Editing Nortel (section)

==== Accounting restatements ====

Frank Dunn presided over a dramatic restructuring of Nortel, which included laying off two-thirds of its workforce (60,000 staff)<ref>{{Cite news |date=2007-03-13 |title=How Dunn's misplaced optimism snowballed |url=https://www.theglobeandmail.com/report-on-business/how-dunns-misplaced-optimism-snowballed/article1357908/ |access-date=2024-01-31 |work=The Globe and Mail |language=en-CA |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131165438/https://www.theglobeandmail.com/report-on-business/how-dunns-misplaced-optimism-snowballed/article1357908/ |url-status=live }}</ref> and [[Write-off#Write-down|writedowns]] of nearly US$16 billion in 2001 alone. This had some initial perceived success in turning the company around, with an unexpected return to profitability reported in the first quarter of 2003. The black ink triggered a total of $70 million in bonuses to the top 43 managers,<ref>{{cite news | url=https://www.theglobeandmail.com/report-on-business/no-business-reason-to-release-nortel-reserves-court-told/article2309645/ | location=Toronto | work=The Globe and Mail | first=Janet | last=McFarland | title=No business reason to release Nortel reserves, court told | date=January 20, 2012 | access-date=August 22, 2017 | archive-date=March 4, 2016 | archive-url=https://web.archive.org/web/20160304210618/http://www.theglobeandmail.com/report-on-business/no-business-reason-to-release-nortel-reserves-court-told/article2309645/ | url-status=live }}</ref> with $7.8 million going to Dunn alone,<ref>{{cite news | url=https://www.thestar.com/article/1117383--nortel-trial-letters-show-nortel-execs-knew-they-were-getting-bonuses-fraudulently-crown-alleges | location=Toronto | work=The Star | first=Michael | last=Lewis | title=Nortel trial: Letters show Nortel execs knew they were getting bonuses fraudulently, Crown alleges | date=January 18, 2012 | access-date=September 6, 2017 | archive-date=November 9, 2012 | archive-url=https://web.archive.org/web/20121109035253/http://www.thestar.com/article/1117383--nortel-trial-letters-show-nortel-execs-knew-they-were-getting-bonuses-fraudulently-crown-alleges | url-status=live }}</ref> $3 million to chief financial officer Douglas Beatty, and $2 million to controller Michael Gollogly.<ref>{{cite news |url=https://www.ctvnews.ca/nortel-execs-were-getting-bonuses-fraudulently-crown-1.755569 |title=Nortel execs were getting bonuses fraudulently: Crown {{pipe}} |work=CTV News |date=January 18, 2012 |access-date=May 26, 2012 |archive-date=March 8, 2012 |archive-url=https://web.archive.org/web/20120308084047/http://www.ctv.ca/CTVNews/Canada/20120118/nortel-exec-fraud-trial-120118/#ixzz1jrHQEEzQ |url-status=live }}</ref> Independent auditor [[Deloitte & Touche]] advised audit committee chairman [[John Cleghorn]] and board chairman [[Lynton Wilson|"Red" Wilson]] to look into the suspicious results, who hired the law firm WilmerHale to vet the financial statements.<ref name="Nortel Nailed Coffin">{{cite web|title=Accounting scandal another nail in Nortel coffin|url=http://www.financialpost.com/story.html?id=2173704|access-date=July 7, 2014|url-status=dead|archive-url=https://web.archive.org/web/20100222095656/http://www.financialpost.com/story.html?id=2173704|archive-date=February 22, 2010}}</ref> In late October 2003, Nortel announced that it intended to restate approximately $900 million of liabilities carried on its balance sheet as of June 30, 2003, following a comprehensive internal review of these liabilities. The company stated that the restatement's principal effects would be a reduction in previously reported net losses for 2000, 2001, and 2002 and an increase in shareholders' equity and net assets previously reported on its balance sheet. A dozen of the company's most senior executives returned $8.6 million of bonuses they were paid based on the erroneous accounting. Investigators ultimately found about $3 billion in revenue had been booked improperly in 1998, 1999, and 2000. More than $2 billion was moved into later years, about $750 million was pushed forward beyond 2003 and about $250 million was wiped away completely. The accounting scandal hurt both Nortel's reputation and finances, as Nortel spent an estimated US$400 million on outside auditors and management consultants to retrain staff.<ref name="Nortel Nailed Coffin"/>

To improve its liquidity, in 2003 Nortel arranged a US$750 million credit support facility with [[Export Development Canada]].<ref name="2003-EDC">{{Cite press release | title = Nortel Networks Announces US$750 Million Support Facility with EDC and Details of Special Matters to be Considered at Upcoming Shareholders Meeting | publisher = Nortel Networks Corporation | date = February 14, 2003 | url = http://www.nortel.com/corporate/news/newsreleases/2003a/02_14_03_edc_credit_facility.html | access-date = December 9, 2009 | url-status = dead | archive-url = https://web.archive.org/web/20061228171135/http://www.nortel.com/corporate/news/newsreleases/2003a/02_14_03_edc_credit_facility.html | archive-date = December 28, 2006 }}</ref> Walter Robinson of the [[Canadian Taxpayers Federation]] denounced the line of credit, calling it "[[corporate welfare]] at its worst."<ref name="SunMedia-EDC2003">{{Cite news | last = McKibbon | first = Sean | title = Bailout Billion; Taxpayers to prop up mega-loser Nortel | newspaper = Winnipeg Sun | location = Winnipeg | page = 8 | publisher = Sun Media | date = February 16, 2003 }}</ref>

On April 28, 2004 amidst the accounting scandal, three of Nortel's top lieutenants—Douglas Beatty, CEO Frank Dunn and Michael Gollogly—were fired for [[financial mismanagement]].<ref name="reuters_2013">{{citation |url=http://ca.reuters.com/article/businessNews/idCABRE90E13720130115?pageNumber=2&virtualBrandChannel=0&sp=true |publisher=Reuters |date=January 15, 2013 |access-date=October 7, 2016 |title=Analysis: Nortel case spotlights Canada corporate crime record |first=Cameron |last=French |location=Toronto, Ontario |archive-url=https://web.archive.org/web/20161009000139/http://ca.reuters.com/article/businessNews/idCABRE90E13720130115?pageNumber=2&virtualBrandChannel=0&sp=true |archive-date=October 9, 2016 |url-status=dead }}</ref> They were later charged with fraud by the [[Royal Canadian Mounted Police|RCMP]].<ref name="NYT-ExecsArrested">{{cite news | last = Austen | first = Ian | title = 3 Ex-Nortel Executives Are Accused of Fraud | work = The New York Times | date = June 20, 2008 | url = https://www.nytimes.com/2008/06/20/technology/20nortel.html | access-date = June 25, 2008 | archive-date = September 24, 2015 | archive-url = https://web.archive.org/web/20150924044814/http://www.nytimes.com/2008/06/20/technology/20nortel.html | url-status = live }}</ref><ref name="Citizen-20080620">{{cite news | work = Ottawa Citizen | title = Top former Nortel execs charged with fraud | publisher = CanWest MediaWorks Publications | date = June 20, 2008 | url = http://www.canada.com/ottawacitizen/news/story.html?id=c0d441c3-223a-4855-b3ad-09f6144727fa | archive-url = https://web.archive.org/web/20130307140914/http://www.canada.com/ottawacitizen/news/story.html?id=c0d441c3-223a-4855-b3ad-09f6144727fa | url-status = dead | archive-date = March 7, 2013 | access-date = October 7, 2011 }}</ref> The trial began on January 16, 2012,<ref name="Gazette-20111003">{{cite news | author = Postmedia News | title = Nortel criminal trial to begin Jan. 16 | work = Montreal Gazette | date = October 3, 2011 | url = https://montrealgazette.com/news/Nortel+criminal+trial+begin/5496356/story.html | access-date = October 3, 2011 | archive-url = https://web.archive.org/web/20111202181937/http://www.montrealgazette.com/news/Nortel+criminal+trial+begin/5496356/story.html | archive-date = December 2, 2011 | url-status = dead }}</ref> ending with acquittals for all three.<ref name="reuters_2013" /><ref name="Globe-DunnTrialVerdict">{{cite news | work = Globe and Mail | title = Three former Nortel executives found not guilty of fraud | date = January 14, 2013 | url = https://www.theglobeandmail.com/globe-investor/former-nortel-networks-executives-acquitted-of-fraud/article7319241/ | access-date = January 30, 2013 | location = Toronto | archive-date = January 17, 2013 | archive-url = https://web.archive.org/web/20130117153458/http://www.theglobeandmail.com/globe-investor/former-nortel-networks-executives-acquitted-of-fraud/article7319241/ | url-status = live }}</ref><ref>{{cite news | url = https://www.thestar.com/business/2013/01/11/nortel_verdict_frank_dunn_two_other_executives_not_guilty_of_fraud.html | title = Nortel verdict: Frank Dunn, two other executives not guilty of fraud | location = Toronto | newspaper = The Star | date = January 14, 2013 | access-date = November 27, 2016 | archive-date = November 28, 2016 | archive-url = https://web.archive.org/web/20161128050413/https://www.thestar.com/business/2013/01/11/nortel_verdict_frank_dunn_two_other_executives_not_guilty_of_fraud.html | url-status = live }}</ref>

The [[United States Securities and Exchange Commission]] (SEC) also filed charges against them and four vice-presidents for civil fraud.<ref name="Citizen-20080620"/> On December 19, 2014, remaining civil charges from the [[Ontario Securities Commission]] and SEC were simultaneously dropped.<ref>{{cite news|last=Bagnall|first=James|title=Nortel allegations finally fade away, with no apologies and no blame laid|url=https://ottawacitizen.com/news/national/bagnall-nortel-allegations-finally-fade-away-with-no-apologies-and-no-blame-laid|newspaper=Ottawa Citizen|access-date=January 16, 2016|date=December 31, 2014|archive-date=January 7, 2016|archive-url=https://web.archive.org/web/20160107174902/http://ottawacitizen.com/news/national/bagnall-nortel-allegations-finally-fade-away-with-no-apologies-and-no-blame-laid|url-status=live}}</ref>