Company Profile
It participates in several different industries: Electronics Fire & Security Healthcare Plastics & Adhesives Engineered Products & Services It employs over 267,000 people Its services and products are provided worldwide
Parties Involve
Dennis Kozlowski
Graduate of Seton Hall University Began work at Tyco in 1976 Worked his way up through the
company, becoming CEO in 1992 Was key in an $850 million dollar purchase of an under seas fiber-optic cable business On June 3, 2002 he resigned for personal reasons On September 12, 2002 he was formally indicted on several charges On October 7, 2003 he went to trial
Mark Swartz
Previously worked for Deloitte & Touche Started working at Tyco in 1991 In 1995 he became the CFO He was nominated for a CFO Excellence Award in 2000 September 12, 2002 he was formally charged and pleaded innocent October 7, 2003 he went to trial February 10, 2004 he testified on his behalf
Problem
Tyco's former CEO Dennis Koslowski, former CFO Mark
Swartz, were accused of giving themselves interest-free or interest loans (sometimes disguised as bonuses) that were never approved by the Tyco board or repaid. Some of these "loans" were part of a "Key Employee Loan" program the company offered. They were also accused of selling their company stock without telling investors, which is a requirement under SEC rules. Koslowski and Swartz stole $600 million dollars from Tyco International through their unapproved bonuses, loans, and extravagant "company" spending.
Discovery of Fraud
In 1999 the SEC began an investigation after an analyst
reported questionable accounting practices. This investigation took place from 1999 to 2000
coat hangers for 2,900, and a 1,650 dollar appointment book A variety of expensive paintings
The Charges
They were charged with civil fraud and theft Other charges against Kozlowski and Swartz included
corruption, conspiracy, grand larceny, and falsifying records The maximum sentence for the two would be 30 years each.
Implications
The company re-structured their management, firing a
total of 9 executives on their board Most notably, Edward Breen was hired as the new CEO and David FitzPatrick was hired as the new CFO On May 6, 2003 a new ethical guide was distributed to all employees
Possible Precautions
Companies could more closely monitor their
employees for unethical conduct The government could monitor accounting practices of companies more closely Any executives of companies who exhibit suspicious behavior should be closely watched
Thank you !