That question left Crown attorney Hubbard at a loss for an answer, leaving him to mumble that his junior colleague, who also appeared caught off-guard, would address that aspect the next day. This is a trial that has cost the taxpayers millions of dollars and was based on the fact that one of Canada`s largest companies went bust and thousands of investors lost millions upon millions. With all that pain, it was felt someone should be punished, but the Crown picked the wrong people and had no evidence against them.
There had not been a single shred of evidence to suggest that the three accused, former CEO Frank Dunn, Chief Financial Officer Doug Beatty, and Controller Michael Gollogly in any way deceived Nortel`s auditing firm Delloite or Nortel`s shareholders about any of their actions.
If a fraud was perpetrated, the way The Toronto Star reported what was said, the Crown`s argument is that it was perpetrated by telepathy, `The accused in the long-running Nortel Networks Corp. fraud trial didn’t need to tell underlings to falsify accounting entries to trigger return to profit bonus payouts in 2003, the Crown alleged in its closing arguments Thursday “Everybody just knew what to do,” lead counsel Robert Hubbard said.
The irony is that after billions of dollars of bad investments by the previous team of senior executives that had been approved by the board, Nortel`s subsequent leadership, who are now on trial, had the company turned around after the largest ever restructuring of a Canadian company. The workforce was reduced by two-thirds, about 60,000 employees, and the company was on the verge of returning to profitability. But after a financial restatement had to be issued, a frequent occurrence among major companies, the Board hired a forensic audit team to review Nortel.`s accounting practices After a brief investigation, which was not nearly long enough to examine the massive number of transactions involved, one of the forensic auditors, who was contradicted by members of his own team, said there were improprieties. Rather than conducting a more thorough investigation, Nortel`s board immediately went into a panic, suspended Dunn, Beatty and Gollogly, and that led the company into a series of events that caused an unstoppable tailspin.
James Bagnall at The Ottawa Citizen has summed up the matter clearly:
After more than five months of testimony from 17 Crown witnesses, the most puzzling aspect of the Nortel fraud case is that it was brought at all.
Despite having culled millions of emails from the hard drives of Nortel employees, the Crown could not produce a single instance in which the co-accused — chief executive Frank Dunn, chief financial officer Douglas Beatty or controller Michael Gollogly — instructed anyone to do anything illegal. No gun. No smoke.
Nor has the Crown been able to explain behaviour that suggested fraud was far from the thoughts of the accused. They designed a return-to-profitability plan that deliberately would not trigger payments until multiple conditions had been met over a full year. Nortel rival Lucent Technologies paid its employees a bonus simply for staying with the firm.
When Nortel’s board convinced Dunn in 2004 to replace his chief financial officer, he hired Bill Kerr — a former Nortel CFO who knew more about the company’s accounting than nearly any other outsider he could have picked. Douglas Beatty, the executive Kerr replaced, refused to cut his staff of internal auditors, even though Nortel shrank by two-thirds.
The Crown’s theory of the crime — that Dunn and his colleagues orchestrated a global conspiracy under the nose of Nortel’s longtime auditor, Deloitte — was difficult enough to accept as a starting point. But in the past few months, one witness after another testified about the wide open debate between auditors and Nortel managers over the proper accounting treatment for dozens of key entries in 2002 and 2003.The Defense will make its closing arguments next week. But based on the lack of substance the Crown offered, this trial which has destroyed the careers of three innocent men, and which appears to have only been brought for the purpose of appeasing public anger, cannot end soon enough.