Reuters
Nortel: OSC Investigating Accounting Woes
Tuesday April 13, 7:12 pm ET
By Jeffrey Hodgson
TORONTO (Reuters) - Canada's top securities regulator has launched an investigation into accounting problems at Nortel Networks Corp. (Toronto:NT.TO - News), adding to the scrutiny of controversial results restatements at the leading telecom equipment maker.
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The Brampton, Ontario-based firm said on Tuesday it was informed in an April 12 letter that Ontario Securities Commission enforcement staff had launched an investigation.
The investigation relates to Nortel's restatement of results last year and a warning in March that a second restatement would likely be needed.
A top official with the regulator said its corporate finance staff got involved with Nortel last fall when it said it would need to restate results. But it decided to escalate the investigation last month.
"In our letter to Nortel we actually indicated to them we officially opened our file on March 15.... We felt the information that we had, without going into the detail, it met the criteria," said Mike Watson, director of enforcement with the Ontario Securities Commission.
News of the OSC investigation comes after Nortel informed investors on April 5 that the U.S. Securities and Exchange Commission (News - Websites) had launched a formal probe of the financial restatements, fueling concern about how deep its accounting problems run.
Nortel's accounting troubles started in October when it warned it would restate financial data going back to 2000. The restatement was initially viewed by many as a housekeeping exercise.
That restatement, which ran from 2000 to the first half of 2003, was done because the company took larger than needed accruals and provisions as it cut about two-thirds of its staff and operations when the tech bubble burst.
But Nortel shook investor confidence when it warned on March 10 it would likely restate results for the second time and delay filing key documents with U.S. regulators.
Its stock was pounded further on March 15 after it suspended its chief financial officer and controller, placing them on paid leave of absence as part of its independent accounting review, launched last year by its audit committee.
Spokeswoman Tina Warren said Nortel has been co-operating fully with the Canadian regulator and hopes to bring the investigation to a conclusion as soon as possible.
"We have been in communications with the OSC since October 2003. We wanted to share our release as soon as we could ... the work of our independent review is ongoing and we want to complete that work as soon as possible," she said.
Warren said Nortel still plans to report earnings on April 29 and chief executive Frank Dunn would be available for questions.
Analysts have said that with U.S. accounting scandals like Enron and WorldCom still fresh in their minds, the slow pace of Nortel's accounting review has caused some investors to imagine worst-case scenarios.
Nortel: OSC Investigating Accounting Woes
Tuesday April 13, 7:12 pm ET
By Jeffrey Hodgson
TORONTO (Reuters) - Canada's top securities regulator has launched an investigation into accounting problems at Nortel Networks Corp. (Toronto:NT.TO - News), adding to the scrutiny of controversial results restatements at the leading telecom equipment maker.
ADVERTISEMENT
The Brampton, Ontario-based firm said on Tuesday it was informed in an April 12 letter that Ontario Securities Commission enforcement staff had launched an investigation.
The investigation relates to Nortel's restatement of results last year and a warning in March that a second restatement would likely be needed.
A top official with the regulator said its corporate finance staff got involved with Nortel last fall when it said it would need to restate results. But it decided to escalate the investigation last month.
"In our letter to Nortel we actually indicated to them we officially opened our file on March 15.... We felt the information that we had, without going into the detail, it met the criteria," said Mike Watson, director of enforcement with the Ontario Securities Commission.
News of the OSC investigation comes after Nortel informed investors on April 5 that the U.S. Securities and Exchange Commission (News - Websites) had launched a formal probe of the financial restatements, fueling concern about how deep its accounting problems run.
Nortel's accounting troubles started in October when it warned it would restate financial data going back to 2000. The restatement was initially viewed by many as a housekeeping exercise.
That restatement, which ran from 2000 to the first half of 2003, was done because the company took larger than needed accruals and provisions as it cut about two-thirds of its staff and operations when the tech bubble burst.
But Nortel shook investor confidence when it warned on March 10 it would likely restate results for the second time and delay filing key documents with U.S. regulators.
Its stock was pounded further on March 15 after it suspended its chief financial officer and controller, placing them on paid leave of absence as part of its independent accounting review, launched last year by its audit committee.
Spokeswoman Tina Warren said Nortel has been co-operating fully with the Canadian regulator and hopes to bring the investigation to a conclusion as soon as possible.
"We have been in communications with the OSC since October 2003. We wanted to share our release as soon as we could ... the work of our independent review is ongoing and we want to complete that work as soon as possible," she said.
Warren said Nortel still plans to report earnings on April 29 and chief executive Frank Dunn would be available for questions.
Analysts have said that with U.S. accounting scandals like Enron and WorldCom still fresh in their minds, the slow pace of Nortel's accounting review has caused some investors to imagine worst-case scenarios.
