The board of directors of Nortel Networks Ltd. said it has appointed a special committee to investigate, review and evaluate shareholder complaints about some of its current and former directors and officers.
The company, which is still under pressure to wade out of its financial crisis, that it will not be able to complete the investigation within the two-week time frame demanded by the shareholders.
The company said it received a letter “purporting to be on behalf of certain shareholders” that accused some of the former and present directors and officers of the company of three fiduciary breaches between 2000 and 2003.
The first accusation was that the company officers and directors caused the company to engage in unlawful conduct or failed to prevent such conduct. The second was that they issued false company statements, while the third was that they violated the law.
The company did not unveil the names or the number of people listed in the purported letter.
“By return letter dated July 20, 2004, Nortel Networks confirmed that its board of directors would carefully consider the matters that had been raised,” said the company. “However, given the nature and extent of the allegations, the company stated that it was not realistic for a response to be provided within the 14-day deadline.” It did not say when the investigation would be completed.
The company said the same form of complaint was filed July 30 in the U.S. District Court for the Southern District of New York.
This is not the first time the company has received complaints from shareholders, and a number of class-action lawsuits already have been filed since the company revealed inconsistencies in its financial statements. The company had overstated its profits from 2000 to 2003. And it has not released its financial results this year because of investigations both internally as well as from the Securities and Exchange Commission and the Ontario Securities Commission.
Nortel said by Aug. 19 it would “be in a position to announce estimated preliminary unaudited results for the first and second quarters of 2004 and provide an update on the restatement impact.” The vendor stated it plans to reveal the final unaudited results for 2003 and the first and second quarters of this year by the end of the third quarter.
The company’s shares dropped 3.6 percent to $3.45 on the news.
