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RealTime IT News

Nortel CFO Forced To Resign

Nortel Networks Monday announced the resignation of its chief financial officer after finding he had made numerous inside trades to affect the cash value of his employee stock and fixed income funds, officials announced to the Securities and Exchange Commission (SEC).

Terry Hungle was forcefully resigned after executives found he had made several transfers during his previous tenure as vice president of finance and business development for the Americas division.

Frank Dunn, Nortel president and chief executive officer, has been appointed CFO until he can find a replacement. Dunn was the CFO from February 1999 until November 2001 before assuming leadership of the Internet equipment giant.

"This matter is unfortunate but the actions we have taken are in the best interests of Nortel Networks," he said. "Let me emphasize that 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."

According to a voluntary notification to the SEC and the Ontario Securities Commission (OSC), Hungle transferred $86,300 from his fixed income fund to a stock fund investing primarily in Nortel. Three months later, he transferred $78,000 back from his stock fund to the fixed income fund.

In and of themselves, the transfers were not illegal, but Hungle had made the transfers outside the specified trading window imposed by the company for certain employees, the CFO included.

Nortel officials declined comment on the detail of the transfers and how much money he might have made, saying they would wait for a determination from the SEC and OSC.

The move to force Hungle's resignation is a wise one for the equipment maker, which was faced with the dilemma of "outing" its CFO or face worse when the transfers were made public from another source.

Companies around the U.S. and abroad are taking a hard look at the actions of its key employees after the disaster at Enron, where executives allegedly bilked employees of their stock options while raking in million in personal profits.

Many are more willing to proactively disclose internal audits, rather than face an angry Congressional investigation committee.

Global Crossing , an international "carrier's carrier" is also under scrutiny from investigators for some of its practices. An alleged letter claims Global Crossing and its auditor, Arthur Andersen (which also audits Enron), were inflating quarterly figures reported to the SEC.