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Nortel Disconnect

Frank Dunn under the gun; Former Dell CFO doing good deeds in Austin; CFOs on the move.
CFO Staff, CFO Magazine
May 1, 2004

It's been a wild few years for Nortel Networks Corp. The Brampton, Ontario-based telecom company slashed its workforce by almost two-thirds, divested assets, and consolidated real estate. In July 2003, it reported that it was settling into "relative stability," but CEO Frank Dunn and CFO Douglas Beatty announced that the company's audit committee wanted to review the tumult of the previous 18 months.

The review eventually lead to a December 2003 restatement of financial results. Nortel has also delayed its 2003 10-K filing, placed Beatty and controller Michael Gollogly on indefinite leave, and revealed that the Ontario Securities Commission and the SEC are investigating the restatement. The regulators will probe Nortel's accounting for the restated fiscal years, which date back to 2000, when Dunn, a 28-year Nortel vet, was the top finance executive. Will Dunn, who won praise for keeping the company out of bankruptcy, be the next executive to take an unplanned vacation?

"No Wall Street analyst knows why the SEC is looking at Nortel," says Robert Tango, an analyst with William Blair & Co. in Chicago. Tango has maintained a "market perform" rating on the stock. "I would doubt very much that there was intentional deceit," he says, noting that the company's business prospects are improving, with "legitimate" demand for wireless systems and the company's core networking products.

Nortel has said simply that the ongoing review by its audit committee "is reexamining the establishment, timing of, support for, and release to income of certain accruals and provisions in prior periods."

But with little information about what investigators are finding — and no explanation for the executives' suspensions — some analysts speculate that bad news is on the way. Wachovia Securities and JPMorgan both downgraded Nortel to neutral ratings after it benched the CFO and controller. "We feel that Beatty's departure indicates the audit of Nortel's past results could be substantially widened," wrote Wachovia analyst Stephen Koffler in a recent report. Whether the audit will widen to the door of Dunn's office remains to be seen. —Kate O'Sullivan

The Good Life

When the late-1990s bubble burst, most CFOs of dot-coms and tech companies either headed back to "brick and mortar" or faced investigation by the SEC. So it's refreshing to learn of former CFO stars from that era who walked away clean, rich, and eager to help others.

That's what Joy Covey did. As CFO of Amazon.com, she helped build one of the great dot-com success stories. She landed on the cover of CFO magazine in June 1999, and shortly thereafter was promoted to chief strategy officer. At the end of 1999, though, Covey quit, taking an estimated $125 million in Amazon stock with her. Rather than kick back in Park City, Utah, with her family, she focused her energy (and wealth) on giving back: she founded the Beagle Foundation, which deals with environmental issues.

Last year, California State University, Fresno, gave her its Distinguished Alumna Award.

Another CFO-turned-philanthropist is Thomas Meredith, former CFO of Dell Computer Corp., who helped design one of the most copied business models in the world. He left the PC giant in 2000, with stock and options worth an estimated $150 million.

Meredith then co-founded the Austin Idea Network, a not-for-profit organization that addresses quality-of-life issues in central Texas. His Meredith Private Foundation works to enhance the lives of children. In January, he and his wife, Lynn, won the Association of Fundraising Professional's Outstanding Philanthropists of the Year Award.

John C. Wilson, president and CEO of J.C. Wilson Associates, an executive-recruiting firm, says there are plenty of executives making the move to philanthropy. "A lot of people made a lot of money for themselves a few years ago," he says.

"Now they want to do something that benefits others." —Joseph McCafferty

CFOs on the Move

Grocery company Safeway Inc. has named Robert Edwards as CFO, replacing Vasant Prabhu, who has joined Starwood Hotels " Resorts Worldwide Inc.... George Harrington was named SVP and CFO of BMC Software Inc., succeeding former CFO John Cox, who will now report to Harrington as chief accounting officer.... Eric Olsen will be the new CFO of construction-materials supplier Lafarge North America Inc. effective January 1, 2005, replacing retiring Larry Waisanen.... Winn-Dixie Stores Inc.'s new CFO is Bennett Nussbaum. He succeeds Richard McCook.




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