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Tyco Scandal 2002

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Carmen Labonte

on 29 January 2014

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Transcript of Tyco Scandal 2002

Tyco Scandal 2002
Summary of the Scandal
-CEO Dennis Kozlowski, CFO Mark Swartz, and chief corporate counsel Mark Belnick
-stole $150 million
-inflated company income by $500 million
-falsified records to conceal illicit company loans
-started being investigated in January
-banking sources noticed a fuzzy transaction
-large sums of money being transferred to Kozlowski's accounts
Specific Details of the Accounting Impropriety
-accused of giving themselves interest free loans
-disguised as bonuses
-weren't approved or repaid
-sold company's stock without telling investors
-kept their activities out of accounting books
-didn't show books to shareholders or board members
Effects and Results of the Scandal
-found guilty in 2005 of:
taking bonuses without approval
abusing the employee loan program
misrepresenting company's financial position
-Edward Breen replaced Kozlowski as CEO
-checked to make sure no other fraud occurred
-restored faith by recovering funds taken
-elected a new board of directors
Thanks for Watching!
Corporation Overview
-founded in 1960 by Arthur Rosenberg
-specializes in advancing fire safety and security
-operations in over 100 countries
-over 70,000 employees
-makes over $10.52 billion in sales
-claimed over 40 major acquisitions since 1986
-design, produce, sell, and/or install:
electrical and electronic components
undersea telecommunications systems
fire protection systems
electronic security services
specialty valves
disposable products
-Kozlowski resigned before accused of tax evasion
-Sep. 12, Kozlowski and Swartz accused of enterprise corruption
-Dec. 17, board member Frank Walsh pleads guilty

-Oct. 7, first trial for the three men
-pleaded innocent
-"deserved and disclosed all corporate payments and perks"
-June 17, men found guilty
-could each face up to 25 years in prion
-Kozlowski was one of the top corporate managers in 2001
-loans paid for personal purchases:
unnecessary expensive items
-bonuses given as loan forgiveness
-workers were unaware that it was illegal
-paid people off who suspected them

-company created the Tyco Guide to Ethical Conduct
-three elements:
strong and ethical corporate leadership
behaviour tracking processes
-confidential hotline produced to report misconduct
-2004, Tyco won "Outstanding Improvement in Board Governance" award

Recommendations as How to Avoid Similar Accounting Improprieties
-make intentions known
-accounting books checked regularly
-check up on financial values of employees
-be aware of what is happening in your business
Full transcript