A former Nortel Networks Corp. employee will testify Monday about the creation of excess accounting reserves at the company at the end of 2002, including entries made late in the process after the operating divisions had submitted their final numbers.
The fraud trial of three former Nortel executives is scheduled to resume Monday after a 20-day break, and the Crown has said it will continue to call more former employees to testify about accounting decisions at the company in 2002 and 2003.
The first witness Monday is expected to be Jim Kinney, the former vice-president of finance in Nortel’s wireless division, who will be the sixth former employee to testify at the trial.
Crown attorney Robert Hubbard said at the opening of the trial in January that Mr. Kinney would testify about a controversial period at the end of 2002 when Nortel’s top executives are accused of manipulating the company’s financial results using accounting reserves hastily created after the quarter had ended.
The Crown alleges former chief executive officer Frank Dunn, former chief financial officer Doug Beatty and former controller Michael Gollogly created the new provisions to erase a profit in that quarter because they felt it would not help them collect their full payouts under special “return to profitability” bonuses in place at the company. They allegedly then reversed the new provisions, and used other existing reserves, to push the company to profitability in 2003 to trigger the bonuses.
The men have denied all the allegations and have said the accounting reserves used in 2002 and 2003 were legitimate and were approved at the time by the company’s auditors at Deloitte & Touche.
The trial began in January and the Crown has said its witnesses will continue at least until late May. Defence lawyers have made no disclosure yet whether they intend to call any of their own witnesses – including the accused – once the Crown completes its side of the case.
One key Crown witnesses expected to testify after Mr. Kinney is Linda Mezon, the former assistant controller who worked directly for Mr. Gollogly. Ms. Mezon is the most senior former executive scheduled to take the stand at the trial, and many previous witnesses at the trial have testified about working for Ms. Mezon and making accounting entries based on her instructions.