Case Study on "Tyco: I'm Sure That IT'S a Really"

Case Study 4 pages (1145 words) Sources: 3

[EXCERPT] . . . .

TYCO: I'M SURE THAT it'S a REALLY NICE SHOWER CURTAIN

Tyco

Tyco: I'm sure that it's a really nice shower curtain

Summary of author's view point

The author speaks about the fall of former Tyco CEO Dennis Kozlowski, and Mark Swartz former chief financial officer who were both found guilty by a Manhattan jury on June 17th, 2005. They had both without the shareholders knowledge had taken loans from the company of around $170 million. They had also made stock sales without disclosing as was found out through an investigation by the Securities and Exchange Commission. $600 million was the total amount Tyco lost in fraudulent practices. There been an investigation of sales tax evasion in New York for Dennis Kozlowski the board of directors demanded that he resigns as the CEO of Tyco, and he did this on June 3rd, 2002. The sales tax evasion was in regards to paintings purchased in Manhattan for his New York house. To avoid paying the sales tax of 8.2% he had the paintings shipped to his New Hampshire home Beschorner, 2006.

Evidence collected showed that he knew very well what he was doing so the evasion was pre-meditated.

Kozlowski was charged for avoiding paying taxes together with knowingly falsifying financial documents and evidence tampering on June 4th, 2002. He had no regard of the law, and as he always hated paying taxes he would do anything in his power to ensure he evades paying taxes. Kozlowski ordered an art dealer to ship empty boxes to New Hampshire where they were signed for by a Tyco employee and ship the paintings to his New York home, this he did to show that the paintings were not to be hung in New York but rather New Hampshire. To keep their fraudulent activities silent Kozlowski and Swartz paid off Tyco board members and some employees. They falsified their expense accounts, and would give out bonuses to some employees though this had not been authorized. They did this to ensure their illegal activities continued without been reported by the employees.

With the investigations taking place against the two, the Tyco stock was coming tumbling down, and this was affecting the company's market capitalization. In December 2001, the stock was valued at $60, but it had come to $10.10 in June 2002, and the stock continued to drop with more revelations from the investigations. From the investigations, it was found out that the company would falsify its financial records to indicate it was making a profit for years, and the company had to eliminate profits of $382 million that had been previously reported. Mangers were encouraged to bypass rules of accounting to ensure that their departments were profitable.

Mark Belnick, Tyco's legal counsel was fired because it was alleged that he was disrupting investigations. Belnick was sued by Tyco for accepting payments without disclosing, and for deleting files thus affecting the investigation Maguire, 1997.

On all the charges brought against him, Belnick was found not guilty. The author goes on to show the impact that the board of directors had on Kozlowski. Some board members were personal friends of Kozlowski, and he involved them in his illegal dealings he conducted, or they had full knowledge.

Kozlowski and Swartz manipulated the employee loan program to ensure that only the two benefited although it was meant for top executives. They took loans, and they did not have to repay them. Kozlowski… READ MORE

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