In basketball terms, it was a slam dunk.
After looking at thousands of pages of documents and listening to two dozen witnesses, Ontario Justice Frank Marrocco said the Crown hadn’t proved former Nortel Networks executives Frank Dunn, Douglas Beatty and Michael Gollogly deliberately misrepresented financial results of the ailing telecom company.
The year-long trial dealt with the release of accrued liabilities into income on financial statements, which the prosecution said was done so the accused and other managers could qualify for profitability bonuses.
But aside from one release of $80 million in the first quarter 2003 results, liabilities released in the next two quarters weren’t outside the normal course of business.
As for the $80 million, the judge said it didn’t make a difference – Nortel would have been in the black with or without it.
As for alleged hokey-pokey in the fourth quarter 2004 financial statement that turned a profit into a loss, Marrocco said no matter what was done Nortel wasn’t profitable that quarter.
In short, he rejected Crown prosecutor Robert Hubbard's entire case. Still, Marrocco said, "it was entirely appropriate that we go through this process to find out what happened."
His 141-page written decision goes into greater detail than these transactions, but Marrocco’s shorter oral decision read Monday in court had an interesting preface before he got into the nitty-gritty.
For many former Nortel employees, pensionners and shareholders this was no ordinary trial.
For them the collapse of Nortel after so many years of being a telecommunications giant had to be explained beyond mere poor sales or more agile competitors -- and Marrocco obviously had a sense of how many eyes were on the courtroom.
In fact, coincidentally in a nearby Toronto hotel Ontario’s chief judge this week is trying to broker a deal to slice up some $9 billion (all figures U.S.) of remaining Nortel assets to creditors, including former staff.
“I know that there are other proceedings going on which deal with Nortel Networks Corporation,” Marrocco said starting his oral decision. “Those matters are not before me.”
Marrocco emphasized that his decision is based on evidence heard and documents presented in his courtroom only and that the criminal charges had to be proven beyond a reasonable doubt.
As background, Marrocco then briefly recounted Nortel’s background, which showed how great the company had been and how low it fell: Between 1998 and 2001 the company spent $29 billion on 22 acquisitions, the judge noted, during a period of strong economic growth in the telecom industry. But by 2001 the industry “began to experience a slowdown attributed to excess capacity.”