On Wednesday, the company announced that it has fired CEO Frank Dunn. Nortel's chief financial officer, Douglas Beatty, and controller, Michael Gollogly, both of whom had been placed on paid leave of absence by Nortel on 15 March, were also sacked.
"The actions taken by Nortel's board are about accountability for financial reporting," Lynton Wilson, chairman of the board, said during a conference call with analysts. "The board believes these actions are important steps in restoring confidence in the company's leadership."
When asked if Dunn and the two other executives lost their jobs because of fraud, Wilson said that he could not comment. "The investigations are ongoing, and it's inappropriate to provide specifics," he said. He also said he was unaware of any police investigations.
William Owens, a director of the company since 2002, has been appointed president and CEO. Prior to being appointed to Nortel's board, Owens served as CEO of Teledesic LLC, a satellite communications company. Owens is also a veteran of the Gulf War, and he once held the second-highest rank in the US military.
William Kerr, who has been acting chief financial officer, and MaryAnne Pahapill, who stepped in as controller on 15 March, will now hold these positions permanently.
The board of directors also announced that four others who worked as finance executives during the periods under review have been placed on paid leaves of absence pending further investigation.
The management blood-letting comes as Nortel conducts an internal investigation of its accounting practices. Nortel's internal auditors began looking into the company's finances after it was discovered that roughly $900m in liabilities had been either recorded incorrectly in prior periods or had not been properly released in the appropriate periods.
In October 2003 and March 2004, the company announced that it would probably restate results for certain periods. It has already restated earnings from 2000, 2001 and 2002, along with figures for the first two quarters of 2003.
Earlier this month, the Securities and Exchange Commission launched a formal investigation into Nortel's restatements.
Nortel provided an update on this investigation in a statement released Wednesday. While the company can't provide exact details, it said that unaudited results for the year ended 31 December, 2003, will need to be revised. The company estimates that net earnings for 2003 will likely drop by 50 percent, and that the company will likely report a net loss for the first half of 2003. Results reported for each quarter in 2003 and for earlier periods including 2002 and 2001 are also likely to be restated
