Nortel Networks (Quote) 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 (Quote), 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.
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