Tech Titans Prone to Scandals

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Frank Dunn, Nortel CEO

In 2004 Nortel CEO Frank Dunn got the boot (along with CFO Douglas Beatty) for his part in a widespread accounting scandal. Dunn was charged by the SEC with directing an earnings management fraud to meet earnings targets, fabricate profits and pay performance-related bonuses. And the Royal Canadian Mounted Police charged him and other Nortel execs with making falsifying financial results and knowingly deceiving or defrauded the members, shareholders or creditors of Nortel. These alleged misdeeds forced Nortel to reissue its financial statements for 2000, 2001 and 2002 and for the first and second quarters of 2003.

Nortel's downward spiral pre-dated Dunn, but his team's efforts didn't do anything to slow the company's eventual path to bankruptcy in 2009.

Greg Reyes, Brocade CEO

Brocade CEO Gregory Reyes resigned in 2005 after the storage networking company revealed discovery of accounting irregularities in connection with stock-option grants. Reyes was sentenced to 21 months in prison and a $15 million fine for fraud in 2008, though in August of 2009 his conviction was overturned on appeal due to misconduct by prosecutors. However, this past June Reyes was sentence to 18 months in jail and was ordered to pay $15 million as a fine. Reyes has had a strong show of support from those who believe he was unfairly targeted by the government in a witch hunt of sorts, and another appeal is likely.

Sanjay Kumar, CA CEO

Sanjay Kumar was ousted as CEO of Computer Associates in April 2004 and pleaded guilty two years later to charges including falsely reporting hundreds of millions of dollars in revenue for licensing agreements before the deals were finalized.

Several other CA executives were also implicated in the financial fraud. Kumar reported to federal prison in August 2007 to begin serving a 12-year term. A U.S. District Court judge ordered more than $1 billion in restitution to the victims of the company's securities fraud. CA paid $225 million of that total, leaving $798 million in restitution to Kumar.

Stephen Gardner, Peregrine Systems CEO

Back in 2002, Gardner and Peregrine CFO Matt Gless resigned following an internal investigation by the San Diego company into up to $100 million in accounting irregularities. The company had been a high flier in the asset management software business, making a series of acquisitions to fuel its growth.

Gardner was sentenced in 2008 to more than eight years in federal prison and to forfeit some $1.4 million in proceeds from real estate and from brokerage accounts.

Peregrine wound up filing for bankruptcy protection in 2002, sold off its Remedy business to BMC, then emerged from bankruptcy protection in 2003 only to be acquired by HP in 2005.

Network World's Ann Bednarz and Jim Duffy contributed to this report.

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Read more about data center in Network World's Data Center section.

This story, "Tech Titans Prone to Scandals" was originally published by Network World.

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