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Former Nortel Networks president and CEO Frank Dunn was among those who had civil charges filed against them. ((Chris Wattie/Canadian Press))

Stock market regulators inthe United States filed civilcharges Monday against severalformer Nortel Networks executives, including ex-CEO Frank Dunn.

"The fraudulent conduct at issue here was egregious and long-running," saidLinda Thomsen,the enforcement director at the U.S. Securities and Exchange Commission.

"Each of the defendants betrayed Nortel's investors and their misconduct gave rise to billions of dollars in shareholder losses," she wrote in a release.

Chargedalong with Dunn are former chief financial officer and controllerDouglas Beatty, former controller Michael Gollogly and former assistant controller and vice-president of corporate reporting MaryAnne Pahapill.

The SEC accused the four of "repeatedly engaging in accounting fraud to bridge gaps between Nortel's true performance, its internal targets and Wall Street expectations."

The four are charged with "violating and/or aiding and abetting violations of the antifraud, reporting, books and records, internal controls and lying-to- auditors provisions of the federal securities laws."

Dunn and Beatty have also been charged with violations of the officer certification provisions instituted by the Sarbanes-Oxley Act. That law requires senior corporate executives to certify company financial statements are accurate.

The SEC is seeking civil monetary penalties, prohibition against serving as an officer and director of a publicly listed company, and return of financial gains with prejudgment interest against all four defendants.

The charges were filed in theU.S. District Court for the Southern District of New York.

An RCMP criminal probe was launched in August 2004. It is still ongoing.

OSC makes allegations of misconduct

Also on Monday, theOntario Securities Commission alleged that Dunn, Beatty, and Gollogly broke securities laws by making "material misstatements" in Nortel’s financial filings that they knew or should have known were "materially misleading."

A hearing in the matter has been set for May 1.

In a statement, Dunn said he wasdisappointed that, after three years, the SECbrought charges on the same day as the OSC.

"I think it would have been appropriate, under the circumstances, if the authorities in the United States had deferred to the Ontario Securities Commission in what is really a Canadian matter, and had acknowledged that the Canadian authorities are fully capable of addressing these important issues," Dunn said.

CEO fired

In March 2004, Nortel stock plunged after the company warned it would delay filing its audited financial statements for 2003 and would likely make more financial restatements. The company then put its chief financial officer and controller on paid leave. The stock sank again.

Both the SEC and the Ontario Securities Commission began investigations in April 2004 of Nortel's earnings restatements.

On April 28, 2004, Nortel fired Dunn and the two executives who had been on paid leave, and put four more on paid leave.

The company subsequently went through several rounds of accounting restatements as it cleaned up its books.

Shares of Nortel finished up nine cents at $33.01 on the TSX Monday.