Nortel Networks Corp., the focus of criminal and regulatory accounting probes as it prepares to restate several years of financial results, issued a long statement Thursday in which it released results for the first half of the year; announced that it had cut 3,500 jobs, or 10 percent of its workforce; and reported new measures to enhance corporate governance and ethics.
The layoffs included the “termination for cause of seven finance executives.” according to the company announcement.
The executive terminations are in addition to the April sacking of the company’s former president and CEO, Frank Dunn; its CFO, Douglas Beatty; and its controller, Michael Gollogly.
The board of directors found that each of the 10 executives “had primary, or substantial, responsibility for the company’s financial reporting” and ought to have been aware of company violations of generally accepted accounting principles and that the “improper application” of GAAP resulted in a misstatement of Nortel’s financials, according to the company.
The company said it will “demand repayment by these individuals of payments made under company bonus plans in respect of 2003, and will take further additional action with respect to these individuals, if appropriate.”
The preliminary results announced by the company for the first half of 2004 included an estimate of first and second quarter earnings between zero and 1 cent per share. The company, North America’s largest telecom manufacturer, reported that first-quarter revenue was $2.5 billion and second-quarter sales were $2.6 billion.
Nortel also reported that it would tighten its corporate practices and conduct, setting up the post of a chief ethics and compliance officer. It will also appoint a chief strategy officer and chief marketing officer.
Further, the company said that an independent review by its audit committee is continuing and that the committee expects to be able to finalize and file the company’s audited financial statements for the year 2003 by the end of the third quarter of 2004.