Fraud Allegations

Washington, DC: (Apr-30-08) The US Securities Exchange Commission (SEC) brought charges against Craig Johnson, James Kinney and Kenneth Taylor, three former executives with Nortel Networks Corp., alleging that they engaged in financial fraud. The allegations stemmed from the former executives' involvement in Nortel's earnings management fraud during 2002 and 2003. The suit claimed that Johnson, Kinney and Taylor improperly maintained reserves during the fourth quarter of 2002, which they knew, or were negligent in not knowing, were no longer needed. It also accused the three, who, acting upon the orders of former Nortel corporate executives Frank Dunn, Douglas Beatty and Michael Gollogly, of manipulating Nortel's earnings by setting up approximately $37 million in unnecessary reserves during the fourth quarter of 2002. It was alleged that the action was done in order to suppress an unexpected profit and smooth Nortel's consolidated financial result.

As part of a settlement reached in the case, the three men agreed to pay $75,000 each to resolve the SEC's allegations. Apart from paying $75,000 each, Johnson will pay disgorgement in the amount of $66,845, while Kinney and Taylor will each pay $52,000, along with prejudgment interest of $21,186 and $16,481 respectively. The deal stipulated that all the former executives are banned from acting as an officer or director of any public company for five years. [CANADIAN BUSINESS: 3 FORMER NORTEL VPS SETTLE FRAUD CHARGES WITH SEC]

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Published on May-2-08