Nortel Networks has fired its president and chief executive officer, replacing Frank Dunn with William Owens, and has also delayed the release of its financial results for the first quarter of the year.
Nortel has been involved in an independent review of the circumstances leading to the reissuing of its financial statements for 2000, 2001 and 2002 and for the first and second quarters of 2003. As a result of those investigations, Dunn was "terminated for cause", Nortel said.
Former chief executive officer Douglas Beatty and former controller, Michael Gollogly, also been terminated for cause.
"Yesterday was a very long day for the board and its advisors," said Lynton Wilson, chairman of the board. "These actions are an important step in the process of restoring confidence in the company's leadership and financial reporting."
The telecommunications equipment maker is already the subject of investigations by both the US Securities and Exchange Commission and by Canada's top securities regulator, the Ontario Securities Commission.
"We are co-operating with all of the regulation authorities and we will continue to do so," Wilson said. "This is about the accountability for financial reporting. The investigations are ongoing and it would be inappropriate to comment further."
In March, Nortel placed its chief financial officer and its controller on paid leaves of absence following questions about the company's 2003 financial results. At the time, the company appointed William Kerr as chief financial officer and MaryAnne Pahapill as controller on an interim basis. Nortel has now made those appointments permanent.
Owens was quick to try and reassure Nortel's customers and shareholders.
"To our customers I say: We will not let this distract us," Owens said. "To our shareholders: We're committed to getting this right."
Problems with its accounting practices came to light in October when Nortel announced it would restate financial results for 2000, 2001, 2002 and the first two quarters of 2003 as part of a review of its assets and liabilities. Then on 10 March, Nortel said it was likely to restate results for the second time and would delay filing required financial documents with US regulators.
Kerr said that as part of its restated results it expected a 50% reduction in 2003 net earnings, though losses from previous years will be revised down. "It's fair to say that all areas will be affected", when it comes to the restatement of its financial numbers, he said.
Laura Rohde and Stephen Lawson writes for IDG News Service