Nortel (NT) dropped early Tuesday as news of another criminal investigation added to the company's legal woes.
Late Monday, the Brampton, Ontario, telecom gearmaker said it was notified by the Royal Canadian Mounted Police that a review of the company's accounting has turned into a formal criminal investigation. Nortel says it will "continue to cooperate with the RCMP."
Nortel is already the subject of a criminal investigation by the U.S. attorney's office in Dallas, as well as civil probes by the
Securities and Exchange Commission
and the Ontario Securities Commission.
Earlier this year, an internal audit revealed that the company had overstated profits in 2003. And in the wake of the discovery, the company fired several top executives who had
collected special "return-to-profit" bonuses. Nortel has said it will have to restate its numbers going back several years.
The news comes just as Nortel was seeking to show investors it has put its troubled past behind it. On Thursday, the company is expected to release preliminary financial results for the first two quarters of 2004 and to provide an update on the impact of its ongoing audit.
The criminal investigation is just the latest setback for Nortel as it attempts to fix its battered books. Last month, a group of Nortel shareholders brought a lawsuit against 28 current and former directors and executives for unlawful conduct between 2000 and 2003.
The suit charges that company officers falsified financial results, allowing them to "loot Nortel of hundreds of millions of dollars via bonuses paid based on phony profits." Nortel says it has appointed a committee to look into the charges.
In addition to the tech shop's accounting scandal, business itself hasn't been exactly booming. Nortel said last month that its costs were too high and hinted that
cuts were in order. But executives have not detailed any plans yet.