SEC Probe of Nortel Upgraded to Formal
The U.S. Securities and Exchange Commission has made formal its investigation into accounting irregularities at the Brampton, Ontario-based Nortel Networks, Corp., the Wall Street Journal reported yesterday.
By making the investigation formal, the SEC gains the ability to issue subpoenas for documents and information, John Gavin, president of regulatory research firm SEC Insight Inc., told the Journal.
The company’s chief financial officer and controller were suspended last month as a company said that a probe into "certain accruals and provisions" would result in a restatement of results for 2003 and possibly other years as well, the Journal reported. The combination of the staff shake up and the restatements made investors jittery and sent stock prices down.
Nortel, a telecommunications-equipment maker, had acknowledged earlier informal inquiries by the SEC in reference to a results restatement the company made last fall as well as its recent announcement that it would restate past results a second time, the Journal reported.
"The matter has been the subject of an informal SEC inquiry," but now the securities regulator has "issued a formal order of investigation," the company told the Journal Monday.
"Nortel Networks has been fully cooperating with the SEC and will continue to do so in order to bring the inquiry to a conclusion as promptly as possible," the company said.
The move make the inquiry formal could be a sign Nortel is "not cooperating as much as they say they are" with the SEC, Gavin told the Journal.
A Nortel spokeswoman would provide no details about the SEC’s actions or say why the investigation has been made formal, the Journal reported, adding that an SEC spokesman declined comment.