SEC to fine Nortel for accounting fraud

North America's largest telephone equipment maker, Nortel Networks, is to be fined by the US Securities and Exchange Commission for accounting fraud.

The regulator launched an investigation into Nortel's accounting in 2004.

The company restated it's results in the following year, admitting revenue had been inflated by $3.4bn.

In March the SEC pursued legal action, suing CEO Frank Dunn and three former officials who were accused of manipulating earnings from 2000 to 2004 so as to meet analyst's projections.

This would be the first test case of an SEC policy that empowers agency commissioners to have a greater say in penalties for corporations, Bloomberg reported.

Staff lawyers previously negotiated settlements with companies without consulting SEC commissioners.

Last month, SEC attorneys obtained approval from commissioners to seek a fine of less than $100m.

The fine amount could be an indication of future corporate penalties, at a time when SEC chairman Christopher Cox has been accused of favouring companies at the expense of investors.

An example of a lenient corporate fine includes that of Xerox Corp, which paid a $10m fine in 2002, under old SEC policy, to settle allegations that the company overstated revenue by $3bn.

Nortel shares rose 16 cents to C$27.54 in trading on the Toronto Stock Exchange. They're down 12 percent this year.

Further reading:

Nortel CFO to step down

SEC to hit Nortel with fine of up to US$100M for accounting fraud: report

SEC plans for fine Nortel up to $100 million for alleged fraud, reports say

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