Nortel Networks Corp. (NT) took steps to close the books on a protracted accounting scandal on Tuesday, releasing long-awaited restatements of results from 2001 through 2003 and announcing that executives would pay back millions of dollars in bonuses.

Nortel, one of the world's biggest telecom equipment suppliers, said costs and billions in sales had been misreported during the period and laid the blame squarely on the shoulders of former management.

"My dad always told me when I was going to the airport and hopping in a rental car: the first thing you do is you fix all the rear-view mirrors," said Duncan Stewart, a fund manager at Tera Capital Corp. which holds Nortel stock.

"Knowing what happened in the past is an important stage before you can start figuring out the present or the future."

Shares in Nortel rose 6 Canadian cents to C$4.17 on the Toronto Stock Exchange (search) and 9 cents to $3.43 on the New York Stock Exchange (search).

Nortel said that its former chief executive, Frank Dunn, and its former chief financial officer, Doug Beatty, played key roles in the accounting malaise, which has led to criminal and regulatory investigations of Nortel's bookkeeping.

Nortel, which has fired Dunn, Beatty and several others "for cause," said an independent review had found that former corporate and finance managers had endorsed the recording and release of provisions that were not in accordance with generally accepted accounting principles in at least four financial quarters.

In several quarters, that made the difference between a profit and a loss.

Shareholders have alleged that Nortel officers cooked the books so that the company could turn a profit in 2003 and so that the executives could benefit from a bonus plan that paid out millions of dollars. Those charges have not been proven in court.

Nortel has demanded repayment of $10 million in bonuses paid to 10 executives it fired for cause and said it could take further action.

Separately, twelve senior executives who still work at the company have agreed to repay about $8.6 million in bonuses. None of those executives have been found to have been directly involved in inappropriate accounting, Nortel said.

The figures released on Tuesday are a second restatement of results for the period. During a 10-month audit, the company missed three self-imposed deadlines to issue corrected numbers, citing the complexity and volume of the work.

Nortel also said it will review revenue restatements for 1999 and 2000. It has hired law firm Wilmer Cutler Pickering Hale and Dorr, which worked on the 2003 restatement, to help investigate specific transactions.

"Nortel has finally given investors some clarity on the issue and some visibility into the extent and depth of the issues," said Tim Ghriskey, chief investment officer at Solaris Asset Management, which has held Nortel shares, but does not presently.

"For us to buy the stock, we really want to be able to envision an operating turn at this company, the potential for positive surprises on an operating basis, and at this point, we think those positive developments are still some time off."

The restatements were largely in line with Nortel's previous estimates, which were revised several times under biweekly updates required by regulators.

The restatement reduced 2003 net earnings to $434 million, or 10 cents a share, from the $732 million, or 17 cents, initially reported, but boosted revenue to $10.19 billion from $9.81 billion.

Sales in 2001 rose to $18.9 billion from $17.4 billion and the loss was reduced to $8.08 per share from $8.52. Revenue in 2002 rose to $11 billion from $10.57 billion and the loss was reduced to 78 cents a share from 85 cents.

Nortel also said that five directors, including its chairman Lynton (Red) Wilson, will retire from its board. The board reappointed two recently hired directors.

($1=$1.22 Canadian)