TORONTO – Three fired Nortel Networks executives not only knew about, but supported their staff in rigging company books to show mega-million-dollar profits in order to pocket big bonuses, a court heard Wednesday.
Wrapping up his opening submissions for a trial expected to last into summer, prosecutor Robert Hubbard said the three accused fraudsters shared more than $13 million in bonuses before the declining firm's "polluted" finances were revealed and its stock share prices collapsed.
Frank Dunn, Douglas Beatty and Michael Gollogly have pleaded not guilty to two charges each of fraud over $5,000. RCMP charged them in 2008.
Hubbard told Judge Frank Marrocco "they were indifferent to the results" of a promised accounting review, and "falsified" company books, records, financial statements and other documents including press releases.
The releases gave glowing reports of improved sales by Nortel, which aided a dramatic stock value comeback for the former industry leader in sales of telephone and telecommunications equipment, the prosecutor said.
Hubbard added Gollogly even raised objections about his bonus before accepting the cash.
Documents shown in court — from among 23 million pages prepared during a lengthy investigation — show Nortel share prices dipped below 50 cents in September 2002, resulting in a New York Stock Exchange warning to investors. Within 18 months, amidst glowing reports, shares shot up to above $8, before tumbling again.
Nortel's board suspended Beatty, the former chief financial officer, and Gollogly, the company's controller, in March 2004. The doomed firm "terminated" them and Dunn, the silver-haired former CEO, that April.
The company, once Canada's biggest firm, filed for creditor protection in 2009.
Last month, Nortel announced the Ontario Superior Court of Justice had extended proceedings until April 13 "to provide stability to the Nortel companies to continue with the wind down of operations and other significant work toward the development of a plan of arrangement . . . and conclusion of the creditor protection proceedings."
The three former executives sat near their lawyers, in front of computer display terminals showing prosecution files, until the judge adjourned the trial in mid-morning.
Defence lawyers will begin their submissions Thursday morning.
The lawyers will argue their clients had no knowledge of the alleged scheme or accounting discrepancies.
If convicted, the trio could each face up to 14 years in prison.