Police charges ex-Nortel exec with fraid

Former Nortel Networks chief executive officer Frank Dunn and two other former executives of the telecommunications equipment maker were charged Thursday by Canada's national police force with fraudulently mistating the company's financial results.

Dunn, 54, is charged with fraud affecting the public securities market, as well as with falsification of accounts and documents and involvement in issuing a false prospectus.

Facing similar charges are former Nortel chief financial officer Douglas Beatty, 53, and former corporate controller Michael Gollogly, 49.

The Royal Canadian Mounted Police alleges criminal activity within Canada's premier technology company between the beginning of 2002 and mid-2003, when Dunn, Beatty and Gollogly are accused of fraudulently misstating financial results.

The three were fired in 2004 after allegations of accounting irregularities at the company.

The company issued a statement stressing that it has not been charged and was not the target of the investigation

"The company has fully cooperated with the RCMP and will continue to do so. This is in relation to former executives of the company who were dismissed for cause in 2004," Nortel said in a statement.

The U.S. Securities and Exchange Commission filed civil fraud charges last year against Dunn and other executives _ including Beatty and Gollogly _ alleging they directed a so-called earnings management fraud to manipulate the company's financial reports.

The SEC alleges that Dunn, Beatty and Gollogly directed the improper companywide release of about $500 million of excess reserves in the first and second quarters of 2003 to inflate earnings and pay bonuses.

U.S. regulators allege the executives aimed to "create the false appearance" that the company had returned to profitability after three years of red ink so they could pay themselves and others bonuses, which were based on the company hitting certain financial targets.

Nortel Networks Corp., which once accounted for one-third of the total valuation on the Toronto Stock Exchange, ran into financial headwinds around 2000 and lost billions of dollars of value.