Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Sunday, January 08, 2012

Criminal fraud trial of three ex-Nortel executives begins

One of the most spectacular flameouts in corporate history will be on the docket this week when pre-trial motions begin into criminal charges against former executives at Nortel Networks Corp.

Justice Frank Marrocco is scheduled to preside Thursday over motions, including those by the defence, in an open-court hearing at the Superior Court of Justice of Ontario. A trial before the justice is to begin in Toronto on Jan.16.

The RCMP charges allege that the defendants, including ex-Nortel chief executive Frank Dunn, engineered an elaborate accounting fraud to mask falling Nortel sales after the technology stock bubble popped in the spring of 2000.

Prosecutors say the scheme cost the Toronto company’s shareholders billions and contributed to the demise of the once-high flying Bell Canada equipment arm, with Nortel now being wound up under creditor protection.

“It’s the biggest (financial scandal) in Canada, one of the biggest in the world,” Rotman School of Management financial analysis professor Ramy Elitzur told the Star in 2008.

The criminal matter is to commence nearly four years after the RCMP charged Dunn, former chief financial officer Douglas Beatty and former controller Michael Gollogly with seven counts each.

Charges include two counts of fraud affecting a public market, two counts of falsifying books and documents and three counts of issuing a materially wrong prospectus.

If convicted, the maximum sentences are 14 years for fraud affecting markets, five years for falsifying accounts and 10 years for filing a false prospectus. Nortel fired the three executives “for cause” in 2004.

“We are confident that the evidence will demonstrate that Mr. Dunn acted honestly and diligently in the interests of Nortel’s shareholders and employees at all times, and that he will be acquitted of these charges,” Dunn’s lawyer, David Porter, of Toronto law firm McCarthy Tétrault, said in a statement after the charges were announced. He declined comment Friday.

The long interval between the filing of charges and the trial reflects the volume of evidence assembled by Nortel, which says it was not targeted by investigators and is co-operating with authorities.

In 2009, the Crown said it had already delivered more than four million documents to the defendants, while the RCMP says it took more than 50 people sorting through electronic data to assemble the case.

The U.S. Securities and Exchange Commission in 2007 filed civil charges against former Nortel executives including Dunn, Beatty, Gollogly and a former vice-president of corporate reporting, MaryAnne Pahapill.

The SEC alleges the former Nortel executives concocted a scheme to improperly book sales and manipulate cash reserves in an effort to bump up Nortel financial results to meet Wall Street expectations and trigger bonus payouts.

“The fraudulent conduct at issue here was egregious and long-running,” said Linda Thomsen, director of the commission’s Division of Enforcement.

“The action sends a strong message that officers of U.S.-filing foreign corporations will be held to the same standards of accountability that are required of all participants in the U.S. financial markets.”

Nortel emerged in the late 1990s as a world leader in the optical networking technology used by countless telephony and dot-com ventures.

It went on an unprecedented buying spree, using its stock, which peaked at $124.50, to acquire a series of in-process research companies that culminated in record-breaking goodwill charges against Nortel.

When the dot-coms, fuelled by abundant venture capital, failed to deliver sales and profits, the speculative stock bubble burst, sending the tech-weighted Nasdaq index into a tailspin that wiped more than $300 billion from investors’ portfolios.

Nortel’s Internet and telephone networking companies slashed orders and Nortel’s share price and profits plunged.

The company responded with sweeping leadership changes, shed more than 60,000 employees and retreated to its core business.

Nortel appeared to return to profitability under Dunn until March 2004, when the company said it would delay filing audited financial statements for the preceding year.

That warning turned out to be a prelude to a series of financial restatements that led to an Ontario Securities Commission settlement with the company that saw Nortel pay $1 million and prompted a criminal investigation by the RCMP.

Original Article
Source: Star 

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