& cplSiteName &

Former Nortel Execs Acquitted of Fraud

Craig Matsumoto
News Analysis
Craig Matsumoto
1/14/2013
50%
50%

Frank Dunn, one of the multiple ill-fated Nortel CEOs of the 2000s, was acquitted of fraud in Ontario Superior Court Monday. The same is true of former CFO Douglas Beatty and former Controller Michael Gollogly. All three were charged by the Canadian government in June 2008. Six months later, Nortel filed for bankruptcy protection -- and Monday happens to be the four-year anniversary of that filing. Coincidentally, Monday is also the scheduled start day for mediation talks about distributing Nortel's $9 billion in remaining assets. Among those fighting for the money will be pensioners, bondholders and suppliers. According to reports, Justice Frank Marrocco did note some manipulating of the books. For example, executives manipulated accruals -- money set aside for future liabilities -- to make Nortel turn a profit in its first quarter of 2003. But Marrocco noted that this is not out of the ordinary. More generally, he didn't see any damning evidence that the executives "deliberately misrepresented" Nortel's finances. A key accusation in the case was that Dunn and the others cooked the books in order to unlock profitability bonuses for all employees including themselves -- $12.8 million in all. (Although, some of that was in stock, which is now valued at a whole lot less.) See the Ottawa Citizen article from Friday for a hefty summary of the arguments presented at trial. For more

Other coverage of the verdict: — Craig Matsumoto, Managing Editor, Light Reading
(8)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
1/16/2013 | 6:29:34 PM
re: Former Nortel Execs Acquitted of Fraud
Duh,

I believe that employees are the single biggest problem. -áCompanies should be operated for the benefits of their shareholders. -áEmployees often are at complete odds with that and want companies to be operated solely for the benefit of their employees. -áNow one would think that these are in alignment. -áBut they are often not. -áOf course, how you would do this in right to work states or how multi-national companies (like when I was a Siemens employee in the US) have any way of complying is beyond me.

Now, to me Management - including the CEO - are just employees. -áFor example, bonuses are often calculated based on results....but if the results are manipulated (see Nortel) then the bonuses to all levels are often bad. -á

seven
lrmobile_Stevery
50%
50%
lrmobile_Stevery,
User Rank: Lightning
1/16/2013 | 4:56:51 PM
re: Former Nortel Execs Acquitted of Fraud
> -áI'd adapt the German practice of giving non-executive employee-shareholders

I'm not familiar with the German system, but how do they prevent that appointee from becoming as corrupt as the others?

The fundamental issue is that a board appt of a well-known company is a nice perk, which is why the mutual fund guys don't raise anywhere near the stink that they should when a company is underperforming.
Duh!
50%
50%
Duh!,
User Rank: Light Sabre
1/16/2013 | 4:01:54 PM
re: Former Nortel Execs Acquitted of Fraud
-áCorporate governance is a huge issue.-á Of the great telecom equipment companies that came into the 1998 bubble, how many are not troubled, dissolved or broken up?-á-á Cisco and (arguably) Ericsson are the only exceptions I can think of.-á And how much of the blame for these failures can be placed on narcissistic, greedy, disengaged, short-sighted senior managements, enabled by complacent boards?-á I differ with you (or maybe not?) on one part of the solution.-á I'd adapt the German practice of giving non-executive employee-shareholders (usually through their union) a seat on the board.-á It would take a lot of work for legislators and regulators to get the details exactly right. But whose interests are better aligned with buy-and-hold outside investors than employees?

Shortly before the late election, I made a half-baked attempt to reach out to now-Sen. Warren to ask her to start thinking about corporate governance and what federal legislation might start to address those issues.-á Now that she's in office, it seems like time to reach out again.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
1/16/2013 | 6:24:00 AM
re: Former Nortel Execs Acquitted of Fraud
mmqos,

I doubt we both worked together on FiOS. -áI was with AFC and about the only 3rd party that I spent time with was Harmonic - who did our original video overlay.

The corporate governance thing is a big issue. -áYou want an independent BoD, but in reality they are appointed by management. -áYes, theoretically they are openly voted on but the management slate gets elected about 99 times out of 100. -áThat means that both the BoD and the management have vested interests in scratching each other's back. -áIf a BoD cans management then the BoD is likely to have several members replaced. -áAnd management wants a BoD that rubber stamps what it says (especially around compensation and bonuses). -áI do not have a great set of fixes but the first one should be that no employee (and that means senior management) should be a BoD member.

seven
MMQoS
50%
50%
MMQoS,
User Rank: Light Sabre
1/15/2013 | 10:56:58 PM
re: Former Nortel Execs Acquitted of Fraud
Craig:
I worked at Nortel 8 years until bankruptcy in R&D and later after R&D was shuttered at my location, in new product development.-á My gut reaction is to say "hang'em high" for destroying, as ANON writes, a great company.-á But while these 3 were an integral part of the huge financial mess that ultimately sank the Company, they are just the fall guys.-á In my experience, the real ones who should have been indicted and gone on trial are the Nortel BoD members that approved the shady financials including all of the bonuses presented to them by Dunn.-á These were executives from other industries and finance and all carried a fiduciary responsibility to examine in detail CEO and CFO decisions, especially as the financial problems became obvious.-á
However by allowing precious funds to be channeled into employee bonuses, and the bonuses were exceptionally large, those funds were wasted, which would have gone a long way to push the development of new products we were proposing to management.-á They could have even saved the company given some needed product management changes.-á But even with the financial and publicity problems Nortel was experiencing at the time some of our key customers were still pushing us for new innovative products but by then the funding had gone to bonuses.-á I for one was working closely with Verizon on FiOS and FiOS TV product designs which were ultimately picked up by Alcatel and/or Ericsson and are now deployed in the Vz network.-á Similar situation with SBC LightSpeed.
I had hoped the Canadian government would have had the courage to go after the real culprits at Nortel the way my government (US) went after the dirty execs here especially as the result was to lose one of their major technological jobs providers.

And Brook you and I may have worked together on FiOS and hopefully you for a company with a dutiful BoD.-á
MMQoS
Net Worthy
50%
50%
Net Worthy,
User Rank: Light Beer
1/15/2013 | 7:10:38 PM
re: Former Nortel Execs Acquitted of Fraud
I left Nortel some time before the wheels fell off so I didn't suffer financially the way many people did. That said, I have followed the trial proceedings with considerable interest and I have a strong sense that the case was very weak and they should never have been charged.

The reasons for Nortel's collapse are many but this ill-advised prosecution was a huge disruption and distraction at a critical time.
ANON1238695912491
50%
50%
ANON1238695912491,
User Rank: Light Beer
1/15/2013 | 3:36:23 PM
re: Former Nortel Execs Acquitted of Fraud
Too little too late. Even then this is not the reason why NT went down. It started with their acquisitions of BroadBand NEtworks, Clarity, Bay Networks etc., and then their cluelessness in not being able to absorb them to their potential.. Wasted money, and people's lives. Shred ppl took destiny into their own hands while others got left behind until they were laid off.

A company which gave life to even people with no degree in Computer Science or Engineering...

I went to Ottawa recently and visited the Carling campus. It looks like a ghost town now.. It was Very disturbing to me after having seen-á the best during hay days.

Great company and good bunch of people to work with. I treasure my experience.
Craig Matsumoto
50%
50%
Craig Matsumoto,
User Rank: Light Sabre
1/14/2013 | 11:50:07 PM
re: Former Nortel Execs Acquitted of Fraud
Any reaction from ex-Nortelers?-á There's a difference between "fraud" and "not having the best of intentions," so I can believe that they were acquitted, but I'd guess that the verdict doesn't sit right with a lot of people.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, July 27, 1:00PM EDT
The Changing Face of the Data Center World
Rodney M. Elder, Senior Solutions Architect, Equinix
UPCOMING COURSE SCHEDULE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
in association with:
From The Founder
In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (0) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
LRTV Interviews
Enterprise Pitch for Ciscosson

7|14|16   |   04:43   |   (0) comments


After seven months of near silence, Cisco and Ericsson executives publicly discussed details on their extensive partnership. Among the tidbits shared by Martin Zander, VP, group strategy programs, Ericsson, and Doug Webster, VP service provider marketing, Cisco: The partnership was initially launched to serve the service provider market, but is already gaining ...
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Kevin Lo's Move to Facebook: Sign of Things to Come?
Patrick Donegan, Chief Analyst, Heavy Reading, 7/20/2016
Verizon's Next With VNFs
Carol Wilson, Editor-at-large, 7/21/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Ericsson Ejects CEO Vestberg
Ray Le Maistre, Editor-in-chief, 7/25/2016
Is Dish Going Down the Drain?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/21/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.