Justice Frank Marrocco of the Ontario Superior Court of Justice acquitted the three former executives of Nortel, Frank Dunn, Douglas Beatty, and Michael Gollogly. The acquittals involved a fundamental rejection by the trial judge of the Crown theory that, in Q4 2002 and Q1 and Q2, 2003, the three former executives of Nortel had fraudulently manipulated the booking, and release, of accrued liabilities in an effort to create false financial statements, triggering bonuses to which they were not entitled.
The decision of Justice Marrocco is the first time a Canadian criminal court has considered an allegation of accounting fraud against corporate executives, based on a prosecution claim that the existence of fraud can be inferred from the restatements themselves.
This claim was firmly rejected by Justice Marrocco, who found that the differences between the first restatement, the second restatement, and the original accounting was not attributable to fraud but rather to different thresholds between the first and second restatement and to Deloitte changing its mind concerning the proper accounting for the transactions at issue.
After the six month trial, and reviewing thousands of pages of documentary exhibits, Justice Marrocco acquitted the accused, concluding that the original financial statements of Nortel were not materially misrepresented.
Frank Dunn was represented by McCarthy Tétrault LLP with a team led by David Porter, and that included sole practitioner John Dent, Harry Underwood, Sarit Batner, Andrew Matheson, Michael Rosenberg and Dorothy Charach (litigation).
Douglas Beatty was represented by Lafontaine & Associates with a team that included Greg Lafontaine, Lori Anne Thomas and David Shulman.
Michael Gollogly was represented by Greenspan Humphrey Lavine with a team that included Sharon Lavine and Robin McKechney.
Robert Hubbard, Amanda Rubaszek and David Friesen were counsel for the Crown.