According to legend, the Royal Canadian Mounted Police (RCMP) always gets their man. This time, instead of a lone mounted officer in a rocky and snow filled landscape catching the criminals, the market enforcement team of the RCMP caught three former executives from the telephone equipment company Nortel.
Former CEO Frank Dunn, Chief Financial Officer Douglas Beatty and corporate controller Michael Gollogy were charged today with fraudulently misstating financial results as Nortel attempted to right itself after the tech bubble burst of 2001.
The three were also accused of making false entries and omitting materials in Nortel’s books. The alleged illegalities date back to the start of 2002 and follow through to June 30 of 2003. It is believe the fraud was conducted to paper over the decline of company stock prices. Nortel eventually posted billions in losses and was forced to layoff thousands of employees.
Nortel reacted to the news of the criminal charges by issuing a statement saying the company wasn’t a target of the investigation and that the former executives were dismissed for cause in 2004.
In 2007, Nortel settled civil charges filed by the U.S. Securities and Exchange Commission (SEC). The SEC claimed Nortel’s business practices let it meet “unrealistic” revenue and earnings forecasts it had provided to Wall Street. Nortel paid $35 million to settle the charges.
The RCMP said it received co-operation from the U.S. Federal Bureau of Investigation, U.S. and Ontario securities regulators, and Nortel.