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Struggling Nortel, CEO Flew High With Corporate Jet
Digital Phone Manufacturers Failing in Style

By SIMON AVERY AND BRENT JANG / VON
February 11, 2009

Mike Zafirovski, CEO of now-bankrupt Nortel Networks Corp. (NT), is the latest CEO to come under fire for using limited company resources for his personal benefit.

First, some context. Yesterday, news broke that bailed-out Wells Fargo was planning a lavish Las Vegas junket for certain employees (the bank has just canceled those plans due to bad publicity and a public shaking-down). Then, recall the Citigroup jet brouhaha from last week. Finally, remember the Detroit automakers CEOs gliding into D.C. on a private aircraft to testify about how badly they needed government money.

Now The Globe and Mail reports that, since joining Nortel in 2005, Zafirovski has “racked up hundreds of thousands of dollars worth of personal travel at Nortel's expense.” Nortel wouldn’t reveal how much money that totals, but The Globe and Mail spoke to an airline consulting firm that estimated the costs at around $1.5 million.

Much of the flight activity took place in 2008, one of the worst years ever for the global economy and, on a macro level, for Nortel itself. Amid layoffs, tumbling earnings and unsuccessful restructuring attempts, Zafirovski made 204 trips on the company’s $17 million jet, The Globe and Mail found. At least one in five of those flights was personal and the plane often sat ready at the airport down the road from Zafirovski’s Illinois home, the newspaper said.

Just like Wells Fargo, Citigroup and the carmakers, Nortel’s catching a lot of heat as these revelations come to light. Subsequently, the company has announced the jet no longer is in use.

“We have grounded the jet and are working to dispose of it as soon as possible,” Nortel told The Globe and Mail. “Past use was disclosed in public records in great detail. Future use will be zero.”

Would that still be the case if Nortel hadn’t been caught? Are corporations ever going to realize that they need to axe the unnecessary extravagances before they ever even think of laying off workers?