US SEC nails Nortel for $35 million

PHONE SWITCH firm Nortel got nailed by the SEC to the tune of $35 million for what used to be euphemistically called accounting "irregularities."

The firm apparently decided that if it couldn't make its earnings numbers in the years 2000, 2002 and 2003, it would just adjust its goalposts rather than admit that it had missed them.

That led it into dodgy practices such as claiming unsold inventory as revenue and tweaking it's financial reserve balances. The fact that it paid out hefty executive bonuses for hitting financial targets likely had something to do with incentivising certain accounting abuses.

An SEC spokesgnome told the Associated Press, "Nortel's culture had long been extremely target-driven. It was understood across the company that either missing or exceeding a financial target reflected a failure to manage the company's business properly."

An SEC official further said: "In that environment, accounting did not serve to measure Nortel's performance. Instead, Nortel's executives and finance managers treated their books as tools to meet the company's financial objectives."

Nortel announced it was conducting a review of its assets and liabilities in 2003 and produced a restatement of finances for 2000, 2001 and 2002.

But this restatement "was a cover-up," the SEC said, describing it as " superficial and sharply limited."

The SEC notes that Nortel has had completely new senior management since 2004.

Meanwhile, civil fraud charges are being pursued in the US courts against Nortel's former CEO Frank Dunn, former CFO Douglas Beatty, former Controller Michael Gollogly and former Assistant Controller MaryAnne Pahapill. µ