Nortel ( NT) placed two financial executives on leave Monday in the wake of an expanding internal probe of its bookkeeping.

The Canadian telecom-gear maker named William Kerr interim financial chief and MaryAnne Pahapill interim controller. They supplant Douglas Beatty and Michael Gollogly, who were put on paid leave as the company looks into problems with its accounting.

Nortel said last week it would restate financial results for some 2003 and prior reporting periods. The announcement shocked Wall Street, coming as it did just five months after the company filed a previous restatement. Nortel said Monday it would file for an extension with the Securities and Exchange Commission on its 2003 annual report, which is due March 30.

The developments complicate the emerging telecom-spending recovery story on which Nortel shares have rallied so robustly this year. The stock doubled between Jan. 1 and the middle of last month as investors bet that big telcos like Verizon ( VZ) would boost their capital spending in 2004 after a long pause. But Nortel shares have since given back some ground amid rumblings that the spending boost won't be as strong as Wall Street has hoped.

Nortel shares closed Friday at $6.43.

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