NEW YORK, July 7, 2004 (PRIMEZONE) -- The New York law firm of Wechsler Harwood LLP today announced that it has commenced an investigation against Nortel Networks ("Nortel" or the "Company") (NYSE:NT) for violations of the Employee Retirement Income Security Act of 1974 ("ERISA") in relation to its handling of investments in the Company's employee retirement benefit plan (the "Plan").
In particular, the investigation focuses on whether the Company and certain Plan administrators breached their fiduciary duties by: (a) negligently misrepresenting and negligently failing to disclose material facts to the Plan and the Plan participants in connection with the management of the Plan's assets and (b) negligently permitting the Plan to purchase and hold Nortel stock when it was imprudent to do so.
The material facts being investigated include, but are not limited to the fact that, in April of 2003, Nortel advised investors that it would be restating its financial results for 2000, 2001 and 2002 and the first and second quarters of 2003. Then, after reporting solid fourth quarter results that far surpassed analysts' expectations, the Company shocked investors by announcing that it would be restating its financial results yet again, this time for the just-reported fourth quarter of 2003 as well. Subsequently, in a clear indication of the severity of the Company's problems, the Company announced that it would be placing defendants its CFO, Douglas Beatty, and controller, Michael Gollogly, on paid leave of absence, pending the completion of the Company's independent review being undertaken by its audit committee. Following this announcement, shares of Nortel common stock fell $1.19 per share, or 18.5%, to close at $5.24 per share on extremely high trading volume.
In April 2004, the Company fired Beatty, Gollogly and its CEO, Frank Dunn and disclosed that its previously announced restatement would be worse than earlier planned. In addition, the Company disclosed that its financial results for Q1 2004 would be indefinitely delayed. On this news, Nortel shares plunged to below $4.00 per share. Subsequently, a number of class actions were filed in the United States District Court for the Southern District of New York against the Company as well as Dunn, Beatty and Gollogly alleging violations Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
If you are a Plan participant and hold shares of Nortel stock in your retirement benefit plan and want to discuss this investigation with an attorney or have any questions concerning this notice, your legal rights or any matter within our expertise, you may e-mail or call Wechsler Harwood who will, without obligation or cost to you, attempt to answer your questions. Wechsler Harwood has extensive experience in both federal securities and ERISA litigation and has taken a leading role in many important actions on behalf of defrauded shareholders. The Wechsler Harwood website (www.whesq.com) has more information about the firm and detailed information regarding this matter.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca