- The Washington Times - Wednesday, February 13, 2002

TORONTO (AP) Nortel Networks Corp. is moving quickly to show it isn't becoming Canada's Enron.
Frank Dunn, chief executive of North America's second-biggest telecommunications equipment and service provider, said the abrupt resignation of Nortel's chief financial officer was related to investments in the company's 401(k) retirement program and nothing more.
The resignation of Terry Hungle comes amid heightened scrutiny of how corporate executives profit from trading the stock they hold in their own companies. Top Enron Corp. officials made millions selling company stock before the Houston-based energy marketer imploded last year, while many other employees saw their retirement nest eggs evaporate.
Brampton, Ont.-based Nortel said it notified the U.S. Securities and Exchange Commission and the Ontario Securities Commission.
"This matter is unfortunate, but the actions we have taken are in the best interests of Nortel Networks," Mr. Dunn said. At a conference with analysts yesterday morning, he tried to distance Nortel from Enron by stressing that company officials have had no discussions with regulators about the company's business or accounting practices.
"It all focused on Terry and his personal trading," Mr. Dunn said, adding that he would take no questions about the issue.
Mr. Dunn also reiterated earlier company statements that Nortel expects first-quarter revenue will be 10 percent lower than last year. Nortel shares fell 6 percent, or 42 cents, to close at $6.42 on the New York Stock Exchange.
But he cautioned that business "activity over the last 25 days has indicated even more resolve by customers than originally anticipated to minimize spending in the near term and this will make the task of delivering our first-quarter sales outlook more challenging."
The company still expects gradual revenue growth throughout the year that will return it to profitability by the fourth quarter, Mr. Dunn said.
Mr. Hungle resigned Monday after questions arose about personal investments he made in the company's 401(k) retirement plan just ahead of corporate announcements that caused significant swings in the Canadian company's stock price.
In a statement sent to the Associated Press, Mr. Hungle admitted errors in making the transfers but said he wasn't trying to profit from his position with the company.
"I now recognize that I made a serious mistake in judgment," Mr. Hungle's statement said. "I wish to emphasize that I did not at any time seek to take advantage of any inside information I possessed. Nonetheless, I express my sincere regret to the company, its shareholders and its employees for these mistakes."
The news is another blow for Nortel as the fiber-optics giant tries to recover from a disastrous 18 months in which its shares lost more than 90 percent of value and it has been cutting its work force in half.
Mr. Dunn, who was CFO before his promotion, said he'll take over Mr. Hungle's duties until a successor is hired. Mr. Hungle was named chief financial officer of Nortel on Nov. 1.
Mr. Hungle's statement said he transferred about $78,500 from a stock fund invested primarily in Nortel shares to a fixed income fund on March 27, 2001, prior to the announcement that Nortel would cut 5,000 jobs and would not meet reduced profit forecasts.
Nortel's stock fell 16 percent on March 28, the first trading session after the job loss announcement.
"At the time, I was not Nortel's chief financial officer … and did not know that the company was about to issue this news release," Mr. Hungle's statement said.
Mr. Hungle then transferred almost $86,300 from the fixed income fund to the stock fund in December, just before Nortel said it would lose less than expected during the fourth quarter. The shares rose from $6.98, the opening price after the announcement, to a peak of $8.59 on Jan. 7.


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