Nortel Networks Corp. is suing three former top executives, seeking repayment of more than $10 million in bonuses stemming from results that were subsequently deemed incorrect, according to the Toronto Star.
The embattled telecom-equipment giant accused former chief executive officer Frank Dunn, former chief financial officer Douglas Beatty, and former controller Michael Gollogly of breaching their fiduciary duty to the company by signing off on financial statements that inflated Nortel’s profits, according to the paper, citing a statement of claim filed in a Toronto court. The court papers reportedly add that because of those actions, Nortel “misstated its financial condition and results of operations in public filings,” leading to repeated restatements and delayed filings.
Dunn, Beatty, and Gollogly
were fired in April 2004.
Those misstated company profits also resulted in millions of dollars in bonus payouts to the three former executives. According to the Star, Nortel wants Dunn to repay about $6.25 million (in U.S. dollars); Beatty, about $2.4 million; and Gollogly, about $1.6 million. The company also wants the three former executives to pay interest and legal costs.
Last month, when Nortel restated its results and singled out improper actions by its finance department, 12 senior executives agreed to return about $8.6 million in bonuses, though none was found to have been directly involved in the inappropriate conduct.
Meanwhile, Nortel announced in a regulatory filing it will pay new finance chief Peter Currie about $1.5 million in salary and bonuses in 2005. Currie, who replaced William R. Kerr, will receive a base salary of $600,000 per year (in U.S. dollars) and a bonus of $300,000, to be paid within 60 days of joining the company. Nortel added that he will be eligible for an annual performance-based bonus equal to 100 percent of salary. This year, however, that bonus is guaranteed, although it is pro-rated for the number of months of his active employment.