A former Nortel Networks chief executive and two of his lieutenants were charged on Thursday with fraudulently misstating financial results as the telephone equipment maker struggled to right itself after the tech bubble burst in 2001.
Aside from ex-CEO Frank Dunn, who faces seven counts, former Chief Financial Officer Douglas Beatty, and Michael Gollogly, Nortel's former corporate controller, also face charges, the Royal Canadian Mounted Police said.
The market enforcement team of the RCMP said the three were also accused of making false entries and omitting materials in Nortel's books. The charges date to between the start of 2002 and June 30, 2003 and mark a milestone in the years-long probe, which has been a high profile case in Canada.
The alleged fraud occurred after a meltdown in technology stocks that saw Nortel fall from its perch as an investor darling amid billions in losses and thousands of layoffs.
Canada has long battled a perception that it has a soft stance on corporate crime and rarely lays criminal charges against white-collar offenders.
Meanwhile, U.S. prosecutors and regulators have aggressively targeted large-scale fraud cases like those of Enron, Adelphia Communications and Worldcom.
"Given the historical reticence of Canadian authorities to bring criminal securities fraud charges, and recognizing the high-profile nature of this case, undoubtedly the Crown has considerable confidence in the quality of its evidence and ability to prove all the charges," said Jacob Frenkel, a former U.S. federal prosecutor and a partner at the Maryland law firm of Shulman Rogers.
"This is an opportunity for the Crown to demonstrate its ability to be as effective as American regulators pursuing allegations of public company fraud in the criminal courts," Frenkel said.
In a statement issued shortly after the charges were announced, Nortel, North America's biggest maker of telephone equipment, said it was not the target and that the charged executives were dismissed for cause in 2004.