Nortel will pay a $35 million civil penalty to the Securities and Exchange Commission as part of a settlement over financial reporting at the telecommunications gear manufacturer.
As part of the long-running dispute that included a series of earnings restatements and a scandal that cost several former Nortel executives their jobs, Nortel also agreed to provide quarterly written reports detail progress in improvements of internal financial controls.
The settlement was announced as the SEC filed a lawsuit in federal court in New York accusing Nortel of revenue fraud and earnings management fraud in 2000, 2002 and 2003.
"This is an important fraud case involving conduct from 2000 through 2003," said Linda Thomsen, director of the SEC’s Division of Enforcement, in a statement. "Since that time, under new leadership, Nortel has undertaken significant efforts to address the wrongdoing, remedy the harm and implement a remediation plan to prevent recurrence of the misconduct."
In June, both Bloomberg and the Wall Street Journal reported that Nortel faced a fine of $100 million or more following a three-year SEC investigation.
Nortel (NYSE: ) announced the settlement Monday before stock markets closed. Nortel shares closed at $16.77, down 7 cents.
Although the settlement amount was less that had been rumored, the SEC’s Christopher Conte said the fine reflected “the seriousness of the company’s past activity. Nortel’s fraud was long-running, intentional and pervasive."
The settlement covers “all issues” in the matter, Nortel said in a statement.
"We are pleased that we have reached final resolution in this matter,” Nortel Chief Executive Officer Mike Zafirovski, who came on board two years ago after the financial scandal was uncovered, said. “The settlement recognizes the extensive and proactive efforts made by Nortel’s board and senior management to identify and address the accounting and internal control issues and conduct that led to the investigation.
“Through hard work, a dedication to excellence and an unwavering commitment to serving our customers, Nortel is recreating a great technology company which upholds the highest ethical standards and sound business practices,” he added. “This is a new Nortel."
In September, the SEC expanded its legal action against several former Nortel executives to four more, increasing the total to seven. Among them is former Nortel CEO Frank Dunn. Nortel fired Dunn and other executives for “cause” related to earnings reports from 2000 through 2004.
Nortel recently reached a settlement with the Ontario Securities Commission and paid $940,000 to cover the cost of the investigation. The agency did not impose a fine.
Nortel also has settled class-action lawsuits related to the financial problems at a cost of $2.5 billion in stock and cash.
Nortel employs some 2,000 people at its campus in Research Triangle Park.
