Nortel Shares Fall On Exec Bonuses Story

Shares of the Canadian company fell 31 cents, or 8.7 percent, to close at $3.26 on the New York Stock Exchange.

The Wall Street Journal reported Monday that in past years Nortel's long-term compensation award had been granted entirely in the form of restricted stock. But this year, the board's compensation committee decided to give half of the award in cash.

Nortel's stock has since fallen nearly 44 percent since the awards were distributed in February, meaning that if the executives had received Nortel stock instead of cash, they would have fared far worse.

In addition, the company, which is based in Brampton, Ontario, withheld about a quarter of the shares granted to the employees to pay the taxes on the bonuses. As a result, the executives received only about a quarter of their bonus in the restricted stock plan in shares.

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Last fall, the company restated its financial results to move $952 million of liabilities to prior periods' income, among other moves. Last month, Nortel said the second restatement would slash its reported net income of $732 million in 2003 in half and turn that year's first half profit to a loss. It also fired its chief executive and two other top executives.

A Nortel spokesman, Christina Warren, declined to say why Nortel paid cash bonuses while the review of its accounting was continuing, the Journal said.

She also declined to say whether any of the executives would have been in a position to know Nortel would need to restate its results, though the recipients were among the company's top executives.

The cash payouts totaled $12.4 million to 16 executives, according to the filings. Among the recipients were former controller Michael Gollogly, who was fired for cause last month and received $310,230 in cash. Former CEO Frank Dunn and former Chief Financial Officer Douglas Beatty didn't receive these bonuses.

On Friday, Nortel said it has received a subpoena from federal prosecutors in Dallas ordering it to produce accounting records and other documents going back more than four years.

Nortel said it will fully cooperate with authorities.

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