Frank Dunn at Nortel's AGM in April 2003.

Frank Dunn is proceeding with the construction of a luxury home that could be worth as much as $15 million despite criminal probes into the accounting activities at Nortel Networks Corp. while he was CFO and CEO.

The lakeside mansion is being built in Oakville near Toronto on a picturesque waterfront property acquired for $4.3 million two years ago, according to land registry documents obtained by Canadian Press.

The property was bought in August 2002, 10 months before Mr. Dunn took over as CEO of Nortel with the retirement of John Roth.

The home, once complete, will have an estimated market value of $12 million to $15 million.

Mr. Dunn was fired for cause earlier this year. His dismissal relates to the massive audit of Nortel's books that has sparked regulatory and criminal investigations on both sides of the border. However, no formal allegations of wrongdoing have yet been leveled against him.

Last week, new CEO William Owens promised that any bonuses paid to executives found to have been involved in the accounting mess will be revoked. That includes about US$10 million paid out in 2003 to 10 fired executives, including Mr. Dunn.

Nortel's audit is expected to result in restatements of fiscal results going back to 2001, encompassing Mr. Dunn's service to the company as both CFO and CEO.

Charles Smedmor, a forensic accountant at Toronto firm Smedmor & Associates, told CP he finds it surprising that someone in Mr. Dunn's position would continue with such a "discretionary" project.

"A concern is whether putting these funds into such a real estate project may reduce the potential recoveries for Nortel and its shareholders," Mr. Smedmor said.

The land registry documents suggest Mr. Dunn isn't paying for the construction entirely with cash. On May 10 of this year, only 12 days after being fired from Nortel, he took out a mortgage for $3 million.