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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Have you noticed the recurrence of failure of oversight seems to bubble up. Is there something in the water that makes people irresponsible?
"If there was ever a mess that made the case for the S.E.C.'s using the post-Enron reforms to force boards to exercise greater vigilance, this is it. Corporate kleptocracy should at least be a challenge."
Corporate Kleptocracy
Published: September 2, 2004
White-collar crooks typically skim from the top, but Conrad Black stands accused of pocketing the whole top, the middle and much of the bottom of the barrel of his company's assets. An inquiry that was commissioned by the company, the Hollinger International newspaper publisher, and led by Richard Breeden, a former chairman of the Securities and Exchange Commission, accuses Mr. Black and his chief operating officer, David Radler, of helping themselves to some $400 million of Hollinger funds from 1996 to 2003. That's roughly 95 percent of the company's net income for the period.
Hollinger owns The Chicago Sun-Times, The Jerusalem Post and many smaller papers, and recently sold The Daily Telegraph in London. Conrad Black, who was born a Canadian but is now a British lord, is the publicly traded company's largest shareholder and was its chief executive until last fall. He treated Hollinger as if it were his private piggy bank, the inquiry found.
Its report, entitled "A Corporate Kleptocracy," accuses holding companies controlled by Mr. Black and Mr. Radler of siphoning off hundreds of millions of dollars from Hollinger in dubious management fees and absurd noncompete fees. The men are also accused of having the company bankroll joyrides on the company jet, handbags and exercise equipment for Mr. Black's wife, birthday opera tickets, and those generous charitable donations that make one an esteemed member of the community.
As in the case of Enron and Tyco and other recent tales of corporate thievery, a hapless board of celebrity directors figures prominently in this case. The Hollinger board included the likes of Henry Kissinger; Robert Strauss, the former Democratic Party leader and ambassador to the Soviet Union; and Richard Burt, the former ambassador to Germany. Richard Perle, the Washington foreign policy hawk who served in President Ronald Reagan's Defense Department, comes in for special criticism in the report - he is accused of pocketing more than $5 million in fees from the company, partly from inappropriate dealings that were conflicts of interest. Plenty of investors may have been suckered into buying Hollinger shares because of its board's star power, but its directors seem to have acted as Mr. Black's marionettes.
Mr. Black and Mr. Radler deny any wrongdoing and disagree with the conclusions of the 513-page report. Part of their defense is to assert that the directors signed off on all their compensation, but some directors have been saying they were misled. The new Hollinger board and investors are seeking to recover $1.25 billion from Mr. Black and others, and the escalating legal battle will continue the scrutiny of the role of the board.
It is hard to imagine that directors who were even minimally engaged in the running of a company wouldn't have raised more questions about Mr. Black's behavior. If there was ever a mess that made the case for the S.E.C.'s using the post-Enron reforms to force boards to exercise greater vigilance, this is it. Corporate kleptocracy should at least be a challenge.
http://www.nytimes.com/2004/09/02/opinion/02thu2.html
Black reminds me of that head of Tyco, except he has hair. ;) Same lavish parties, over the top purchases.
Meanwhile some kid's in jail for selling some pot.
Yup, we got our priorities confused. In the movie Wall Street Gekko said, "Greed works, greed is right...and greed, mark my words, will save not only Teldar Paper but the other malfunctioning corporation called the U.S.A." Seems like all corporate CEOs believe the ideology of greed-is-good. Will we be able to save ourselves?
The CEO Test for Bush
Bush gave a long speech Thursday night, which sounded like a laundry list of promises more than anything else. He pointed to few genuine accomplishments during the past four years, and seemed stuck in fall, 2001.
If you think about George W. Bush as CEO of America, Inc., it becomes clearer why his poll numbers have been so low (low to mid forties) in the run up to the election. No president with those kinds of poll numbers in the spring before the election has ever won.
Bush's basic characteristic is not steadfastness, as the convention attempted to argue, but rashness. He is a gambler who goes for the big bang. He loses his temper easily, and makes hasty and uninformed decisions about important matters. No corporation would keep on a CEO that took risks the way Bush has, if the gambles so often resulted in huge losses.
Let us imagine you had a corporation with annual gross revenues of about $2 trillion. And let's say that in 2000, it had profits of $150 billion. So you bring in a new CEO, and within four years, the profit falls to zero and then the company goes into the red to the tune of over $400 billion per year. You're on the Board of Directors and the CEO's term is up for renewal. Do you vote to keep him in? That's what Bush did to the US government. He took it from surpluses to deep in the red. We are all paying interest on the unprecedented $400 billion per year in deficits (a deficit is just a loan), and our grandchildren will be paying the interest in all likelihood.
And what if you had been working for America, Inc. all your life, and were vested in its pension plan (i.e. social security)? And you heard that the company is now hemorrhaging money and that the losses are going to be paid for out of your pension? What if you thought you were going to get $1000 a month to retire on, and it is only going to be $500? Or maybe nothing at all? Because of the new CEO whose management turned a profit-making enterprise into an economic loser? Would you vote to keep him on?
What if the CEO convinced himself that the Mesopotamia Corp. was planning a hostile takeover? What if he had appointed a lot of senior vice-presidents who were either incompetent boobs or had some kind of backroom deal going with crooked brokers, and fed him false information that Mesopotamia Corp. was making a move and had amassed a big war chest for the purpose? And what if, to avoid this imaginary threat, he launched a preemptive hostile takeover of his own, spending at least $200 billion to accomplish it (on top of the more than $400 billion he is already losing every year)? Remember, it was a useless expenditure.
It turns out that Mesopotamia Corp. was a creaky old dinosaur with no cash reserves, and couldn't have launched a hostile takeover of the neighborhood mom and pop store. And, moreover, its arena of operations is extremely dangerous, and nearly a thousand America, Inc. workers get killed taking it over. And it turns out that the managers that the CEO put into Mesopotamia Corp. were bunglers. They adopted policies that made the taken-over employees bitter and sullen and uncooperative. Instead of standing on its own, the wholly owned subsidiary of Mesopotamia, Inc., requires continued infusion of capital from America, Inc. It looks increasingly as though Mesopotamia, Inc., will have to be let loose, and that its new managers will opt for interest-free Islamic banking as soon as they can.
Meanwhile, the real threat of a hostile takeover comes from al-Qaeda, Inc. Because 138,000 employees had to be assigned to Mesopotamia, Inc., there are few left to meet that challenge.
So given this kind of record, do you vote this CEO back in? It is often said that a lot of Americans want to stick with Bush to "see Iraq through." But if you think about him as a CEO, and look at how well he has run things, you can see the idiocy of this argument. The real question is, do you throw good money after bad?
http://www.juancole.com/
Fire the CEO & his staff!
Replace them with
he is talking about ownership and people starting to own something etc.. What a scam.. I know in his mind he is thinking about people owning stock in his buddies' companies. He also proposed health care plan for small business but has no idea how he is going to fund it. So this CEO can layout a plan but completely eliminate the plan to fund it.
I'm really happy to see you returned.
I watched on MSNBC, but in between his speech, went to check on kids, go to bathroom, chatted with my husband etc.. Usually I like to remain glued to the TV after the kids go to bed. Actually they showed Kerry/Edwards speech in springfield Ohio as a rebuttal to President's speech. Kerry is changing his tone now and attacking Bush. So good for him. I think it is about time. Though since he had no time to prepare the sppech it wasn't the greatest. I liked the Edwards intorduction better. I have also heard rumors that Kerry is going to change his campaign advisor. I think he needs to do that ASAP.
It's really difficult to know what to do, but I agree he needs to do something. I am particularly disappointed that Kerry hasn't mentioned the lack of stratage after the war. He hasn't attacked on the lack of progress in Afghanistan. He seems almost frozen by his misguided vote on giving GWB authorization to pursue Iraq. One would think that since is attacking (spreading lies) Kerry on his senate record, Kerry should be able to attack Bush on his corporate record which is horrible, and possibly illegal. The Democrats have been too nice to GWB et al. But then I remember that I don't like attack ads, but can't argue with their effectiveness.
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