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| Tue, 08-24-2004 - 2:54pm |
Aug. 24, 2004. 07:09 AM
Fired Nortel CEO builds mansion
Took out mortgage worth $3 million on lakefront lot
Bought land soon after taking company's helm
TYLER HAMILTON
TECHNOLOGY REPORTER
Frank Dunn, recently fired chief executive of scandal—plagued Nortel Networks Corp., is in the midst of building a multimillion-dollar lakeside dream home in the heart of Oakville, the Star has learned.
According to land registry documents, the tree-lined waterfront property was bought for $4.3 million cash in August, 2002. The purchase came 10 months after Dunn, former chief financial officer of Nortel, replaced John Roth as CEO of the struggling telecom-equipment giant.
Oakville-based architecture firm Hicks-Pettes Architects Inc. and Coulson Fine Homes of Mississauga are designing and constructing Dunn's new abode, which sources say will likely have a market value between $12 million and $15 million when finished.
"I can't comment, we have to keep our client confidentiality," said Janet Coulson of Coulson Fine Homes when contacted by the Star. "It's a beautiful property," said William Hicks of Hicks-Pettes, who also declined further comment.
Dunn, who already resides in Oakville, did not return calls, nor did his attorney Thomas Heintzman of Toronto-based McCarthy Tetrault LLP.
Brampton-based Nortel announced last week it is cutting another 3,500 employees, bringing to 30,000 a workforce that swelled above 95,000 four years ago. The company, which under Dunn pledged in 2002 to become profitable again, is under criminal investigation by the Royal Canadian Mounted Police and federal authorities in Texas for accounting irregularities stretching back to 2001.
Dunn and two high-ranking financial officials were fired "for cause" in April, followed last week by the termination of another seven executives.
Nortel has said it is also conducting an internal review of its accounting practices, which analysts suspect is focused on bonuses paid to certain senior executives in 2003.
Williams Owens, Nortel's current CEO, said last Thursday the company will demand repayment of 2003 bonuses worth about $10 million (U.S.) that were paid to the 10 dismissed executives, including Dunn. It's estimated that Dunn's 2003 bonuses exceeded $4.5 million.
"It's surprising that Mr. Dunn is apparently undertaking such a large discretionary project at this time," said Charles Smedmor, a forensic accountant with experience in real estate at Toronto-based Smedmor & Associates.
"A concern is whether putting these funds into such a real-estate project may reduce the potential recoveries for Nortel and its shareholders."
The Star visited the property, partly fenced in along a wealthy stretch of Lakeshore Rd. East, and was met with a polite yet determined construction worker, who escorted us off site.
Photographs from the air show a grandiose, partially complete mansion with a built-in custom swimming pool. A boathouse is located at the edge of the water, where a break wall leads to a large boat slip.
Dunn appears to have paid cash for the property, but land registry documents show the ex-CEO took out a mortgage May 10 — 12 days after being fired from Nortel — for $3 million. The mortgage was through Royal Bank of Canada at prime rate less 0.5 per cent. His monthly payments, which began in June, are about $15,000.
Ramy Elitzur, an associate professor of accounting at the Joseph L. Rotman School of Management, said taking a mortgage out on the property makes sense given Dunn's current situation.
"I don't see him being employed by anybody in the industry for some time," said Elitzur. "He probably did it because he wanted to have cash on hand."
In addition to paying for construction of his new home, Dunn faces the prospect of having to pay back his 2003 bonus, or pay huge legal fees trying to keep it. He also faces legal fees related to a number of class-action lawsuits, which allege Dunn and other executives knowing and recklessly misrepresented Nortel's financial situation in 2003 and parts of 2004.
None of these claims have been proven in court.
"He's now in a whole new ballgame in terms of what's going to happen," said Elitzur. "Just to be on the safe side he took the mortgage, I suspect."
Additional articles by Tyler Hamilton

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Such egos!
I swear when I watched the interview he believed what he was saying. Is lying like this a gift or is it genetic?
"Enron is a dirty word up here in Washington State."
Here too, on a few continents as well.
He SB put in stocks so people can throw rotten eggs & tomatoes at him. ;)
He SB put in stocks so people can throw rotten eggs & tomatoes at him. ;)
And dirty gym socks too!!!
More on Enron from today's local news....
Cantwell: Enron profited from fish kill
05:27 PM PDT on Wednesday, August 25, 2004
http://www.king5.com/topstories/stories/NW_082504ENBenroncantwellJK.b20d8ff7.html
By GARY CHITTIM / KING 5 News

Resources
Video Clips

KING
Sen. Maria Cantwell increased her year-long attack on Enron Wednesday by rolling out audio tapes that she said proves Enron executives and power traders knew full well the toll their actions were taking on Northwest rate payers and fish.
Cantwell said that while fish and residents in this state were paying the tab, Enron was cashing in on Columbia river Power.
The tapes released Wednesday come from right in the height of big energy crisis, summer of 2000.
Hundreds of thousands of ratepayers in Washington State are still paying increased fees because of the crisis. And thousands of salmon may have also been sacrificed in Enron's efforts to make a profit.
In 2000, California was in the middle of a power crises and a court ordered Bonneville to produce more power so power giant Enron could sell it California.
Partial transcript of trader conversation (Word document)
Gary Chittim's 5 p.m. report
"It was causing us here in the Northwest to run our system harder than we would have otherwise, so we could help the people in California," BPA spokesman Ed Mosey said.
And running it harder meant more migrating salmon were sucked through the deadly the turbines.
"Some estimates are that we killed as many as two percent of the Chinook from that year," Cantwell said.
In one tape, an Enron trader can be heard talking about killing fish.
"It's hot and they don't have enough power so they're killing fish in the Northwest so people in California can enjoy themselves at a baseball game," the trader said, according to a transcript provided by Cantwell.
"The fact that now even Enron joked about the fish kill, about the fact emergency orders would kill fish and they continue to profit to the tune of $70 million or more is outrageous," Cantwell said.
While the discussions on some parts of the tapes may be outrageous, the actions discussed in other parts may even be illegal, such as profiting by exporting out of California the very same power a judge ordered the Northwest to provide.
"The Northwest was sacrificing salmon to keep the lights on in California while Enron worked as hard as it could to manipulate markets, lying cheating and stealing," said Steve Johnson, executive director of the with the Washington PUD Association.
Cantwell and others claim the Federal government has done nothing to reimburse the region.
"They are the policemen on the beat and the Northwest has been mugged and they're not doing a thing about it," she said, referring there to the Federal Energy Regulator Commission.
Power rates in most of Washington state's utility districts still have not come down much from the hikes caused by that crises in 2000.
One of the people that can be heard on tapes is Enron trader Tim Belden, who has pleaded guilty to federal crimes and is reportedly aiding in the investigation that may bring down more executives.
Online at: http://www.king5.com/topstories/stories/NW_082504ENBenroncantwellJK.b20d8ff7.html
Lay will most likely get away with his reasoning, that he didnt know what was going on, which is pathetic.
The enron employees will never be able to recoup their losses, and neither will those that invested in the company, which is horrible.
It is pathetic that this is accepted as an excuse not reason.
Let's see if a criminal had robbed employees, the US government, stockholders and citizens of at least two states would he be allowed to walk away with millions? There is something wrong with out society!
Corporations need regulation, unrestrained they are dangerous. There used to be SEC regulations that would have stopped this, but it was defanged.
Edited 8/26/2004 5:32 pm ET ET by hayashig
The rich get richer and the poor get poorer when there is someone who resides in the White House who doesn't give a damn about the average Joe.
Franklin Roosevelt and his wife, Eleanor, came from rich families but they felt for the poor. Between the two of them, they did wonders for the commom man. Eleanor, after Roosevelt died and when she was in her old age, reached out to the rest of the world and did marvelous things for the poor in many countries.
The first Ford wasn't that interested in the common man when he made all his money, but his sons had a heart for the common man.
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