Nortel fires CEO, CFO, controller over earnings

Maker of telecom gear might halve 2003 profit

April 29, 2004|By NEW YORK TIMES NEWS SERVICE

Nortel Networks Corp., North America's largest maker of telecommunications equipment, fired its chief executive officer, chief financial officer and controller yesterday and might halve last year's earnings as part of a sweeping review of the company's accounts.

Nortel, whose audit committee has been investigating its past statements, said some of the profit recorded last year would be shifted to previous years when the company lost money. The company, based in Brampton, Ontario, will also delay the release of its first-quarter earnings.

Nortel said its chief executive, Frank A. Dunn, was "terminated with cause" and replaced by William A. Owens, a director at the company since 2002. Dunn was chief financial officer at Nortel before becoming chief executive.

The others fired, Chief Financial Officer Douglas C. Beatty and Controller Michael J. Gollogly, had been on paid leave since last month.

"These actions are an important step in the process of restoring confidence in the company's leadership and financial reporting," said Lynton R. Wilson, chairman of the board at Nortel.

Nortel shares closed down 28 percent, or $1.59, at $4.05.

The day before the Nortel firings, another technology company, network operator Global Crossing Ltd. of Florham Park, N.J., said it would restate its earnings for last year because it understated costs.

Computer Associates International Inc., a New York software company, replaced its chairman and chief executive officer last week.

Like those companies, Nortel has been dogged by troubles for years. In the past several weeks, the Securities and Exchange Commission began a formal investigation into accounting practices at the company and Nortel put several executives on leave. The company restated more than three years of earnings in October.

The company's latest moves call into question not only Nortel's previous efforts to increase transparency, but also the strength of the company's recovery. Nortel, which recorded its first profit in six years last year, has benefited in the past year from an upturn in spending by telecommunications carriers.

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