Embroiled in an accounting scandal, Nortel Networks Corp. has fired its chief executive officer and two top finance executives and plans to restate 2003 earnings downward by 50 percent.
The company replaced president and CEO Frank Dunn with William Owens, who has been a director of Nortel and NNL, a subsidiary, since February 2002.
Owens was vice chairman of the U.S. Joint Chiefs of Staff from 1994 to 1996, and commander of the U.S. Sixth Fleet during Operation Desert Storm in 1990 and 1991. He served as vice chairman and co-CEO of Teledesic LLC, a satellite communications company, from August 1999 to June 2003, when he was named chairman and CEO.
Nortel also fired chief financial officer Douglas Beatty and controller Michael Gollogly, who had been placed on paid leaves of absence on March 15. The company said that William Kerr and MaryAnne Pahapill, would assume the positions of CFO and controller, respectively, that they had held on an interim basis.
Kerr first joined Nortel in 1994 as controller. Before leaving the company in 2001, he held a number of senior finance posts, including treasurer and senior vice president slots in finance and business development. Pahapill, who joined Nortel in 1999 has held a number of finance posts, including assistant controller and assistant treasurer.
The Nortel and NNL boards also put four senior business-line finance executives on paid leaves of absence, pending the company’s review of its restatements for 2000, 2001, and 2002, and the first and second quarters of 2003.
The Nortel board’s actions “are about accountability for our financial reporting,” said Lynton Wilson, chairman of the board. “These actions are an important step in the process of restoring confidence in the company’s leadership and financial reporting.”
Nortel also will cut 2003 net earnings by about 50 percent. Those earnings will mostly be reported in previous periods, resulting in cuts in previously reported net losses in those periods, which include 2002 and 2001, according to the company. Nortel will also report a net loss for the first half of 2003 compared with the previously announced net earnings for that period.
Nortel’s revenues and the company’s cash balance will not be affected by the restatement, according to the company. Nortel added that its audit committee will continue to review the second half of 2003, leaving open the possibility of yet another restatement.
Nortel added that it isn’t in a position to report preliminary financial results for the first quarter of 2004, which were due today. The company’s stock plunged by more than 25 percent on Wednesday.