Frank Dunn was chosen to run Nortel Networks Corp. (NT ) in November, 2001, primarily because its board thought he possessed the financial acumen to lift the Brampton (Ont.) equipment maker out of a quagmire. Amid the telecom industry meltdown, Nortel said it lost $27.3 billion that year after losing $3.5 billion in 2000. Dunn had served as chief financial officer since 1999. "We thought Frank was the guy with the right kind of skills," Lynton R. "Red" Wilson, chairman of Nortel's board, told BusinessWeek at the time.
Bad assumption. Last April, Wilson and the board booted Dunn from the chief executive's chair after questions emerged about the very area he was supposed to be such an expert in -- accounting. Now several investigations are under way to determine if Dunn cooked the books to generate profits and cash bonuses. A U.S. grand jury has subpoenaed Nortel's financial statements -- in addition to personnel and accounting records dating from 2000 -- as part of a criminal investigation by the U.S. Attorney's Office for the Northern District of Texas, in Dallas. The Securities & Exchange Commission and the Royal Canadian Mounted Police are also probing. Dunn declines to comment.
Far from fixing the company, Dunn seemed only to cast it into more turmoil. Nortel is still struggling to restate results from 2000 to 2003, and it may have to cut 2003 earnings by half. In 2004, many analysts expect the company to break even at best.