All About Nortel - Latest Comments

Re: Ericsson Bids $730M for Wireless Units

Yoshi — Thu, 30 Apr 2015 20:35:47 -0000

Hello fellow conqueror :3

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 11:37:07 -0000

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 11:12:42 -0000

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 10:59:10 -0000

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 10:44:48 -0000

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 10:39:19 -0000

Re: EPS Estimates for Q1

Yaron Weil — Mon, 25 Nov 2013 06:13:22 -0000

message

Re: Matlin Patterson Submits $725 Million Bid

Farrah Zeman — Mon, 09 Jul 2012 13:49:54 -0000

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Re: All About Nortel Starts to Wind Down

Farrah Zeman — Mon, 09 Jul 2012 13:12:59 -0000

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Re: And So the Case Begins…

protosphere — Thu, 28 Jun 2012 13:56:54 -0000

My posts do not appear past June 5th now, not sure why.

A more recent article gives the pros and cons of a conviction:

Court has scheduled the Crown’s closing
arguments for Sept. 27-28, while defence lawyers will present their closing
arguments on Oct. 2-3.

The Crown’s case, however, has several strengths.
Strength No.
1: The trial hinges on the clear fact that Nortel’s accounting was wrong
during 2002 and 2003, a fact supported by two successive restatements
of the company’s books.
The restatements have freed the Crown from
having to demonstrate as a starting point that the accounting treatment
was erroneous, which can be surprisingly difficult to do in the absence
of a clear admission by the company. It means the starting point for
the trial was whether the errors were intentional or not.
Strength
No. 2: Internal reports dubbed “outlooks” and “road maps” for
executives were introduced at Nortel in 2003 – and, according to
testimony, not shown to auditors or the board of directors –
illustrating how the company could move from losses to profitability by
using millions of dollars of accounting reserves to meet the targets.
Some
of the outlooks included pages analyzing the profit levels needed to
trigger payouts under Nortel’s complex bonus and share unit plans. The
defence argues the documents were innocuous efforts at forecasting and
planning, but the Crown alleges they are road maps to a fraud.
Strength
No. 3: Testimony about closing the books for the fourth quarter of 2002
was possibly the best employee evidence at the trial. At least four
non-head office employees testified about receiving unusual phone calls
early in 2003 asking if their operating divisions had any more
accounting reserves they could create for the fourth quarter of 2002.

There are also weaknesses in the Crown’s case that offer strength to the defence:
Weakness
No. 1: There is no single smoking gun that clearly implicates the
accused – no e-mail, memo or conversation where the accused openly
discussed fraudulent manipulations. The Crown can only suggest the
accused must logically have known about and directed the fraud, arguing
no one else had the authority to make such key decisions.
Weakness
No. 2: The three accused have stuck together and are presenting a
combined defence with no one striking a deal to testify against the
others. As a result Judge Marrocco is left with a challenge of
separately weighing the guilt of each accused when there is little
evidence which of the men made which key decisions at issue.
Weakness
No. 3: There is plenty of evidence that many of the accounting
decisions in question were reviewed and approved by Nortel’s external
auditors at Deloitte & Touche, helping the defence build its
argument that the accused believed their decisions were appropriate at
the time. Similarly, there are many reports, memos and e-mails showing
that accounting treatment of reserves was being carefully studied
internally by Nortel staff beginning in 2002.
It means the defence
has grounds to suggest the executives were releasing reserves as part
of a well-intentioned effort to get the accounting fixed. Lawyers for
the accused have stressed Nortel was facing huge chaos in 2001 and 2002,
allowing errors with accounting reserves to fester unnoticed. When
problems with overstated accounting reserves finally came to light, the
defence argues executives tried to fix them in the most expedient way
possible by reversing the reserves – and booking the income – to try to
get the mistaken entries off the books.

Re: And So the Case Begins…

felixmk — Wed, 27 Jun 2012 20:56:36 -0000

I predict that they will be acquitted. Crown has not shown real criminal activity, just idiotic managers, auditors, and board... and stupidity is not a crime.

Re: And So the Case Begins…

protosphere — Tue, 26 Jun 2012 15:15:51 -0000

http://www.theglobeandmail....

Testimony complete at Nortel trial

Jun. 26 2012

Defence lawyers for three former Nortel Networks Corp. executives told their fraud trial Tuesday they will call no witnesses to testify in the case.
More Related to this Story

The defence announcement came just moments after Crown attorney Robert Hubbard told a Toronto courtroom the Crown had no further evidence to present in its case. It means all testimony has been completed at the long-running trial, and the case will move to closing arguments in the fall.

The defence decision to call no witnesses was widely expected at the trial. It is relatively rare in Canada for the accused to testify in their own defence, and many other potential witnesses who worked with the accused in accounting and finance roles at Nortel have already testified as Crown witnesses.

Former Nortel chief executive officer Frank Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly are each charged with two counts of fraud for allegedly manipulating the company’s accounting reserves in 2002 and 2003 to push Nortel to profitability to trigger special “return to profitability” bonuses for themselves.

Lawyers for the three men have denied all the allegations and have argued the men believed the use of accounting reserves was appropriate at the time, and the decisions were all approved by Nortel’s auditors from Deloitte & Touche.

Mr. Justice Frank Marrocco of the Ontario Superior Court has scheduled the Crown’s closing arguments for Sept. 27 and 28, while defence lawyers will present their closing arguments on Oct. 2 and 3.

The trial began in January and heard testimony from 20 witnesses, many of them former Nortel finance employees. More than 2,500 documents were tendered during the trial as part of almost 600 exhibits.

Re: And So the Case Begins…

bankrupt_bob — Tue, 26 Jun 2012 14:05:37 -0000

...but then, "this" can't be real life, can it? ;>)

Re: And So the Case Begins…

protosphere — Tue, 26 Jun 2012 11:30:34 -0000

a quitter never wins and a winner never quits =)

and please do not tell me you call people "dude" in real life =)

Re: And So the Case Begins…

protosphere — Tue, 26 Jun 2012 11:19:43 -0000

http://www.theglobeandmail....

Former Nortel CEO Frank Dunn leaves the University Ave. Court House in Toronto, Jan. 12, 2012. Mr. Dunn and two other former Nortel executives are accused of manipulating financial statements +
As Crown wraps up at Nortel trial, burden shifts to judge

Jun. 24 2012, 7:02 PM EDT

If a judge has ever had a tough verdict to render, it would be Mr. Justice Frank Marrocco.

This week, the spotlight at the long-running trial of three former Nortel Networks Corp. executives will shift to Judge Marrocco, a seven-year veteran of the Ontario Superior Court, as the Crown wraps up five months of evidence in the marathon fraud case.

Defence lawyers have not said whether they intend to call any witnesses of their own, but are not expected to do so. If they do not, the legal battle will move to closing arguments, likely to be scheduled for September.

The volume of evidence alone makes Judge Marrocco’s work daunting.

Since it began in January, the Nortel trial has seen more than 2,500 documents tendered as part of almost 600 exhibits. Dozens of thick black binders of exhibits line bookshelves in a spacious courtroom on Toronto’s University Avenue, representing a mere fraction of the 30 million pages of material disclosed to the RCMP in its investigation.

While the evidence is voluminous, the allegations in the case are relatively straightforward. The Crown alleges Nortel’s executives manipulated the company’s huge stockpile of accounting reserves on its books – amounts previously booked to cover anticipated future expenses – to push the company to profitability when most advantageous in the first and second quarters of 2003.

The alleged motive is that the executives wanted to trigger special “return to profitability” bonuses for themselves, ultimately earning payouts totalling a combined $12.8-million for former chief executive officer Frank Dunn, chief financial officer Douglas Beatty and controller Michael Gollogly.

The allegations may be the only straightforward thing about the case.

One of Judge Marrocco’s biggest tasks will come as he weighs the often ambiguous evidence presented at the trial from 20 Crown witnesses, much of it coming from cautious accountants who at times sounded more like they were called by the defence than the Crown.

Judge Marrocco is left to piece through hundreds of hours of testimony to decide which evidence remains clear and uncontested, and which was shaken under examination.

The Crown’s case, however, has several strengths.

Strength No. 1: The trial hinges on the clear fact that Nortel’s accounting was wrong during 2002 and 2003, a fact supported by two successive restatements of the company’s books.

The restatements have freed the Crown from having to demonstrate as a starting point that the accounting treatment was erroneous, which can be surprisingly difficult to do in the absence of a clear admission by the company. It means the starting point for the trial was whether the errors were intentional or not.

Strength No. 2: Internal reports dubbed “outlooks” and “road maps” for executives were introduced at Nortel in 2003 – and, according to testimony, not shown to auditors or the board of directors – illustrating how the company could move from losses to profitability by using millions of dollars of accounting reserves to meet the targets.

Some of the outlooks included pages analyzing the profit levels needed to trigger payouts under Nortel’s complex bonus and share unit plans. The defence argues the documents were innocuous efforts at forecasting and planning, but the Crown alleges they are road maps to a fraud.

Strength No. 3: Testimony about closing the books for the fourth quarter of 2002 was possibly the best employee evidence at the trial. At least four non-head office employees testified about receiving unusual phone calls early in 2003 asking if their operating divisions had any more accounting reserves they could create for the fourth quarter of 2002.

All had submitted their year-end numbers by this time, and said they had never received such a phone call before asking them to look for more reserves they could book after the fact. While witnesses shifted their evidence under cross-examination to varying degrees, it will be hard for the defence to fully counter the sheer volume of people telling similar versions of events.

There are also weaknesses in the Crown’s case that offer strength to the defence:

Weakness No. 1: There is no single smoking gun that clearly implicates the accused – no e-mail, memo or conversation where the accused openly discussed fraudulent manipulations. The Crown can only suggest the accused must logically have known about and directed the fraud, arguing no one else had the authority to make such key decisions.

Weakness No. 2: The three accused have stuck together and are presenting a combined defence with no one striking a deal to testify against the others. As a result Judge Marrocco is left with a challenge of separately weighing the guilt of each accused when there is little evidence which of the men made which key decisions at issue.

Weakness No. 3: There is plenty of evidence that many of the accounting decisions in question were reviewed and approved by Nortel’s external auditors at Deloitte & Touche, helping the defence build its argument that the accused believed their decisions were appropriate at the time. Similarly, there are many reports, memos and e-mails showing that accounting treatment of reserves was being carefully studied internally by Nortel staff beginning in 2002.

It means the defence has grounds to suggest the executives were releasing reserves as part of a well-intentioned effort to get the accounting fixed. Lawyers for the accused have stressed Nortel was facing huge chaos in 2001 and 2002, allowing errors with accounting reserves to fester unnoticed. When problems with overstated accounting reserves finally came to light, the defence argues executives tried to fix them in the most expedient way possible by reversing the reserves – and booking the income – to try to get the mistaken entries off the books.

Re: And So the Case Begins…

protosphere — Tue, 26 Jun 2012 11:14:31 -0000

http://www.theglobeandmail....

Cleghorn says he didn’t know about questionable Nortel accounting practices

Thursday, Jun. 21 2012

Former Nortel Networks Corp. audit committee chairman John Cleghorn said he did not know Nortel senior staff had prepared an internal outlook in March, 2003, showing how they could earn payouts on their bonuses by the end of June that year.
More Related to this Story

Mr. Cleghorn, the former chief executive officer of Royal Bank of Canada who joined Nortel’s board in 2001, testified Thursday at the Toronto fraud trial of three former Nortel executives, explaining he did not learn about a number of accounting decisions made by management during a controversial period in 2003 until the board’s independent investigators told them about the events in 2004.

Mr. Cleghorn testified he did not know, for example, that Nortel had initially turned a profit in the fourth quarter of 2002 after years of large losses, nor that staff members had put out a call to the operating divisions to look for new accounting reserves to be booked in the period that ultimately had the effect of turning the profit into a loss.

And he said he did not know staff had done modeling in March, 2003, to figure out how to reach profit thresholds to trigger executive bonus payouts by the end of the second quarter that year.

Asked by Crown attorney David Friesen if he would have wanted to see such a document, Mr. Cleghorn said he would.

“I’d ask the question, ‘What did that mean?’ But it wasn’t shown to us.”

He also testified Nortel often had surprises at the end of its quarterly periods because it did “not have robust systems” for tracking its financial status from the general ledger to quickly prepare draft financial statements.

“The company had not been razor sharp,” he noted.

Mr. Cleghorn said, however, that there were plans to upgrade the systems and it couldn’t be made a priority at a time when the company was facing so many other major challenges.

He said it a was a “pleasant surprise” to learn Nortel had turned a profit in the first quarter of 2003, and said he was not concerned at the time that Nortel had reached the target after reversing $80-million of head office, non-operating accounting reserves to boost income by that amount.

“It sounded to me like there was a clean-up going on of the balance sheet, words to that effect,” he said.

Asked if he knew whether there were appropriate “triggers” to justify releasing the reserves, he said he assumed there were.

“I don’t recall a discussion that they did not have triggers, because not having a trigger is not according to GAAP [Generally Accepted Accounting Principles],” Mr. Cleghorn said. “The auditors were not hung up about these numbers being recorded in the results.”

The release of the reserves had become a central issue in the case. Former Nortel chief executive Frank Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly are accused of manipulating the reserves in 2003 to push Nortel to profitability and trigger special “return to profitability” bonus payouts for themselves.

The men have denied the allegations and have said they believed all the accounting decisions were appropriate at the time and were approved by Nortel’s auditors.

Mr. Cleghorn also testified Thursday there was some tension between auditors from Deloitte & Touche and Nortel’s senior executives after the fourth quarter of 2002 and again after the first quarter of 2003, with both sides complaining they had not had enough time and co-operation to do their work.

Mr. Cleghorn had been named chairman of Nortel’s audit committee in 2002, and said he told both sides they needed to “get their act together” and start earlier in the process to address issues of concern.

He added he wanted to be sure the auditors were getting the information they needed.

“We operated with a rule that if the auditors weren’t happy, we weren’t happy. So we weren’t going to release any statements if the auditors weren’t satisfied.”

In testimony last week, former Deloitte auditor Donald Hathway said he felt “chastised” by Mr. Cleghorn after the first quarter of 2003 for using up too much of Mr. Dunn’s times on concerns about disclosure in Nortel’s earnings press release.

Mr. Hathway also said he felt the board and Mr. Dunn did not understand the role of independent auditors.

Mr. Cleghorn’s testimony will continue Friday.

http://www.theglobeandmail....

Nortel managers did not hinder auditors’ work, Cleghorn testifies

Jun. 22 2012, 3:58 PM EDT

Former Nortel Networks Corp. audit committee chairman John Cleghorn told a Toronto court he mediated an unusual volume of complaints between company executives and the firm’s external auditors in 2003, but said no one in management tried to cut corners or hinder the auditors’ work.

Testifying Friday at the fraud trial of three former Nortel executives, Mr. Cleghorn said he received complaints from both sides after Deloitte & Touche changed the two lead audit partners heading the Nortel file in September, 2002, and January, 2003.

“Nortel’s quarter-ends and year-ends were about the noisiest I’d ever experienced,” he testified before Mr. Justice Frank Marrocco of the Ontario Superior Court. “There was a lot of comment and discussion.”

Mr. Cleghorn is the former chief executive officer of Royal Bank of Canada, and was named to Nortel’s board in 2001 as the tech company was struggling with enormous losses.

He was the final scheduled Crown witness at the long-running trial, which began in January, although Crown attorney Robert Hubbard said Friday he anticipated filing a report on Monday by an accounting expert.

Under cross-examination Friday by lawyer Harry Underwood, who is representing former Nortel CEO Frank Dunn, Mr. Cleghorn said he does not recall management complaining about Deloitte & Touche while the prior audit partners were in place, and said the tension seemed to begin with the audit of the fourth quarter of 2002.

Mr. Cleghorn said there were complaints about both sides not getting information quickly enough or making decisions quickly enough. But he told Mr. Underwood he did not recall management ever complaining that the auditors were being too strict.

“I don’t remember that being said just like that,” Mr. Cleghorn testified.

“You don’t remember management ever complaining about auditors scrutinizing the books too closely?” Mr. Underwood asked.

Mr. Cleghorn said he did not. “That would be a red flag if somebody said that, because what’s wrong with scrutinizing the books too closely?” he replied.

Mr. Dunn, former Nortel chief financial officer Douglas Beatty and former controller Michael Gollogly are accused of manipulating Nortel’s accounting reserves in 2002 and 2003 to push the company to profitability and trigger special bonuses for themselves. The men have denied all the allegations, and have said the accounting decisions were all approved by Deloitte auditors.

In his testimony Friday, Mr. Cleghorn said he disagreed with earlier testimony at the trial from Deloitte auditor Don Hathway, who said Nortel’s audit committee seemed more interested in getting financial statements approved on schedule than in getting them right.

Mr. Cleghorn said the audit committee independently hired external investigators in 2003 to probe Nortel’s use of accounting reserves, even though the investigators said they could not give assurances about when their work would be completed. That investigation ultimately led to the dismissal of Mr. Dunn and other top executives.

“If we were only interested in deadlines and not getting it right, why would we have gone into an external review [with no deadline for its completion]?” Mr. Cleghorn said. “We wanted the financials right first. If the auditors were not happy, we were not happy.”

He also testified that Mr. Dunn fully supported a decision to launch a comprehensive review of the accounting reserves being carried on Nortel’s books in 2003, which led to a financial restatement later that year.

“There was never any suggestion on the part of anybody in management that we shouldn’t do it right [or] we should cut corners,” Mr. Cleghorn said.

Re: Dion Joannou is Still Alive and Well

griffbdeal — Sun, 24 Jun 2012 14:07:32 -0000

clint,since math isn't one of my biggest assets either,maybe we should meet so i can stomp a mudhole in your faggot ass.come on up to wnc and meet some of dion's mountainmen friends so we can give you a much needed lesson in respect.better bring your momma too sissy boy.bulldog

Re: And So the Case Begins…

protosphere — Thu, 21 Jun 2012 11:50:32 -0000

http://www.theglobeandmail....

'Out of balance' accounts under the microscope at Nortel trial

Jun. 19 2012, 6:22 PM EDT

One of the most controversial accounting provisions reversed at Nortel Networks Corp. in 2003 was done as part of a careful balance sheet review that was closely monitored by auditors at Deloitte & Touche, a lawyer for former chief executive Frank Dunn told his fraud trial Tuesday.

Lawyer Harry Underwood, a member of Mr. Dunn’s legal team, spent Tuesday morning painstakingly cross-examining Don Hathway, Deloitte’s former lead audit partner at Nortel, about an accounting reserve Nortel was carrying on its books for inter-company “out of balance” or OOB accounts.

Using an array of internal e-mails and memos, Mr. Underwood attempted to show that Nortel was reversing provisions for the OOB accounts in 2003 as part of an effort to correct its accounting.

The Crown has previously alleged the reserve was one of several being manipulated by Nortel ‘s top officials in 2003 to push the company from a loss to a profit, triggering special “return to profitability” bonuses for executives.

Mr. Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly are charged with fraud over their use of the reserves. The men have denied the allegations, and have said all their actions were appropriate and done with the approval of Deloitte & Touche.

The OOB accounts have been a focus at the long-running fraud trial because Nortel reversed $35-million (U.S.) of the OOB provisions in the first quarter of 2003 – boosting profits by the same amount.

It was the single largest item among a total of $80-million of non-operating head office reserves that were used in the quarter to transform Nortel from a loss to a profit in the period.

In court Tuesday, Mr. Underwood showed Mr. Hathway an internal Deloitte memo in which a junior partner on the audit file analyzed Nortel’s decision to release $35-million from the OOB provision in the first quarter of 2003, and concluded the release “appears plausible” and was “appropriately disclosed” in the notes to Nortel’s financial statements.

Mr. Hathway, however, noted that someone else from Deloitte had inserted a comment into the memo questioning “are we sure” about that conclusion.

“I’m not sure what the wording ‘appears plausible’ means,” Mr. Hathway said. “It’s not a typical conclusion I’ve seen.”

Mr. Underwood, however, replied that Deloitte had accepted the provision release.

“Based on the information we were given at the time, yes we did,” Mr. Hathway replied.

Mr. Underwood added that Deloitte “took comfort” in the fact the provision was being reduced in line with the findings of an internal analysis in 2003 showing it was too large.

The company’s entire OOB reserve was later reversed and eliminated in a second restatement of Nortel’s books completed in January, 2005, after staff reconciled the out-of-balance accounts back to the periods the reserves were created between 1999 and 2001.

Mr. Hathway testified he wanted the entire OOB reserve eliminated in the first restatement in October, 2003, but was told Mr. Dunn wanted to keep $25-million of it on the books, which meant it would still be available for use in the future.

“Mr. Gollogly and I had agreed as part of the first restatement that all of the OOB would be reversed in its entirety, so there wouldn’t be any OOB provision for any period on the books,” he testified.

“Mr. Gollogly later reported to me that that agreement had been undone by Mr. Dunn who objected to that treatment.”

Mr. Hathway said he argued against keeping $25-million of the provision on the books for the future, but was pressured to accept a compromise and finally agreed because he said he decided that a reserve of $25-million would not be a material amount for a company of Nortel’s size.

“Mr. Gollogly advised me to let it go, it wasn’t a big deal and Mr. Dunn would make a big deal out of it at the next audit committee meeting,” he testified.

Mr. Underwood showed Mr. Hathway an internal analysis listing reasons for keeping the reserve at $25-million. Mr. Hathway replied that he accepted the reserve on the basis that it was not material, and not because he felt it was correct.

“But there was a reasoned basis,” Mr. Underwood insisted.

“There were reasons. I didn’t think they were particularly good ones,” Mr. Hathway said.

Re: And So the Case Begins…

protosphere — Wed, 13 Jun 2012 19:20:33 -0000

http://www.theglobeandmail....

Nortel executives ‘didn’t understand’ auditor was independent: testimony

Jun. 13 2012, 3:08

Former Nortel Networks Corp. chief executive Frank Dunn “did not understand” the role of the external auditors from Deloitte & Touche as they probed issues related to the company’s accounting in 2003, a senior Deloitte partner testified Wednesday.
More Related to this Story

Donald Hathway, who was the lead audit partner assigned to the Nortel file in 2003, told the Toronto fraud trial of Mr. Dunn and two other former Nortel executives that after almost a year of working daily with Nortel staff at the company’s head office, he concluded that neither management nor the board’s audit committee understood his role.

Mr. Hathway was assigned to head the Nortel audit team in January, 2003, and said he and Deloitte audit partner John Cawthorne quickly found themselves being pressured by Mr. Dunn to help Nortel find strategies to deal with its accounting issues.

“He had lectured John Cawthorne and I on more than one occasion about the need to be creative and come up with solutions … It indicated to me that he did not understand our role as independent auditors,” Mr. Hathway testified Wednesday in Ontario Superior Court.

He said the relationship with the Nortel board’s audit committee, led by former bank executive John Cleghorn, also grew strained and needed to be “reset” by late 2003.

“The audit committee seemed more interested in getting things done by a certain schedule than they did getting them done right,” Mr. Hathway testified. “I was surprised by that, because my view of their function was to oversee the integrity of the financial reporting process.”

He said he was criticized by Mr. Cleghorn for taking too long to review issues related to the press release announcing first-quarter financial results in 2003, and was “severely criticized” for expressing reservations about offering an assurance on the company’s third-quarter financial statements that year.

Mr. Hathway testified he felt Nortel had a “macho” culture, and that many of its senior executives had never worked anywhere else, so “hadn’t seen how other companies do things.”

“I think that type of culture was problematic,” he said.

By November, 2003, Mr. Hathway was removed as lead audit partner on the file after spending his brief tenure raising red flags about Nortel’s use of accounting reserves in 2003. He instead became a senior technical adviser to the audit team.

He said his supervisor told him he was being replaced because he “didn’t communicate with the audit committee.”

Mr. Hathway said he first discovered in the summer of 2003 – just six months after being assigned to lead the Nortel audit – that senior executives at the company were unhappy with his work.

At the time, Mr. Hathway was pressing the company to launch a comprehensive review of the accounting reserves it was carrying on its balance sheet – a review that later led to a controversial restatement of the company’s books in the fall of 2003.

Those reserves have since become the focal point of the fraud trial of Mr. Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly. The three are accused of manipulating the reserves in 2003 to push the company to profitability and trigger “return to profitability” bonuses for themselves.

All three have denied the charges and have said the use of accounting reserves was approved by Deloitte & Touche auditors.

Mr. Hathway testified that he was shown the results of Deloitte client-survey interviews conducted in July, 2003, with Mr. Beatty and Mr. Gollogly.

In the interview summary, Mr. Gollogly reportedly complained that Deloitte’s two new lead audit partners – Mr. Hathway and Mr. Cawthorne – were “night and day” compared with Deloitte partners previously assigned to Nortel, and were “turning the audit on its head.”

“Gollogly described Don and John as ‘inflexible,’ ” the interview summary said. “Don and John are not in ‘solution mode.’ ”

In a separate client-satisfaction interview with Deloitte, Mr. Beatty reportedly told the firm that he felt Mr. Hathway didn’t have any “skin in the game,” suggesting that because Mr. Hathway was new to the file, he felt he could reverse decisions previously approved by others at Deloitte.

“He’s not going to jeopardize his career, and thus Nortel is getting very tough stances taken by their auditors,” the interview summary quotes Mr. Beatty as saying.

Mr. Beatty also noted in his interview that the audit committee of Nortel’s board was considering replacing Deloitte as the company’s auditor, and would almost certainly do so if the balance sheet review under way in July, 2003, were to eventually turn into a restatement.

Nortel did not, however, replace Deloitte, despite moving ahead with a restatement later that year. Mr. Hathway testified Wednesday that the suggestion by Mr. Beatty “was not something I was too concerned about.”

Re: And So the Case Begins…

bankrupt_bob — Tue, 12 Jun 2012 20:29:20 -0000

...dude ...if nothing else, you don't give up...

Re: And So the Case Begins…

protosphere — Tue, 12 Jun 2012 18:10:36 -0000

http://www.theglobeandmail....

Lead Nortel auditor says he was left in the dark

Jun. 12 2012

The lead auditor for Nortel Networks Corp. in 2003 said he did not know the company was preparing internal “roadmaps” that outlined how profit targets could be met by using the company’s accounting reserves, and said the news was troubling when he learned of it during a later investigation.
More Related to this Story

Five months into the long-running fraud trial of three former top Nortel executives, the Crown is now questioning the lead audit partner from Deloitte & Touche who oversaw the Nortel audit.

Don Hathway testified Tuesday he was not shown internal company documents that Nortel used as “roadmaps” to figure out how it could reach its profit targets in 2003.

The trial has previously heard Nortel first started creating the roadmaps in 2003, which was a period when it had publicly forecast it expected to return to profitability after years of large losses.

One roadmap forecast shown to Mr. Hathway in court suggested hundreds of millions of dollars of accounting reserves might have to be released in quarters in 2003 to transform the company to profitability.

Mr. Hathway testified it would have been “useful” to Deloitte & Touche to have seen the calculations in 2003. He said he first shown the documents in 2004 after a U.S. law firm was hired to do an independent investigation of accounting problems at the company.

“What we saw in 2004 was very concerning, and I think would have changed a lot of stuff had we known about it in 2003,” Mr. Hathway testified.

Former Nortel chief executive officer Frank Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly are accused of fraudulently manipulating the accounting reserves to push the company to profitability in 2003 and trigger special “return to profitability” bonuses for themselves.

The men have denied the allegations and have argued Deloitte & Touche approved all their use of accounting reserves.

In testimony Tuesday, Mr. Hathway told Crown attorney Robert Hubbard that he did not know at the time that the use of $80-million (U.S.) of head office non-operating reserves in the first quarter of 2003 made the difference in terms of triggering bonus payments for the executives in that period.

“I did not have that understanding,” he said.

He said the bonuses were based on internal “pro forma” calculations that he did not examine closely because they were not part of the audited financial statements.

He added he asked Mr. Beatty and Mr. Gollogly about the bonuses before the first quarter results were released, and was told the bonuses would have been paid with or without the use of the $80-million of reserves.

He said he nevertheless insisted to management and the board that the impact of the $80-million be disclosed to shareholders in the company’s press release for the first quarter of 2003, telling Mr. Beatty his audit firm would “not be associated” with the regulatory filings for the first quarter financial statements unless the impact of the use of reserves was disclosed.

Mr. Hathway testified that at a subsequent audit committee meeting to review the proposed disclosure, audit committee chairman John Cleghorn “chastised” him for delaying the preparation of the press over his disclosure concerns and for “taking up too much of Mr. Dunn’s time” on the matter.

Mr. Cleghorn is expected to testify next week at the trial.

Mr. Hathway also testified he recommended to management and to the audit committee that a broader review should be launched in the spring of 2003 to examine the remaining reserves left on the company’s books. That review eventually expanded into a full balance sheet review and later in 2003 led to a restatement of Nortel’s financial statements.

At the time of his initial recommendation, Mr. Hathway testified he did not know that accounting employees had prepared a list of $189-million of accounting reserves that had been identified as no longer needed and releasable, but which were being kept on the books.

Earlier in his testimony, Mr. Hathway said he grew concerned in the spring of 2003 that Nortel’s finance staff didn’t have a “full understanding” of how accounting reserves should be used, so he prepared a presentation of the rules both for the accounting employees and later separately for Mr. Dunn.

Mr. Hathway, who has been auditor at Deloitte & Touche for 36 years, said he was assigned to the Nortel file earlier in 2003 after the former lead audit partner was removed because of time restrictions on how long an auditor can work on a file.

Re: And So the Case Begins…

protosphere — Wed, 06 Jun 2012 12:20:56 -0000

http://www.theglobeandmail....

Former Nortel chairman offers praise for Dunn

Jun. 05 2012

Former Nortel Network s Corp. chairman Lynton (Red) Wilson paid tribute Tuesday to ousted chief executive officer Frank Dunn even as he described firing the long-time Nortel executive in 2004 over accounting concerns.

Mr. Wilson completed his testimony Tuesday at the fraud trial of Mr. Dunn and two other former top Nortel executives, saying he met with the former CEO in late April, 2004, to inform Mr. Dunn the board had decided to fire him for cause following the receipt of a report by outside investigators hired by the board.

Despite the accounting scandal and years of ensuing litigation between Mr. Dunn and Nortel, Mr. Wilson offered generous praise Tuesday for Mr. Dunn’s work earlier in his career, saying he “saved” Nortel in 2001 and 2002 when it was reporting billions of dollars of losses and laying off the majority of its staff.

He said he recalled telling Mr. Dunn at the dismissal meeting that he had done a lot for the company over his 28-year career at Nortel, and had returned it to profitability before his departure.

“His role in managing through the downsizing and returning the company to profitability had been very good.... The ship was listing pretty badly at that point in time and it was a credit to Mr. Dunn’s leadership that he was able to keep the ship afloat,” Mr. Wilson testified.

Asked by Crown attorney David Friesen when Mr. Dunn had generated a profit at Nortel, given that the restatements of the company’s finances eliminated the profits reported in the first half of 2003, Mr. Wilson replied that the second half of 2003 was profitable even after the restatement.

“The company had returned to profitability during his time as chief executive,” Mr. Wilson said.

Mr. Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly are accused of fraudulently manipulating Nortel’s accounting reserves to push the company to profitability in 2003 and trigger “return to profitability” bonuses for themselves.

Harry Underwood, a member of Mr. Dunn’s legal team, suggested to Mr. Wilson during cross-examination that the board had been “constantly stressing” to management the need to return Nortel to profitability.

Mr. Wilson said he didn’t think it was something that needed to be stressed explicitly.

“I don’t think it was necessary to stress it constantly – they were well aware of the challenge,” he said.

Mr. Wilson said the “return to profitability” bonus plan was adopted by the board because it was considered essential to give employees of Nortel an incentive to stay with the company. He agreed with Mr. Underwood that employee morale was low at the time, and thousands of jobs had already been cut.

Mr. Underwood noted that the board’s compensation committee had given long consideration to whether to pay out the “return to profitability” bonuses in December, 2003, after Nortel had already announced its first restatement two months earlier.

“The view was they had legitimately earned it – they had been through fire,” Mr. Underwood suggested.

“Yes, it was earned,” Mr. Wilson said.

Lawyer Greg Lafontaine, who is representing Mr. Beatty, asked Mr. Wilson if he was aware that his client and Mr. Dunn had opted to forego another “success” bonus at the end of 2003 and not to take payout of a large proportion of their share units until the board’s investigators from a U.S. law firm had completed their work.

He said they ultimately never got the money. Mr. Lafontaine added that Mr. Beatty also opted to take 20 per cent of his “return to profitability” bonus in 2003 in stock and took all of his restricted share unit payments in stock. He said Mr. Beatty had to pay tax on the payouts, but held onto those shares until recently, meaning they became worthless.

“He held onto them until the bitter end,” Mr. Lafontaine said.

Mr. Wilson said he did not know Mr. Beatty had kept the shares.

_________________

In my view:

Only a fool would be eluded by what this past board says. Even after years of preparation and legal counsel, the facts remain indisputable.

This board, held close relationships with Dunn, denying the obvious red flags in immediate cash bonuses than traditional stock options that they approved and received, plea bargained and timely stepping down, timely repaid ill got bonuses, after so many no flies on us bored meetings.

Axing people didn't mean they had a need to retain others. Their counsel seems to have provided them with some profoundly bad advise in defense here. That's a bizarre defense to approve bonuses as they let so many go. Like involuntary terminations were spooking the flock of voluntary departures during hard times. That's a blatant lie in my view.

Nortel also never saw a profit, the endless restatements were worst every time counted, and they never did get their low tech accounting right for a high tech company that spent hundreds of millions for SAP software thereafter. Their largest asset remained a tax write off on books they sought to clean for so long. The litigation is a circus of clowns who aren't even funny.

Nortel evolved from a company of innovation to one of bonus as one senior VP put it. This more to the point.

The board is full of it. Old boss same as the new boss, hiring a green CEO who defrauds from day one while even Manley's firm defends Dunn... it was endless.

The board was in every way complicit in these return to profitability bonuses and if they did not know about the reversed provisions, they most certainly should have. Lest presented by an accountant by profession who was surprised by Wilmer's findings, an accountant that they held close relationships with before rolling over on this fall guy when profits were not there to move around later, in fear of their very own skin, and defend him today in retribution.

The board should have been charged than plea bargained and Nortel shut down on the spot before allowed printing billions more with their largest pension shortfall in Canada (before this loophole was closed) , it was so endless...

Even after researching bankruptcy, to restructuring, to liquidating the day following a forced government inquiry, Nortel's assets go to big business creditors (by folding federally than provincially where they operated) circumventing employee severances...it was so endless we can fill pages... an evil empire to the core and bitter end it seems...

The many Owens termed "hard to find" have testimony that would only elude a fool. It is too obvious throughout so far, discrediting, and should not parallel theEichman trials in wasting time here...

The US' DOJ would have had this wrapped up by now with exponentially better questions, knowing exactly what to ask, and with exponentially more severe penalty. These trials have as much teeth as the forced government inquiry... require heavy medication for uncontrollable laughter. I even fear the outcome in this so called "competent process" that would have better taken place in the USA where they also traded.

Re: And So the Case Begins…

protosphere — Mon, 04 Jun 2012 15:39:32 -0000

http://www.theglobeandmail....

Monday, Jun. 04 2012

Nortel bonus plan was recommended by ex-CEO Dunn: testimony

Nortel Network Corp.’s board of directors created the company’s now infamous “return to profitability” bonus plan on the recommendation of chief executive officer Frank Dunn, chairman Lynton (Red) Wilson said Monday.

Mr. Wilson, a veteran business executive who headed Nortel’s board of directors from 2001 to 2005, testified at the fraud trial of three former Nortel executives – including Mr. Dunn – who are accused of manipulating Nortel’s profits in 2002 and 2003 to trigger payouts under their bonus plan.

Mr. Wilson said Mr. Dunn and former human resources head William Donovan approached the board in mid-2002 with a proposal to create a new bonus program to reward everyone in the company if Nortel were to return to profitability after years of large losses.

He said other companies in the telecommunications industry were also facing losses at the time and were creating retention programs to reward key employees simply for staying on staff and not jumping ship. But Nortel felt it should have a plan that rewarded performance and not just longevity.

“I recall Mr. Donovan and Mr. Dunn suggesting we should base ours on a return to profitability, not simply a program for management to stay with the company,” Mr. Wilson testified.

“That sounded to the [board] committee as a more sensible approach, so work was begun at that time.”

The program was designed to pay everyone in the company a bonus upon reaching a single quarter of profitability. For top executives, however, a first tranche of payments was available after one quarter of profits, while a second portion was payable after two quarters of profitability, and a third portion was available after four consecutive quarters of profits.

The program, adopted in late 2002, was later criticized by analysts for providing too much incentive to create a profit in a single quarter to trigger payments. Top executives got their first payouts for the first quarter of 2003 – a period the Crown contends involved manipulation of accounting reserves to reach profitability.

Mr. Wilson testified Monday, however, that the board felt a key element of the program was that it required four consecutive quarters of profits to get the full amount of the payout.

“For the senior executives, it was to be four quarters to ensure the profitability that had been achieved was sustained,” he explained.

Mr. Wilson testified he did not have concerns at the time about the quality of Nortel’s earnings in the first quarter of 2003 – when the bonus was first triggered – despite the fact a large number of accounting reserves had been released in the quarter to achieve profitability.

He said the profits reported to the board in the first quarter were “a pleasant surprise” and had not been anticipated. But he said the fact the company was profitable after releasing reserves “was not a big item” for the board at the time.

He said directors believed the accounting treatment was appropriate and involved reserves that had to be released at the time.

“The main concern of the board was the survival of the company,” he said.

“We were relying on management and the auditors to ensure the numbers were in conformity with Canadian and U.S. GAAP [generally accepted accounting principles]. These numbers in terms of the size of the company weren’t overwhelming. These were quite small.”

Earlier in his testimony, Mr. Wilson said he was not aware Nortel staff had done a review of balance sheet reserves in September, 2002, and had identified $303-million of reserves at that time that were no longer needed and were identified as “releasable.”

Asked by Crown attorney David Friesen if he would have wanted to know that information at the time, Mr. Wilson said it might have been important.

“It would have shown there were provisions on the balance sheet ready for release or should perhaps have been released,” Mr. Wilson replied. “That would have been of interest.”

Mr. Wilson is the first member of Nortel’s board of directors to testify at the long-running fraud trial of Mr. Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly. Former director and audit committee chairman John Cleghorn is also scheduled to testify later this month.

____________________________________________________________

Auditors argued in heated debate, scathing acusations by Wilmer that Dunn's lawyers wouldn't collaborate Dunn's statements in response, now the old board has a well rehersed maybes and humms on the stand to deflect and advocate no flies on them.

The board approved and received immediate cash bonuses than traditional options. They agreed with Dunn and with who they held close relationships before rolling over on him. They timely resigning than abruptly departing for cause and were given 2 years to repay their ill gotten bonuses. With so many no flies on us bored meetings, that no one could have forseen these obvious red flags. They were a dream team of high profile people. Even John Manley sat on the board later, and his firm defends Dunn, which adds credence to matters behind the scenes we may be unaware of... Even this testimony shows the board still running for cover like they didn't know, when they were just as complicit as the auditors held hostage, for these fake profits and bonuses... only the master mind and so few of his henchment are accoutnable for this level of mass orchestration... Red sang... lets hear Vleghorn's reiterations later this month for all it matters. They have legal counsel and they will say the same thing.

Re: And So the Case Begins…

bankrupt_bob — Wed, 30 May 2012 14:53:07 -0000

Changed Ticker SymbolNRTLQ.PK is no longer valid.
It has changed to NRTLQ. ...anybody?

Re: And So the Case Begins…

protosphere — Fri, 25 May 2012 00:27:26 -0000

So much for, if the auditors approved, they must be OK...

http://www.theglobeandmail....

Nortel executives clashed with auditors, trial told

May. 23, 2012

Mr. Richmond said former Nortel CEO Frank Dunn and former chief financial officer Douglas Beatty both felt the new Deloitte partners – John Cawthorne and Don Hathway – were far more rigid than their predecessors

an increasingly confrontational relationship

refused to allow Nortel to use $142-million of accounting reserves in the second quarter of 2003. The move would have boosted the company’s profit by the same amount at a time when the telecom giant was hovering near the break-even mark and even small amounts of income were deemed to be material.

Mr. Richmond said he attended a meeting with Mr. Dunn in July, 2003, where he insisted the $142-million could not be used in the quarter because there were no “triggers” to justify the release of the reserves in that period. He also pushed Nortel to launch a comprehensive review of all its reserves to determine if more were out of date and needed to be removed from the books, he said.

“Mr. Dunn was not inclined to go down that path,” Mr. Richmond said.

He said the Nortel CEO argued that the review would find no further reserve problems and the $142-million was all there was. But he was persuaded to launch the review, which ultimately led to a restatement of almost $1-billion in liabilities, including $733-million of reserves that had been misstated in the first and second quarters of 2003.

In a Deloitte client survey in July that year, Mr. Gollogly expressed his frustrations with the Deloitte auditors working on the Nortel account, the trial heard.the controller allegedly described the two lead audit partners as “inflexible” and “night and day” from the staff who preceded them.

Mr. Dunn argued against the disclosure because the number was not large, but Mr. Richmond argued it was material in terms of pushing the company into profitability for the period.

Mr. Richmond also testified he warned company officials in April, 2003, that the practice of using accounting reserves with no valid triggers had to come to an end.

“They needed to clearly understand that processing unnecessary provisions on the [income statement] in the second, third and fourth quarters was simply not acceptable,” he said.

Mr. Richmond also testified about a “seminal” change in the accounting climate that occurred in 1998 and 1998 after the U.S. Securities and Exchange Commission told companies it would not longer tolerate the use of small amounts of accounting reserves to massage profits to meet earnings targets.

“Within our profession this was a huge deal,” Mr. Richmond said.