The Royal Canadian Mounted Police have laid fraud charges against three executives formerly with Nortel Networks, five years after an accounting scandal battered the company once considered the country's most-prized technology giant.
Former chief executive officer Frank Dunn, 54, is charged with fraud affecting the public securities market; falsification of accounts and documents; and involvement in issuing a false prospectus.
Former chief financial officer Douglas Beatty, 53, and former corporate controller Michael Gollogly, 49, face the same charges under the Criminal Code.
Each of the accused, who were dismissed from Nortel in 2004, faces seven counts. If convicted they could face sentences from five to 14 years.
The RCMP say the charges are linked to allegations of criminal activity between January 1, 2002 and June 30, 2003, which represents the fiscal year of 2002 and the first two quarters of 2003.
The charges allege that the financial statements of Nortel during this timeframe were misstated.
The charges also accuse the suspects of making false entries and omitting materials in Nortel's books.
The RCMP allege the suspects circulated or published a statement or an account "with the intent to deceive and defraud the members, shareholders or creditors of Nortel Networks Corporation."
"I think the message it sends is no one is immune . . . regardless of your stature, or how much money you make in a year or whether you are CEO of a company or just an employee," RCMP Supt. Kevin Harrison said.
None of the allegations have been proven in court.
A lawyer for Dunn issued a brief statement expressing confidence that "the evidence will demonstrate that Mr. Dunn acted honestly and diligently in the interests of Nortel's shareholders and employees at all times, and that he will be acquitted of these charges.''
The RCMP said the men turned themselves in to police on Thursday morning, appeared briefly in a Newmarket, Ont., courtroom and were released on bail.
All three refused to answer questions from reporters outside of the courtroom.
RCMP said they received co-operation from the Ontario Securities Commission, the Dallas Field Office of the Federal Bureau of Investigation, the SEC and Nortel Networks itself.
Nortel responds
Nortel officials released a statement in response to the charges, saying the allegations do not distract the company from the work ahead.
"Nortel has not been charged and was not the target of this investigation," the release said.
"The company has fully co-operated with the RCMP and will continue to do so."
The statement went on to say that Nortel is rebuilding a "great Canadian company" while upholding the highest standards of integrity and ethics.
"Incredible progress has been made in the last few years, and today a new Nortel is emerging under the leadership of a new management team with a proven track record," the statement said.
Nortel's accounting scandal wiped out tens of billions of dollars of stock market value, pushing down the stock prices from hundreds of dollars a share to penny status.
Eventually, the Toronto-based telecom equipment giant was forced to sell off its assets, change its executive leadership and cut more than 60,000 jobs.
In April, three former executives with Nortel settled with the U.S. Securities Exchange Commission for their involvement in the financial fraud allegations.
Craig Johnson, James Kinney and Kenneth Taylor agreed to pay $75,000 each, plus related interest, without admitting or denying the allegations.
The SEC accused the three men of manipulating Nortel's earnings by setting up about $37 million in unnecessary reserves during 2002's fourth quarter that "they knew, or were reckless in not knowing, were no longer needed.''
Litigation against five other former Nortel executives involved in Nortel's alleged accounting fraud is ongoing, SEC said.
On Thursday, the RCMP also charged the founder of plastic building products manufacturer Royal Group Technologies Ltd. with fraud, accusing him of working with fellow executives to defraud the company of $27.4 million in a deal involving property north of Toronto.
With files from The Canadian Press
