Editor’s note: This story has been updated to incorporate further comments from Nortel about DeRoma’s retirement and the repayment of bonuses by Nortel executives.
RESEARCH TRIANGLE PARK — Nicholas DeRoma is no longer the chief legal officer at Nortel, but he will be paid more than $1 million over the next two years as part of a “salary continuation” agreement he negotiated with the networking giant.
DeRoma, who joined Nortel in 1997 from IBM, left Nortel as of Sept. 9.
In a Securities and Exchange Commission filing published on Wednesday, Nortel disclosed the negotiated financial details about DeRoma’s departure but did not indicate any reason for his departure.
A Nortel spokesperson told Local Tech Wire that DeRoma had retired.
The filing, which is dated Sept. 8, said Nortel had reached a “letter agreement” with DeRoma “concerning the cessation of Mr. DeRoma’s responsibilities as Chief Legal Officer” as of Sept. 9.
The agreement calls for DeRoma to be paid a monthly “salary continuance” of $43,833 (or $525,996 per year) in US dollars effective Sept. 10 of 2005 through Sept. 9 of 2007.
DeRoma was one of several Nortel executives who received cash bonuses in 2004 only weeks before Nortel announced it was going to restate earnings, The Wall Street Journal reported.
On Aug. 15, according to federal documents, DeRoma surrendered 238,676 shares of Nortel stock worth $794,791 as part of the agreement reached with Nortel to repay the profitability bonus.
DeRoma and several other executives “volunteered” to repay the bonuses as a sign of their commitment to Nortel, a Nortel spokesperson told LTW Wednesday night. None of the executives repaying bonuses were part of the accounting scandal that led to a series of firings among top Nortel management, she added.
While all employees received a return to profitability bonus, 12 of the company’s most senior executives volunteered without condition to repay to Nortel their respective return to profitability bonuses. Mr. DeRoma was one of these executives.
“By voluntarily repaying their return to profitability bonuses, these executives illustrated their commitment to Nortel’s code of ethical conduct and the establishment of a company-wide compliance program that holds employees to the highest standard of business practices and ethical decision making,” the spokesperson said.
“Neither Mr. DeRoma nor any of these 12 executives engaged in improper accounting conduct. They share the board’s deep disappointment in that action and event and are determined to make it clear to Nortel’s employees, customers, investors and others that such activities are unacceptable,” she added.
News about the bonuses triggered The WSJ report.
“Nortel Networks Corp. gave some top executives millions of dollars in cash bonuses – rather than the usual award of stock – just weeks before the company’s shares plunged on a March 10 warning that earnings would have to be restated for a second time,” wrote Ken Brown and Mark Heinzl in The WSJ in May 2004.
The WSJ noted that controller Michael Gollogly “who was fired for cause” got $310,230 in cash.
Others receiving bonuses were Brian McFadden, president of optical networks, who got $1.49 million; chief technology officer Gregory Mumford, who received $914,782; Susan Spradley, head of wireline networks, got $922,084. DeRoma received $851,145.
In August, Nortel disclosed in another SEC filing that it had reached agreement with DeRoma and others for repayment of the 2003 “profitability” bonuses.
Problems with earnings reports led to wholesale changes in Nortel’s senior management, including Frank Dunn, who was fired as chief executive officer.
Other stipulations in DeRoma’s retirement agreement include:
As Nortel’s chief legal officer, DeRoma had “worldwide responsibility for the legal contracts, corporate secretarial and patent and licensing activities of the corporation and its subsidiaries,” according to Nortel’s website.
DeRoma worked at IBM from 1972 to 1997, including several general counsel posts.
William Donovan, senior vice president of human resources, and Gordon Davies, general counsel corporate and corporate secretary, signed the filing.
To see the complete filing, go to: yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=3909399&Type=HTML
For details of the agreement under which Nortel executives agreed to repay those bonuses, see: yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=3865692&Type=HTML
To see all the filings related to the individual repayment of bonuses, go to: yahoo.brand.edgar-online.com/default.aspx?cik=72911