out what happened. The burden, in my view, is not met,” he added.

“I am pleased with today’s decision, and after waiting almost nine years, I am grateful to have received vindication,” Dunn told CBC. “I am looking forward to turning the page on this chapter of my life and have no further comment at this time.”

In 2009, Nortel filed for protection from its creditors in the US, UK and Canada. Later that year, the company announced it would cease operations and sell off all of its businesses.

In 2012, it was reported the Rockstar Consortium, the organisation formed to exploit the value of patents acquired from Nortel (jointly owned by Apple, Microsoft, RIM, Ericsson and Sony), was conducting negotiations with up to 100 potential licensees.

According to CNET, 1,024 out of around 6,000 patents and patent applications developed by Nortel have already been transferred to Apple. These include intellectual property related to 4G wireless, data networking, optical technology, voice transmission and semiconductors.

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