Nortel Networks Corporation (Nortel) 2003
http://en.wikipedia.org/wiki/Nortel
http://www.theregister.co.uk/2007/03/12/sec_charges_nortel_four_with_accounting_fraud/
The fraud started in 2000 when Mary Anne Pahapill, ex-assistant controller and Douglass Beatty, ex-controller, deceived cash reserves, claim an increase in revenue to satisfy Wall Street and "fattened" their pocket books. But that was not enough for Pahapill and Beatty. They brought in Frank Dunn, ex-CFO and CEO at the Canadian telecoms equipment maker, to their scheme. In order for Nortel to meet the companies requirements, Dunn, Beatty and Pahapill reversed some revenue entries but fell short of Wall Street expectations at the end of 2000. In summary of the year 2000, Pahapill stole the money but at the end of 2000,they realized that Nortel's books were short so they had to decided to fix the problem by reversing revenue recordings. But wait, it gets better.
In 2002 and early 2003, all the executives set aside a total of $451 million in two accounts for safe keeping. However, these funds were used to cover the gap between the company's performance and Wall Street's expectation. As if that was not enough for the executives to commit fraud. This time they brought in Michael Gollogy, ex-controller, to the scheme of things but left Pahapill. I guess she had enough. The trio men decided to dip onto secret funds, again for their benefit of looking smart. They released $490 million to boost earnings, fake profits and pay senior managers their bonuses.
Through all of the reinstating of accounting statements, Dunn and Beatty blame internal controls to save themselves. However, the SEC knows that reinstating accounting statements for many years prior to 2003, was not a fluke. This intentional act of fraud cost the four executives their jobs. All four executives charged with violating and/or aiding and abetting violations of the antifraud, reporting, books and records, internal controls and lying to auditors provisions of the federal securities laws(The Register, 12, March, 2007). Dunn, Beatty, and Gollogy, were fired in 2004. Pahapill left in 2005.
