Mark Evans

Nortel's Accounting Saga

Let me start with clarification on a something I posted yesterday. The independent review done by Washington, D.C.-based law firm Wilmer Cutler Pickering into Nortel's accounting mess alleges the books were cooked by ex-CEO Frank Dunn,ex-CFO Doug Beatty and ex-controller Michael Gollogly.
That said, if the allegations are anywhere near the truth, it will be an amazing story of corporate avarice and stupidity. If the these executives did, in fact, manipulate the books to book a loss in Q4 of 2002 and profits in Q1 and Q2 of 2003, you have to wonder what they were thinking. Were they swayed by bonus-induced riches, or did they honestly believe that super-aggressive accounting practices was acceptable behavior. If no one caugh them in the act, would it still be wrong?
To be honest, I've had my reservations about Frank Dunn's motivations since it surfaced he was building a 15,000 square foot mansion on the shores of Lake Ontario in suburban Toronto. You would think someone in the spotlight would lay low. Instead of building a mega-house, why now renovate and give yourself the most amazing entertainment centre, kitchen and bathroom? Why be so obvious about your new-found riches?
In a posting several months ago, I made an assertion Dunn had a base case of John Roth envy - meaning he wanted to have the same kind of wealth that Roth attained when he walked away from Nortel in 2001. Now, I believe this thesis more than ever.
Speaking of Roth, one of my colleagues at the National Post - Robert Thompson - actually talked to the man today. To paraphrase, Roth said he didn't know much about what was going on at Nortel because he hadn't work there for awhile. That's a reasonable stance if you walked away with $135-million. With that kind of cash, how many things do you really have to worry about?