TORONTO — The prosecution’s fraud case against three former executives at bankrupt Nortel Networks is “preposterous” and “entirely without merit,” court heard Thursday.
Defence lawyer David Porter — who represents former chief executive Frank Dunn — opened for the defence at a trial that will examine one of the most spectacular collapses of the dot-com bubble.
When the technology bubble burst in 2001, Nortel was forced to downsize to reduce costs, Porter told Judge Frank Marrocco.
These company leaders “sought to save the company” and restore its profitability, not through fraud, but through massive layoffs, cutbacks in overhead and reductions in real estate costs, Porter said.
“The fundamental honesty of the accused’s conduct is reflected in the fact that, in virtually every respect, the relevant accounting judgments and decisions of Nortel’s finance personnel were known by Nortel’s auditors, Deloitte & Touche, reviewed in detail by them at the time, and at the time considered appropriate and reasonable by Deloitte,” said Porter, who was speaking for all three defendants.
Their transparent, honest dealings with Deloitte “belies the allegation of fraud made by the Crown,” Porter said.
“Nortel’s sharing of the factual basis for its accounting decisions, and the acceptance and approval of them by Deloitte, completely undermines the Crown’s allegation of dishonest and fraudulent behaviour in this case,” he said.
The company sustained losses every quarter in 2001, and in the second quarter of 2002, it lost a staggering $19 billion, Porter told the court.
The Crown alleges Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly misrepresented Nortel’s financial results between 2000 and 2004 to pocket almost $13 million in bonuses while defrauding investors of billions.
Dunn and Beatty, both 57, and Gollogly, 53, have pleaded not guilty to fraud.