Nortel CFO quits over pension claims
Forewarned is forearmed
Nortel Networks Corp has announced the immediate resignation of its CFO Terry Hungle and notified US and Canadian regulators, alleging he has broken the rules of the company's stock investment plan,Terry Murphy writes
Nortel said Hungle, a 20-year veteran of the firm who was appointed CFO in early October, moved money in his 401k investment plan in and out of Nortel stock outside of "trading windows" imposed on certain high-level employees by the company.
The company said that in March 2001 then-finance-VP Hungle transferred about $78,500 of 401k money out of Nortel stock into a fixed income fund, before the company's March 27 public profit warning. He also transferred about $86,300 back into Nortel stock in December 2001 before the company's December 21 guidance upgrade, the company said.
"This matter is unfortunate, but the actions we have taken are in the best interests of Nortel Networks," said CEO Frank Dunn. "Let me emphasize this matter solely relates to the personal investment transactions made by Terry Hungle, and does not relate to the business, operations or financials of Nortel Networks."
On March 27, the company said its first fiscal quarter net loss could be as great as $0.12, compared to previous expectations of $0.04 per share. Its shares fell 16.5% immediately following the news. On December 21, the company reduced its net loss guidance by $0.02 to $0.16 per share, giving its share price a 12% boost the next day. On both occasions Hungle would have had foreknowledge of the earnings updates.
The resignation comes as perhaps an early example of a technology company getting its house in order to minimize exposure to the current post-Enron paranoia surrounding public companies' accounting practice. While Nortel insists that Hungle's alleged activities do not reflect on its own financial performance, investors are jittery at the slightest sign of irregularities.
Nortel, listed in New York and Toronto, said it has voluntarily notified the US Securities and Exchange Commission and the Ontario Securities Commission. While the company searches for a successor, CEO Dunn will act as CFO. Nortel said it "will have no further comment on this pending regulatory matter."
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