Nortel fraud called ‘conspiracy theory’

TORONTO The Crown’s contention that three former Nortel executives orchestrated a widespread book-cooking scheme is a “fantastic conspiracy theory,” a defence lawyer said in closing arguments at the high-profile trial that concluded Wednesday.

Greg Lafontaine, who represents the now defunct telecom giant’s exCFO Douglas Beatty, said allegations that the top-ranking Nortel executives oversaw an accounting scandal at the firm — which once had 90,000 global employees in numerous divisions — is baseless.

“This is not a case of a small operation where one individual or another is going to have the leeway, going to have the rope, going to have the freedom to act irresponsibly, or on their own,” Lafontaine told the court.

“It can’t happen in the structure we heard about, at Nortel.”

The Crown has alleged that Beatty, along with ex-CEO Frank Dunn, and ex-controller Michael Gollogly, tampered with accounting in 2002 and 2003 to trigger $12.8 million in bonus payments and stocks for themselves.

Those return-to-profitability bonuses were tied to internal targets that the Crown says were reached only by releasing accruals — money set aside to cover future liabilities — onto Nortel’s balance sheets in quarters when it wanted to show it was turning a profit, when it was actually in the red.

The fate of the three men, each charged with two counts of fraud, is now in the hands of Ontario Superior Court Justice Frank Marrocco, who has reserved his decision until January 14, nearly a year after the proceedings began.

All three men, who were fired from Nortel in 2004, have pleaded not guilty. If convicted, each could face up to 10 years in prison.

Lafontaine told the court that the Crown presented no evidence about the involvement of countless accredited accountants from Nortel and outside auditors Deloitte & Touche working together to manipulate the books.

Instead, he accused the Crown of calling reputable witnesses “liars and purjurers” when testimony did not fit with their theory.

Dunn’s lawyer David Porter said while he approved all the accounting at the beleaguered telecom equipment maker during his time as chief executive, it would’ve been “impossible” for him to know whether the figures were