The SEC and Mr. Roth
Nortel Networks did a wonderful job last putting the heads of ex-CEO Frank Dunn and ex-CFO Doug Beatty on a platter for the Securities and Exchange Commission. With Dunn and Beatty accused of cooking the books, the spotlight is being turned on Dunn's predecessor, John Roth, and what role he played in Nortel's accounting “troubles”. If the company was fiddling with its revenue recognition practices at the height of the telecom book in 1999 and 2000, one has to ask if Roth was aware of what was going down. May he did, maybe he didn't but you can be sure the SEC is going to try to find out.
For a detailed look at what the SEC could/may do, read today's story in the National Post.
One of the reasons Roth is seen as a target is the $135-million of stock options he exercised in 2000. It needs to be stressed Roth did nothing wrong other than exhibit excellent timing. But while most Canadians saw the value of their retirement savings plans shrink as Nortel shares crumbled, Roth has retired to his estate in Caledon, Ont.
Speaking of estates, why is that Nortel CEOs feel the need to live in places the rest of us can only dream about? Frank Dunn - in probably one of the worse PR decisions in corporate history - is building a 15K square foot monster home in suburban Toronto.
