Revenue Recognition Fraud Charges Lead Nortel Networks Agrees to Pay $35 Million

October 23, 2007

Accounting fraud can create liability for violating the securities laws and IRS tax rules and regulations. This whistleblower lawyer blog regularly comments on cases of interest, as whistleblowers often play an important role in bringing the violations to light.

The U.S. Securities and Exchange Commission has announced civil fraud charges against Nortel Networks Corp. and Nortel Networks Ltd., alleging improper revenue recognition by Nortel between 2000 and 2003, designed to make the company look appear more profitable. Nortel agreed to pay $35 million to resolve these accounting fraud allegations.

Previously, the SEC reportedly announced civil fraud charges against Nortel's former CEO Frank Dunn, former CFO Douglas Beatty, former Controller Michael Gollogly, and former Assistant Controller Mary Anne Pahapill for their roles in the alleged accounting fraud. The SEC also later alleged involvement in the fraudulent scheme by four former vice presidents of finance of Nortel's business units.

We applaud the good work of the SEC in combatting these fraudulent practices.