Impossible for Nortel CEO to know if balance sheets accurate, fraud trial hears
TORONTO - During his time as CEO of Nortel Networks, Frank Dunn approved all the accounting at the beleaguered technology firm but it would have been "impossible" for him to know whether the balance sheets were accurate, a Toronto court heard Wednesday.
Dunn's defence lawyer, David Porter, told the high-profile fraud trial that his client trusted his company's accountants and auditors when they gave him financial statements to rubberstamp.
His approval was symbolic because no one in the company expected him to personally verify each line in the balance sheet and he shouldn't be held responsible if they were incorrect, said Porter.
Dunn, Nortel’s ex-CFO Douglas Beatty and ex-controller Michael Gollogly are each charged with two counts of fraud for allegedly falsifying the Ottawa-based company's financial statements in 2002 and 2003.
All three have pleaded not guilty.
The Crown alleges that accruals money was being moved around by the accused to show a return to profitability — when in fact the company was struggling financially — so they could be paid $12.8 million in cash and stock bonus payments. Those bonuses were triggered once internal financial targets were seemingly met.
In wrapping up his closing submissions, Porter told the court that the Crown has failed to show evidence that his client made "any attempt to re-jig the (financial) targets" or instructed any of his employees to do so.
"He had no reason to doubt Nortel's accounting," he said.
At the time of the alleged offences, Dunn was too busy travelling to meet with the company's clients to pay close attention to the company's books, according to the defence.
In 2001, Nortel, once an international giant in the telecom equipment industry, reported a loss of $27.4 billion.
"The company was struggling to stay alive," said Porter, who added that Dunn was preoccupied with "desperately working to save a company."
The long-running trial, which began in January, was expected to finish Wednesday with closing submissions from lawyers representing Beatty and Gollogly.
The accused were fired from Nortel in 2004.
If convicted, each could face up to 10 years imprisonment.
Nortel filed for bankruptcy in Canada and the U.S. in 2009 as the result of mounting losses, falling sales, big debts and a gamut of legal issues.