Risk & Compliance

Canada Opens Probe of Nortel Accounting

The networking giant faces a criminal investigation by Canadian authorities after an informal review of its accounting practices.
Ed ZwirnAugust 18, 2004

Telecom-equipment maker Nortel Networks Corp. is facing legal scrutiny on its home turf as well as in the United States.

Nortel, said to be Canada’s largest high-tech company, announced Monday that it had received a letter from the Royal Canadian Mounted Police’s Integrated Market Enforcement Team advising that the RCMP will begin a criminal investigation.

”The RCMP are beginning a criminal investigation, but they did not provide additional detail,” Nortel representative Tina Warren told The Associated Press on Tuesday. Nortel management said the company “will continue to cooperate fully with the RCMP in connection with the investigation.”

The criminal probe follows months of informal review of the company by the RCMP.

In this country, the U.S. Attorney’s office in Dallas has subpoenaed financial documents from the Brampton, Ontario-based company as part of a criminal investigation in the United States., according to the AP. Further, securities regulators in both here and in Canada are investigating the company.

In late April, Nortel fired three high-level executives and put several others on paid leave after the company’s internal investigations found irregularities with its accounting practices. The company has also been hit with numerous class-action lawsuits related to the accounting scandal.

Nortel, which is one of the world’s leading suppliers of telecommunications equipment, is preparing to release delayed financial reports for the first and second quarters of 2004 on Thursday. It is also working on a restatement of financial results for each quarter in 2003 and for earlier periods, including 2002 and 2001, and the preparation of financial statements for the full-year 2003.