Updated from 8:22 a.m. EDT

The accounting inquiry at Nortel ( NT) took a shocking twist Wednesday with the firing of CEO Frank Dunn.

The Canadian telco equipment giant named William Owens president and chief executive, replacing Dunn who was "terminated for cause," Nortel said. The news comes as the company continues to probe bookkeeping irregularities that have provoked two restatements in the space of six months.

Nortel said it will once again have to restate results for 2001, 2002 and 2003. The investigation suggests that the company's reported profit for the first half of 2003 will be wiped out and replaced by losses, and that its overall profit for 2003 will be cut in half. The company said its losses in 2001 and 2002 should be reduced somewhat.

Nortel shares sagged anew Wednesday morning, dropping 29% to $4. The company's shares were among the hottest in the telecom-equipment sector rally of January and February, but the momentum has since been lost as investors reassess the risk at these companies. Nortel shares have now given back all their 2004 gains, even after they doubled in January.

Though the repeated restatements at Nortel have come as a bit of a surprise, the Brampton, Ont., gearmaker's books have raised eyebrows in the past. For instance, the company's surprising profit for the first quarter of 2003 came under scrutiny from investors who noted the convenient timing for the purpose of executive bonuses.

On Wednesday, Nortel made permanent its recent interim financial chief and controller appointments, William Kerr and MaryAnne Pahapill. They replaced Douglas Beatty and Michael Gollogly, both of whom were placed on leave last month and were fired today. The company also placed four other top finance execs on leave.

"The Board of Directors believes that the actions announced today are about accountability for our financial reporting and are in the best interests of the Company and all of its stakeholders, including our investors, customers and employees," said Chairman Lynton (Red) Wilson. "These actions are an important step in the process of restoring confidence in the Company's leadership and financial reporting."

Dunn was Nortel's financial chief under former CEO John Roth during the collapse of the telecom boom before being promoted to take Roth's job in October 2001.

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