January 14, 2005
Nortel Makes News Again
Just when you think Nortel has reported all its bad news, there seems to be more. It is clear that this situation is so complex that even those with the best intentions have been embarrassed. But come on, when compensation plans encourage certain numbers, we all know what human nature does. Is this company going to make it or not?
When management becomes so consumed in trying to root out problems in accounting and reporting, one wonders if there is bandwidth to grow the company and stay in business.
An excerpt on the latest woes is here:
"By October 2003 enough information was in to indicate that Nortel's balance sheet indeed required repair. Dunn revealed that the company's liabilities had been over-stated by nearly $1 billion and blamed the "volatile environment" for the errors. He assured investors that he would provide re-statements for the 42-month period ended June 30, 2003, as soon as possible...
According to the SEC filing, D&T did not report material deficiencies in Nortel's accounting until Nov. 18, 2003, as part of its interim audit for calendar year 2003. A material weakness, in accounting terms, involves internal controls that allow significant errors that are difficult to detect.
At this point, the red flags should have been flying high. Yet, late in January 2004, Dunn triumphantly told investors that Nortel had scored big profits for the quarter just ended. A few days later, Nortel's top executives received $27.3 million U.S. worth of restricted stock units, part of a bonus program tied to company earnings. (The cash portion, about $8.5 million U.S., is now being returned.) It would take a few more weeks before the board received evidence that led it to fire Dunn and his finance executives." For the entire article, click here.
To lead an effective and transparent compliance effort in your company, visit our website at www.issuescentral.com and learn more about Sarbanes-Oxley Compliance Playbook(tm).
When management becomes so consumed in trying to root out problems in accounting and reporting, one wonders if there is bandwidth to grow the company and stay in business.
An excerpt on the latest woes is here:
"By October 2003 enough information was in to indicate that Nortel's balance sheet indeed required repair. Dunn revealed that the company's liabilities had been over-stated by nearly $1 billion and blamed the "volatile environment" for the errors. He assured investors that he would provide re-statements for the 42-month period ended June 30, 2003, as soon as possible...
According to the SEC filing, D&T did not report material deficiencies in Nortel's accounting until Nov. 18, 2003, as part of its interim audit for calendar year 2003. A material weakness, in accounting terms, involves internal controls that allow significant errors that are difficult to detect.
At this point, the red flags should have been flying high. Yet, late in January 2004, Dunn triumphantly told investors that Nortel had scored big profits for the quarter just ended. A few days later, Nortel's top executives received $27.3 million U.S. worth of restricted stock units, part of a bonus program tied to company earnings. (The cash portion, about $8.5 million U.S., is now being returned.) It would take a few more weeks before the board received evidence that led it to fire Dunn and his finance executives." For the entire article, click here.
To lead an effective and transparent compliance effort in your company, visit our website at www.issuescentral.com and learn more about Sarbanes-Oxley Compliance Playbook(tm).
