Nortel’s financial statements to be investigated by SEC

6 Apr 2004

The US Securities and Exchanges Commission (SEC) has issued a formal order of investigation into Nortel Networks’ restated financial statements. Nortel employs 220 people in Galway and a further 720 people at its campus near Belfast, where some 350 workers’ jobs currently hang in the balance.

In October and last month, the company announced that it was reviewing its financial results and would likely restate them for certain periods. It has already restated earnings from 2000, 2001 and 2002, along with figures for the first two quarters of 2003.

Nortel’s internal auditors began looking into the company’s finances after it was discovered that roughly US$900m in liabilities had been either recorded incorrectly in prior periods or had not been properly released in the appropriate periods. In March, the company suspended Chief Financial Officer Douglas Beatty and Controller Michael Gollogly. The accounting matter had been the subject of an informal SEC inquiry. Nortel said it is has been fully cooperating with the SEC.

Following the revelation of a potential US$2.5m deal with manufacturing outsourcing giant Flextronics in January, it was revealed that some 350 manufacturing workers’ jobs at Nortel’s Northern Ireland campus near Belfast hung in the balance, depending on the outcome of negotiations between Nortel and Flextronics.

A spokesman for Nortel Networks in Ireland told “There have been no further developments on that issue so far.”

The Nortel campus in Monkstown employs around 720 people engaged in activities ranging from manufacturing to optical R&D, customer services, supply chain management, software development and strategic management. Approximately 350 of these workers are engaged in manufacturing communications systems. Nortel Networks employs an additional 220 people in Galway engaged in strategic R&D.

By John Kennedy