One of the biggest trials in Canadian corporate history got under way Monday, with the Crown prosecutor beginning to lay out his case against three former Nortel Networks executives who are accused of falsifying financial reports.
Each of three accused men sat in separate rows of the court room with his lawyer, with former chief executive Frank Dunn at the front.
They stood separately to enter not guilty pleas to two charges before Crown attorney Robert Hubbard began his opening statements, alleging the three men worked together to falsify Nortel’s records and statements.
Hubbard said Nortel’s financial statements were incorrect by “over half a billion Canadian dollars” in the first and second quarters of 2003 due to the alleged fraud.
At the time, Nortel was still Canada’s largest technology company — although it was no longer the stock-market star it had been a few years earlier.
It has since gone out of business and sold off in pieces to various buyers — even though it was at one time Canada’s most valuable company, with more than 90,000 employees worldwide.
Dunn, chief financial officer Douglas Beatty and corporate controller Michael Gollogly were dismissed from the company in 2004 — several years before Nortel was forced to seek court protection from its creditors.
The trial got under way in Toronto on Monday after Justice Frank Marrocco ruled not to delay over a pre-trial defence motion requesting more details about the accusations.
The Ontario Superior Court trial is expected to last more than six months.
It is being presided over by Marrocco, who was the lead prosecutor in the case of Bre-X Securities, the biggest corporate fraud in Canadian history.
He said the Crown will bring 27 witness, including key former executives who may have been accomplices.
The Nortel accounting scandal of 2002-2003 produced one of the most spectacular stock market flameouts of a Canadian company, dragging down the share price of what had been Canada’s premier technology firm from a peak of $124.50 in 2000 to penny-stock status.
Nortel’s stock has since been delisted and is worthless.
The company filed for bankruptcy protection in 2009 in the United States, Canada and Europe amid mounting losses, falling sales, big debts and a legacy of legal issues.
Thousands of Canadians lost their jobs when Nortel folded, though thousands of positions were also rescued when other tech giants bought up Nortel’s assets.
The company has sold almost all its operating businesses to various buyers for more than $3 billion.
At its peak during the 1999-2000 technology boom, Nortel went through several years of rapid expansion and diversification funded by debt and stock sales. It briefly became the world’s largest supplier of telecom equipment.
The Nortel case was one of a wave of accounting scandals that led to the collapse of high-profile companies such as energy trader Enron Corp., the WorldCom phone giant, cable operator Adelphia Communications and the Hollinger newspaper group.
Various executives, notably Canadian-born Bernie Ebbers of WorldCom and Conrad Black of Hollinger, were sent to prison after U.S. convictions that held them responsible for wrongdoing at their companies.