Nortel Sues Former Executives
After years of standing mired in a financial scandal, Nortel Networks Ltd. (NYSE/Toronto: NT) is making good on its promise and is asking for a (figurative) pound of flesh from those that allegedly perpetuated some of its mess (see Nortel Wants Its Bonuses Back).
The equipment vendor is suing its former CEO, Frank Dunn; its former CFO, Douglas Beatty; and its former controller, Michael Gollogly, collectively, for more than $13 million in salaries, bonuses, and stock related to the company's "Return to Profitability" incentive program.
Background: Nortel paid out millions of dollars in bonuses following its return to profitability in 2003 but has declined to comment on the issue until now (see Nortel Silent on Baffling Bonuses).
After its accounts were investigated, and after a number of senior executives had been sacked, many doubted that the company had ever made it out of the red while the bonuses, which were linked to profitability, were being paid. (See Canadian Regulator Probes Nortel, SEC Pops In on Nortel, Nortel Rattles Nerves, Nortel CFO Out , and Nortel Fires CEO.)
In a lawsuit filed in the Ontario Supreme Court of Justice on January 31, Nortel accuses the former officers of presiding over financial reporting that "was not in compliance with United States Generally Accepted Accounting Principles (U.S. GAAP) in at least four fiscal quarters."
Nortel says Dunn was paid $4.9 million in bonuses related to the RFP program, and he was given stock valued at about $3 million. The company says Beatty was paid $1.75 million and was given stock valued at $1.15 million and another $63,000 cash in other bonuses. Gollogly nabbed more than $600,000 in bonuses and stock valued at $1.3 million.
— Phil Harvey, News Editor, Light Reading