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Transcript of TYCO International
over 1000 companies
were acquired 1990s TYCO became embroiled in a massive scandal based on real events of TYCO by Victoria Aldaranova
Nadzeya Valakhovich The Other Story of Human Greed Dennis Koslowski million Mark H. Swartz TYCO's former CFO $600 TYCO's former CEO TYCO's KELP Program Designed to encourage ownership of Tyco common shares by executives and other key employees. KELP loans and relocation loans that Koslowski, Swartz and other employees owed were forgiven and written off TYCO's books, by being called "bonuses". Kozlowski and Swartz directed others to falsify TYCO's books and to offset the costs of the relocation loan forgiveness program against an unrelated gain realized on IPO of TYCO's subsidiary. STOLEN Employees What are the consequences? Once upon a time in a beautiful country of Switzerland there was a company called TYCO... SIGNED NONDISCLOSURE AGREEMENT active in 3 major business segments Kozlowski and Swartz used $170 million for personal purposes, without any regard for the legitimate and authorized purposes of the two loan programs. TYCO' s Relocation Loan Program Designed to assist Tyco employees who were required to relocate from New Hampshire to New York and to Boca Raton. Today TYCO International Ltd.
is still in business ... Self Engineered Forgiveness Program Top Management External Auditor ALWAYS THINK WHAT YOU ARE DOING... Dennis Kozlowski & Mark Swartz Shareholders Security Solutions
Flow Control ...t ...until... grand larceny
first degree falsifying business records
fourth degree conspiracy
securities fraud $430 million gain via TYCO share sale $430 $170 million taken as loans Weak system of internal controls. poor documentation and approval procedures
inadequate procedures for proper corporate authorizations
a lack of oversight by senior management at the corporate level
intimidating culture, where people were very unwilling to speak up Analysts INVOLVED PARTIES SHAREHOLDERS COMPANY AND EMPLOYEES STAKEHOLDERS IN GENERAL REBUILDING THEIR ETHICAL REPUTATION Dennis Kozlowski and Mark Swartz:
8 1/3-25 years sentence in prison,
total of $134 million of restitution payment,
$70 million fine for Kozlowski,
$35 million fine for Swartz. Tyco International Ltd.:
$2.975 billion settlement of securities and accounting fraud claims.
Tyco’s former auditor, PricewaterhouseCoopers:
$225 million settlement of securities and accounting fraud claims Loss of over $90 billion, more than 80 percent of TYCO’s peak market value Damaged reputation
The company closed 300 plants during 2003-2006 period
Employees were fired and laid off
Replacement of the Board of directors and most of the top managers Tyco scandal was one of numerous corporate scandals America and the world witnessed in 2002.
In general, they led to decrease of investors confidence in stock markets and to development of new federal regulations. Hiring of Eric Pillmore, the first ever SVP Corporate Governance Replacement of the old board of directors and 290 of the 300 corporate employees 3 principles have been integrated into the governance at Tyco Presence of strong leaders
Web of accountability
Behaviour tracking process “Tyco Guide to Ethical Conduct.” In 2004, Tyco was recognized with an award- the “Outstanding Improvement in Board Governance” award, from the Centre for Corporate Change.