Nortel Networks (TSX:NT)and its auditor, Deloitte & Touche, were named in a class-action suit on Wednesday.
The suit alleges the telecommunications company overstated its revenues in late 2000 and early 2001.
The suit was filed with the Ontario Superior Court of Justice by Toronto law firms Rochon Genova and Lerner & Associates.
The suit alleges that Nortel engaged in improper accounting practices that overstated its revenues. The suit also claims that Deloitte did not make Nortel correct its accounting procedures or warn investors about the revenues.
The allegations have not been proven in court.
Nortel spokesperson Tina Warren said the suit is essentially an amendment to a suit that was filed on Feb. 23, 2001 in the Ontario Superior Court of Justice. She would not discuss the amendments as company lawyers are still examining the filing.
"Nortel networks believes this suit is without merit and we will continue to vigorously defend ourselves," Warren said.
Shares of Nortel traded down alsmost 7.5 per cent on TSX, losing 17 cents to close at $2.10.
The suit is just the latest to be filed against Nortel in the wake of the slide in the company's stock price from its high above $124 per share to its current trading range below $3.
In mid-February, 2001, a trio of class action lawsuits filed in the United States alleged Nortel Network executives sold millions of dollars of company stock just weeks before the company cut its growth forecast by half.
The suits alleged two executives sold over $7 million US of company stock after Nortel announced strong fourth-quarter earnings on Jan. 18, 2001.
On that day, Nortel reassured investors that it expected its revenues and earnings would grow by at least 30 per cent in 2001.
Former CEO John Roth and Dunn have both been named in other lawsuits filed against the company for failure to disclose information in a timely way.
News of the latest lawsuit emerged on the same day that securities regulators and the body that oversees Canada's chartered accountants announced plans to toughen the rules for auditors of public companies.
- FROM July 17, 2002: Securites regulators, accountants tighten rules on Canadian auditors