x
Optical/IP

Nortel Faces SEC Fine, Says Report

The Securities and Exchange Commission (SEC) plans to fine Nortel Networks Ltd. less than $100 million over the accounting scandal that has dogged the vendor for the past four years, according to a report from Bloomberg, which cited four sources close to the matter.

According to the report, SEC commissioners have given the agency's lawyers the go-ahead to levy a fine of less than $100 million. According to a Light Reading source close to Nortel, that would be far less than Nortel staff had been speculating.

It would also be a relative drop in the ocean compared with the $2.5 billion Nortel last year agreed to pay to settle class action lawsuits brought against it by investors. (See Nortel Takes $2.5B Hit.)

It would also be way less than the $750 million the SEC fined WorldCom in 2003 over the $11 billion fraud that sent its CEO Bernie Ebbers to jail. WorldCom became MCI, and it is now part of Verizon Enterprise Solutions . (See SEC Fines WorldCom $750M and Ebbers Sentenced: See You in 2030.)

However, it looks like it might be more than the $25 million Lucent agreed to pay in May 2004 for a lack of cooperation with a SEC investigation into accounting fraud. (See SEC Details Lucent Fraud Charges.)

Nortel did not immediately respond to questions about the Bloomberg report or any discussions with the SEC. The SEC declined to comment.

Nortel is still recovering from the accounting fraud that was first uncovered in 2003, and which resulted in the SEC launching an investigation in April 2004, when the extent of the fraud, which has resulted in restatements totaling more than $3 billion, started to come to light. (See Nortel: Financial Stuff Really Complex, SEC Pops In on Nortel, and Nortel Rattles Nerves.)

As recently as March this year, it said it would need to restate financial reports from 2004, 2005, and 2006, and "make adjustments to periods prior to 2004." (See Nortel Restates the Restated.)

Nortel, though, has done a lot to shore up its reporting structures and introduced new corporate ethics standards in the past two years as it distances itself from the team that instigated the fraud. Those measures resulted in the decision (announced in May 2007) by the Ontario Securities Commission (OSC), Canada's equivalent of the SEC, not to impose a fine following its own investigation. Instead, Nortel paid C$1 million ($938,000) toward the OSC's costs.

The SEC recently charged four former Nortel executives in relation to the fraud. (See SEC Charges Ex-Nortel Execs.)

Nortel's share price is down $0.15 (0.58%) to $25.62 in early trading this morning.

— Ray Le Maistre, International News Editor, Light Reading

Be the first to post a comment regarding this story.
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE