Nortel Networks has terminated its chief executive officer, Frank Dunn, "for cause" amid an ongoing investigation into the company’s financial reporting, Nortel announced today.

Dunn will be replaced by William Owens, a Nortel director since February 2002. Owens was previously the CEO of satellite firm Teledesic and chief operating officer of Science Applications International Corporation.

The appointments of William Kerr and MaryAnne Pahapill, who were named CFO and controller, respectively, on an interim basis in March, have been made permanent. And the former CFO and controller, Douglas Beatty and Michael Gollogly, who were placed on paid leave of absence then, have been terminated "for cause," Nortel said.

In addition, four senior finance executives have been put on paid leave of absence pending further review of Nortel’s accounting.

"The actions announced today are about accountability for our financial reporting and are in the best interests of the company," Nortel’s chairman of the board Lynton Wilson said in a statement issued today. "These actions are an important step in the process of restoring confidence in the company's leadership and financial reporting."

The audit committee currently conducting an independent investigation of Nortel’s accruals and provisions practices will extend the period under review to include all of 2003 rather than just the first half of the year. It is also reviewing 2002 and 2001, as was previously announced.

Nortel expects restatements to result in an estimated 50% reduction in the net earnings previously announced for 2003, much of which will be shifted to prior periods, effectively shrinking net losses in 2002 and 2001 reported earlier. As part of that reduction, Nortel expects the net earnings it announced for the first half of 2003 to become net losses in its restated reports. Nortel doesn’t expect material changes to 2002 or 2001 revenues or its cash balance at the end of 2003. The company cannot predict when it will restate its 2003 financial reports, and it will also delay its first-quarter 2004 earnings report.

The U.S. Securities and Exchange Commission and the Ontario Securities Commission both began formal investigations of the company earlier this month.