Nortel's Investigation Not So Negative

The new regulatory environment makes news of the SEC's action less scary than investors think.
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So the



investigation gets formal. Terrific! That's what we need: a little more scrutiny and a few more negative headlines.

Let's forget that a ton of executives bought huge amounts of shares last week. That doesn't matter. Or that Nortel now

has said that we will know what's cooking at the end of the month. What matters is the negative publicity that the investigation generates.

Excuse me for being cynical, but there was a time when things like formal investigations mattered. It meant that the defendant wasn't cooperating with the government so the government needed to step things up by getting subpoena power through a formal investigation. Not anymore.

Even if you cooperate, which Nortel is doing, things go formal. Things get ugly fast because the feds are no longer strictly regulators; they have become prosecutors too. That's part of the change in environment since the big scandals.

Before the change, it was actually quite a big deal to "go formal." Now it's a given. Folks who sell Nortel off this, I wish the best of luck.

I will use this as an opportunity to get some more cheap stock in while the cheapness lasts. It's a whole new regulatory ballgame and you can't just sell the formally investigated companies anymore.

At the time of publication, Cramer was long Nortel.

James J. Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made.

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