TORONTO — Fraud charges against three former Nortel senior executives have been dismissed after a year-long trial.
Ontario Superior Court Justice Frank Marrocco said Mondau the “burden of proof” had not been met to convict ex-CEO Frank Dunn, ex-CFO Douglas Beatty and ex-controller Michael Gollogly of manipulating Nortel’s balance sheets in order to reap millions of dollars in performance bonuses.
All three had pleaded not guilty.
Prosecutors had charged that the accused improperly manufactured a loss in one quarter and then engineered a profit in a subsequent three-month period in order to trigger lucrative cash and stock bonuses.
Increased profit numbers would have led to a combined $12.8 million in bonuses for the three men in 2003.
“A criminal trial is based on evidence,” Marrocco said Monday. “The burden is on the prosecution (to prove guilt). The burden of proof has not been met.”
If convicted, each of the three former executives would have faced as many as 10 years in prison.
“I am pleased with today’s decision, and after waiting almost nine years, I am grateful to have received vindication,” Dunn said in a statement.
Beatty said nothing as he exited the Toronto courthouse with lawyer Greg Lafontaine.
“It is the vindication of Mr. Beatty,” Lafontaine said. “It’s been very hard on him, as you can expect, and he’s ecstatic that it’s over.”
Gollogly only said “it’s been difficult” as he passed a throng of media.
Once the equipment-manufacturing arm of Canada’s biggest phone company, Nortel became a market darling in the late 1990s as the Internet revolution picked up steam and investors bet the company would make billions selling fiber optics networks.
In 2000, speculators continued to boost the value of the company’s shares to the point where its market capitalization topped out around $400 billion — a full third of the entire Toronto Stock Exchange.
But the shares plunged as tech stocks fell out of favour and Nortel’s sales came up well short of analysts’ stratospheric expectations. The stock dropped more than 99% by 2002, decimating investment funds.
Nortel’s decline led to thousands of job losses, the stripping of employee pensions and financial losses for investors.
Nortel returned to profit in 2003 after several years of losses, but the company then restated results several times, shaking investor faith in its prospects and triggering numerous investigations.
The scandal led to the firing of the three defendants in 2004.
— With files from Reuters