North America’s largest telephone equipment maker, Nortel Networks, is to be
fined by the US Securities and Exchange Commission for accounting fraud.
The regulator launched an investigation into Nortel’s accounting in 2004.
The company restated it’s results in
the following year, admitting revenue had been inflated by $3.4bn.
In March the SEC pursued legal action,
suing CEO Frank Dunn and three former officials who were accused of manipulating
earnings from 2000 to 2004 so as to meet analyst’s projections.
This would be the first test case of an SEC policy that empowers agency
commissioners to have a greater say in penalties for corporations,
Staff lawyers previously negotiated settlements with companies without
consulting SEC commissioners.
Last month, SEC attorneys obtained approval from commissioners to seek a fine
of less than $100m.
The fine amount could be an indication of future corporate penalties, at a
time when SEC chairman Christopher Cox has been accused of favouring companies
at the expense of investors.
An example of a lenient corporate fine includes that of Xerox Corp, which
paid a $10m fine in 2002, under old SEC policy, to settle allegations that the
company overstated revenue by $3bn.
Nortel shares rose 16 cents to C$27.54 in trading on the Toronto Stock
Exchange. They’re down 12 percent this year.
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