Another Scumbag CEO
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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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Edited 8/30/2004 11:53 am ET ET by palak
Just seeing them on the screne gives me the willies. After years in Hawaii, I am finally free of them in Colorado. And yes turn the light on and they run and hide, so yeh that's what it would be like! UGh
"I am satisfied that the Bush administration has gone after all corporate criminals"
LOL
Here are several links
http://abcnews.go.com/sections/business/DailyNews/enron_cheneyletter020109.html
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/01/30/MN46204.DTL
Cheney has been accused by the left of letting corporate giants influence energy policy (smoke and mirrors, btw).
These are two completely different stories, and have no correlation to one another.
Black's $400m 'corporate kleptocracy' to fund lavish lifestyle with his wife.
http://news.scotsman.com/uk.cfm?id=1025012004
• Report accuses Conrad Black of siphoning $400m from Hollinger in 'perks'
• Sum is equivalent to 95.2% of Hollinger net income between 1997- 2003
• Lord Black also named in $1.25bn racketeering lawsuit over Hollinger tenure
Key quote
"Black and Radler made it their business to line their pockets at the expense of Hollinger almost every day, in almost every way they could devise" - Hollinger International report to US District Court in Chicago
Story in full LORD Black, the former owner of the Daily Telegraph, "systematically" siphoned off millions of dollars in payments that should have gone to the newspaper’s then parent group, Hollinger International, according to a report filed with the US District Court in Chicago yesterday.
The money was spent on personal perks including private jets and club memberships, according to the document compiled by a special board committee of the Chicago-based newspaper publisher.
In a damning indictment of his stewardship, the report states that "not once or twice, but on dozens of occasions Hollinger was victimised by as they transferred to themselves and their affiliates more than $400 million (£220 million) over the last seven years".
The sum was equivalent to 95.2 per cent of Hollinger’s adjusted net income from 1997 to 2003, it said.
The 500-page investigation tears into the tycoon in blistering terms, laying a devastating series of claims against the huge sums of money squandered by Black and his wife Barbara Amiel, a glamorous journalist and society hostess who was dismissed recently as a columnist on the Daily Telegraph.
The report accuses Barbara Amiel Black herself of receiving compensation directly from Hollinger for providing "no real services to the company". Since 1999 she has been paid, claims the report, an annual salary of $1.1 million and dividends totalling $1 million as Hollinger’s vice-president editorial.
The report concludes that her work amounted to "nothing more than euphemisms for ordinary activities such as reading the newspaper, having lunch, and chatting with her husband about current events."
The Special Committee found that Amiel Black would not have received her generous salary and bonus were it not for her status as Black’s wife.
In addition, since 1999 she received more than $225,000 in fees for pieces published in Hollinger newspapers.
Further outlining how Hollinger’s funds were misused, the report said Lord Black and his wife billed a long list of living expenses on expenses, from cell phones to perfume. They included charges of $24,950 for "summer drinks", $3,530 for silverware for Lord Black’s corporate jet, and $42,870 for a "Happy Birthday, Barbara" dinner at New York’s La Grenouille restaurant.
Yesterday’s filing follows an announcement by the midwest bureau of US federal watchdog the Securities and Exchange Commission that it has recommended a civil action be pursued against Lord Black after he was forced out of Hollinger International.
The developments represent an escalation of the case against the disgraced tycoon, who was removed as chairman and chief executive of Hollinger International when evidence of his "manipulation" of company monies emerged.
He is also named in a $1.25 billion lawsuit that accuses him of racketeering during his tenure at Hollinger International, whose holdings included the Chicago Sun-Times, and the Jerusalem Post. The Telegraph titles were recently sold to Sir David and Sir Frederick Barclay, owners of The Scotsman.
Hollinger International’s report to the US court, compiled under the guidance of the former SEC chairman Richard Beesten, accuses Lord Black and former Sun-Times publisher David Radler of being preoccupied with "compensation for executives".
"Hollinger went from being an expanding business to becoming a company whose sole preoccupation was generating current cash for the controlling shareholders, with no concern for building future enterprise value or wealth for all shareholders.
"Behind a constant stream of bombast regarding their accomplishments as self-described proprietors, Black and Radler made it their business to line their pockets at the expense of Hollinger almost every day, in almost every way they could devise", it said.
The report was initiated after Tweedy Browne, the largest institutional shareholder, threatened to sue the company if it did not investigate allegations that Hollinger’s board - which includes Richard Perle, the former US defence adviser, and Henry Kissinger, the former US secretary of state - had failed to scrutinise Lord Black’s use of corporate funds properly.
Gordon Paris, chief executive and interim chairman of Hollinger International, said the report was, "an important step forward in our pursuit of restitution for funds and assets inappropriately taken from the company’s coffers".
A statement issued by Lord Black’s private holding company, Ravelston Management Inc, dismissed the report’s charges, calling them "the same exaggerated claims laced with outright lies".
"The report is full of so many factual and tainting inaccuracies that it is not practical to address them in their entirety here," the statement said.
"These issues will ultimately be resolved in courts of justice where the facts and evidence will exonerate the men and women who are being attacked in this report."
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