(Adds Canadian regulator, Dunn statement, byline)
By Karey Wutkowski
WASHINGTON, March 12 (Reuters) - U.S. securities regulators filed civil charges against four former executives of Nortel Networks Corp. NT.TONT.N on Monday, accusing them of an accounting fraud that helped the company meet Wall Street expectations.
The four are former Chief Executive Frank Dunn, former Chief Financial Officer Douglas Beatty, former Controller Michael Gollogly and former Assistant Controller MaryAnne Pahapill.
The Securities and Exchange Commission is seeking a permanent injunction, civil monetary penalties, barrings as officers or directors of a public company, and disgorgement of ill-gotten profits against all four.
The Ontario Securities Commission has conducted its own separate and parallel investigation into the matter. The OSC said on Monday that it has scheduled a hearing on May 1 regarding its investigation into Dunn, Beatty and Gollogly.
“I think it would have been appropriate under the circumstances if the authorities in the United States had deferred to the Ontario Securities Commission in what is really a Canadian matter and had acknowledged the Canadian authorities are fully capable of addressing these important issues,” Dunn said in a statement.
He said he hopes to have the charges explored in a hearing in Canada.
Representatives for Beatty, Gollogly and Pahapill could not immediately be reached.
The SEC charged the misconduct occurred at Nortel, a Canadian manufacturer of telecommunications equipment, between September 2000 and January 2004.
“The fraudulent conduct at issue here was egregious and long-running. Each of the defendants betrayed Nortel’s investors and their misconduct gave rise to billions of dollars in shareholder losses,” SEC enforcement director Linda Thomsen said in a statement.
The SEC said the accounting fraud included altering Nortel’s revenue-recognition policies to accelerate revenue to meet forecasts, and improperly using reserves to meet earnings targets, create profits and pay performance-related bonuses.
Nortel announced earlier this month that it would be restating its results for the fourth time in four years, corrections that first began in November 2003.
Earlier restatements came as a result of accounting scandals. Later errors surfaced as management tried to tighten internal controls over financial reporting.