Beatty, Gollogly Suing NT

It took awhile but ex-Nortel CFO Doug Beatty and ex-controller Michael Gollogly are suing the company for wrongful dismissal. Beatty and Gollogly were terminated with cause along with ex-CEO Frank Dunn in March 2004 amid allegations they were part of a group that cooked the booked to trigger a lucrative bonus structure. Gollogly is seeking $4-million in compensatory, mental distress, punitive and aggravated damages, plus other costs. In the lawsuit, Gollogly alleges he was fired in mid-March, 2004 – soon after Nortel said it needed to restate its financial results again.

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13 Responses to “Beatty, Gollogly Suing NT”

  1. Dunn's A Crook Says:

    They overstated 2003 net income by 60%..it’s been “restated” down from 732M to 293M as of the last 10KA…buried at page 47…this ran the stock up to over $8 and then it cratered and has caused a loss of over 20B in market cap…they have cost Nortel billions in legal fees, settlement costs, accounting charges, lost good will, etc.,

    These two criminals were part of the cabal that overstated 2003 net income by 60%..since then, it’s been “restated” down from 732M to 293M as of the last 10KA…..this ran the stock up to over $8 and then it cratered and has caused a loss of over 20B in market cap…they have cost Nortel billions in legal fees, settlements, accounting charges, lost good will, etc.

    U.S. GAAP accounting rules and the Sarbanes-Oxley Act of 2002 are in place just for guys like them…crooks…I see jail cells in their future…they may not like to prosecute white collar fraud in Canada, but in the U.S. it’s a different story…expect criminal indictments of Dunn, Beatty and Gollogly soon…the U.S. attorney’s office is on a roll after the Enron, Worldcom, Adelphia and Tyco convictions…do you really think they are going to back off now? Bushs’ approval ratings are in the tank…prosecuting corporate criminals makes him look good, and face it, he needs all the help he can get…these frivilous lawsuits are are ridiculous waste of judicial resources…These three will be broke and in jail soon, where they belong.

  2. Open Eyes Says:

    Where do I start?…with so much ignorance compact into one website, I’ll have to pick and choose the comments I address. I figure starting with the lowest IQ and moving up will be the most fair to all of you. That puts, “Dunn’s A Crook” first in line. Did it ever occur to you to think over the facts? It might be hard to move all that wool from your eyes, but don’t worry, I will go over the important facts with you.

    We’ll begin from the time Dunn took the helm in 2002. First order was to restate earnings according to an internal review, however, this was followed shortly after by an external (i.e. independant) review which led to numbers that not only the entire board signed off on, but the outside auditors signed off on…and why wouldn’t they, they were the ones that came up with them. These numbers included provisions (ie estimates) for future expenses, such as court cases they believed they would lose, and estimates of restructuring charges which would look years ahead. You see, this is how accounting works…if you feel you might lose a court case, you estimate the cost and write it off immediately, restructuring is the same, you write down expected losses immediately. Since these estimates look ahead for several years, it is very tough to get an exact figure. Thus, when you realize the exact number down the road, assuming it is different from the original estimate, that difference flows through income adjusting it either up or down depending on circumstances. This is how accounting works. Frank Dunn did not come up with the GAAP (accounting standards), but I assure you, he did follow them. So as things began to turn around and it became clear as to the actual cost of things, the difference flowed back through income as it is supposed to. This difference was only about 5% of sales as I recall. I challenge any of you to budget your life even within 10% of your actual spending two years ahead. And I’m talking about your personal spending not the spending of a global corporation experiencing something totally foreign to it in the bursting of the tech bubble. Anyway, this difference happened to increase income, which subsequently triggered a bonus to employees. However, the profitability continued well beyond that, so even if the profit was recognized too soon, which I strongly disagree with, the bonuses would have happened.

    Shall we move on. Following this return to profitability, with no warning whatsoever, Frank Dunn and several other employees were terminated with cause. The cause they say, was inaccurate financial statements. In came the new CEO Bill Owens, who’s military background ensured that he had never balanced a book in his life. Then, queue the accountants. From my understanding, out of the approximately 1100 employees in the Brampton HQ at the time, 400 were outside accountants trying to correct the financial statements. Over a year later and what I’m sure came to hundreds of millions of dollars later, the books were finally right. So Mr Integreity Bill Owens is told what a great job he did and sent on his way with the standard Nortel executive pension which I’m sure comes to almost 7 figures annually. This allows them to settle a class action in excess of 2 billion and pay the new CEO Mike Z over 10 million before he even shows up for work. What is the first thing he does?…You guessed it, re-states because he does not want to sign off of the work of 400 accountants and hundreds of thousands of man hours. These are people whose sole job is accounting, and they are good at it.

    So why wouldn’t those numbers be signed off on? Do you think this might be because the numbers weren’t right again?…if so, why is Bill Owens not the subject of investigation? Perhaps it is because with a company so complex, as Nortel is, things aren’t as cut and dry as you think. I bet you the next re-statement will bring us right back to the original numbers that Frank Dunn signed off on.

    My prediction is that the only case that is proven will be Frank Dunn’s wrongful dismissal case! In my opinion the men that should be on trial are John Cleghorn and Red Wilson. Why hasn’t the head of the audit committee been subject to investigation? And how about the only man that has been there the entire time Nortel has been Nortel, Mr Lynton Wilson?

    Any comments?

  3. nortel Says:

    can’t disagree with your focus on the audit committee – they were supposed to be overseeing the senior management team.

  4. Anonymous Says:

    I guess Open Eyes is either Frank Dunn or Sleepy (one of the 7 dwarfs). Even if its accounting and shifting cash from assets to liabilities and back, it is still fraudulent to show that the balnce sheet is profitable and allocate bonuses. This is the part that these guys are getting nailed on.

    I’d suggest you take an accounting course or at take a tutorial before you rant.

  5. Open Eyes Says:

    I guess Anonymous is either Red Wilson or just plain stupid. Do you think this accounting course you’ve suggested I take might include the difference between a balance sheet and income statement? You must have at least gone to the same school as Red Wilson and John Cleghorn. There was absolutely no shifting of assets and liabilites, that is what Enron did and yes, that is fraud.

    As I tried to explain above, what the facts show happened at Nortel is that write downs and loss provisions, which are estimates that go years into the future in a overwhelmingly uncertain time (ie 2000) ended up to be overestimated. The amount by which they where overestimated sounds big, but as a percentage of sales this is not the case. Again, I would challenge anyone to budget there lives that far in advance let alone a global company in the most uncertain market of their existence.

    I agree that the reason they are on the hook is because the bonuses where triggered when the unused provisions where released back into revenue. You make it sound as though this happened over a two week period to trigger the bonus. In reality it took years, until the time Nortel was more or less turning a corner and had more certainty in their numbers and confidence that certain provisions would not be needed. Perhaps these provisions where released too early, I don’t know, the courts will sort through that. The facts are in the numbers, and the numbers show that even if the provisions weren’t released back into income in that quarter, Nortel would have made a profit in the next quarter and the bonuses would have been paid. So at most, the bonuses were paid a quarter early.

    People like you, Anonymous and Dunn’s a Crook, represent what is wrong with in the industry…you brains are like play-do waiting to be shaped by the headlines in the paper. I can all but assure you that no charges will be proven, and most likely none will even be laid, because there was no crime commited by Dunn. The only crime commited was by Wilson and Cleghorn is the form of firing the only person you cared enough to turn the company back around from the brink of bankruptcy, as well as wasting hundreds and hundreds of millions of dollars on re-statements that didn’t need to happen as well as billions on settling class action suits related to this.

    By the way, I think it’s funny how anytime anybody goes against the ignorance the likes of you guys smear all over this website, they’re immediatley called Frank Dunn…did you ever think for a moment that you just might be wrong?

  6. Anonymous Says:

    Increduously no originality. So you must be one of thos baby boomers stuck in old times. Part of an accounting course are lessons on Ethics. In any case you agreed with your statement “I agree that the reason they are on the hook is because the bonuses where triggered when the unused provisions where released back into revenue” and this is the ethical part.

    There are many companies who have to allocate funds for potential lawsuits etc. RIM is one example. However, I have yet to see one that never made a dime in profit and gave huge bonuses because funds were re-allocated from escrow. Also the funds allocated did not come from revenue as a percentage.

    Furthermore, revenues were recorded early or pushed out which is also fraudulent. In any case, triggering a big bonus was unethical and yes charges will be laid along with a card GO DIRECTLY TO JAIL, DO NOT COLLECT and you know what, there is no Get out of jail card.

    The lawsuits filed are defensive against Nortel but the US Attorney Office really does give a damn – so look forward to the extraditions.

  7. Anonymous Says:

    Reading Open Eyes contributions, I get the feeling from the wording that this is a lawyer fishing for ideas to hash out a defense and then charge big bucks. If so, then suggest you drop it ‘cos it ain’t worth your reputation if you have one.

  8. Open Eyes Says:

    Every word you say makes me think more and more that you were the dummy that bought Nortel at it’s very peak. The contempt you show for someone that you perceive to have caused the problem reeks of the burn you would have got from the ride down to the current share price. If I had to guess I would say that you were really good at high school football and your career ended there. Inresponse to your comments your first one is just ridiculous, “Increduously no originality”…what is surpising about me not being original. If I was repetitive it’s because you don’t seem to understand facts. And I have facts on my side. I can also assure you that the lawyers working with the three execs firing back are both not me and certainly not “fishing for ideas to hash out a defense and then charge big bucks” When people like the three of the execs sue, it’s for damn good reason, and thouroughly researched and even better prepared.

    When I agreed about them being on the hook with regards to receiving the bonus, I didn’t agree that it was wrong to do it. The company was going to turn a profit and continue to at that point. This is not due to account trickery, it was due to old fashioned hard work. Keeping clients afraid of the near bankruptcy and signing new deals. The bonuses would have been paid in the next quarter and the provisions would have been released at some point. GAAP states that as soon as you know for sure that the provision will not be needed, funds go back into revenue. This wasn’t the first or only time this happened with Nortel, it just happened to be a big deal because this time instead of making the loss smaller or profit larger it actually crossed the line from loss to profit.

    I assure you Dunn has nothing to worry about except the ignorance of people like you who will never see him as innocent. Once again, wrongful dismissal will succeed, most likely through an out of court settlement, there will be no criminal trial and you will look dumber…

  9. Dunn's A Crook Says:

    These three overstated 2003 net income by 60%..since then, it’s been “restated” down from 732M to 293M as of the last 10KA…..this ran the stock up to over $8 and then it cratered and has caused a loss of over 20B in market cap…they have cost Nortel billions in legal fees, settlements, accounting charges, lost good will, etc….why do you keep ignoring this proven fact…when net income is 60% less than advertised due to greed fueled by a crooked bonus structure…this indeed is an ethical lapse that should not be tolerated…

    When Dumb, Booby, and Gangsta cook books to intentionally overstate NET INCOME (Not a “percentage of sales/revenues, as you disingenuously and continually assert) by 60% for FY 2003 and eps from .06 to .17, they can expect handcuffs…did they really think they could get away with it? At worst they will end up broke/bankrupt, since there are some 50 odd lawsuits against them…at best they do some time in the gray bar hotel…they will be pariahs for the rest of their lives…along with Lay and Skilling…

    Maybe this is business as usual in Canada…net income and earnings per share are the key metrics any investor most carefully looks at…if you want a shell game like what these shysters tried to pull off, go to the carnival…they are going to be charged and prosecuted in the U.S. As for Canada, you are right, fraud is often just business as usual. The Sarbanes Oxley Act was made for charlatans like these three. And they are gone. Their suits are worthless moves by mouthpieces posturing for better settlement deals on the criminal charges they will soon face…you think Bush is going to let up on their ilk? Think again.

  10. Open Eyes Says:

    Wow, look who finally decided to throw in his two cents. I don’t have time to keep trying to educate you guys. Do you ever wonder why after Bill Owen’s (Mr Integrity) entire time as CEO overseeing the restatement that they had to restate yet again? Perhaps because there is no one right answer to these issues, there are several, and I assure you nothing was done incorrectly during Dunn’s tenure.

    With regards to your comment:

    When Dumb, Booby, and Gangsta cook books to intentionally overstate NET INCOME (Not a “percentage of sales/revenues, as you disingenuously and continually assert)

    Perhaps you still don’t understand what I’m talking about. My comparison to sales was to help people relate the size of the provisons to the size of the company. Sure millions sounds like a lot to most people, but when you’re dealing with hundreds of billions, it becomes very small. Therefore when you’re ealing with creating a provision for write-downs and settlements years into the future, to be off by such a small percentage is not too bad.

    Facts are, Nortel was profitable and would have remained profitable had they continued on the course Dunn lead them on. Much of the money lost is due to uneeded legal, accounting and settlement fees as well as lost revenues that we will never know about because customers don’t want to be associated with a perceived scandal such as this.

    I apologize for any name calling in my past comments but I really don’t have any respect for ignorant propaganda machines like the two of you guys…

  11. Dunn's A Crook Says:

    These three overstated 2003 net income by 60%..since then, it’s been “restated” down from 732M to 293M as of the last 10KA….there have been very few if any cases where an overstatement of this magnitude did not result in prosecution. Check the securities clearinghouse database.

    Overstating net income by 439M, 60%, for ONE fiscal year, 2003, is something you simply can’t ignore…net income is number investors look at…and the one that runs stock prices up…do you think Nortel would settle unless it saw tremendous exposure? It’s attorneys did the smart thing, after firing these avaricious louts.

    These wrongful dismissal actions are good for comic relief. They won’t get a cent and will burn more attorneys fees when they need every last cent to pay defense lawyers $400/hr to fight the massive litigation already lodged against them. They probably have incurred millions in attorney’s fees already. That’s fine with me, too. There is nothing worse to a financial criminal than ending up peniless. Poetic justice.

    You are just plain wrong while ignoring the plain as day audited financials ….take an accounting class…read the 10KA…most of the U.S. Attorneys and SEC enforcement attorneys did…and they won’t be so charitable….

    This is my last comment on the matter…now get back to work defending these crooks..the other guy was probably right, you sound like one of their legal team..I sure hope so…because, as naive as you are, your clients are going to get the clocks cleaned while you help them go broke more quickly at $400/hr…cheers…

  12. Anonymous Says:

    Hey Open Eyes, you got too much time on your hands to write such long notes.

    Get a real job instead of pretending to have one by blogging.

  13. Anonymous Says:

    I could not resist this but Dunn is Done. Goodbye open eyes. Try and close ’em once in a while.

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