"Two Former Tyco Executives Found Guilty"

            This paper presents an analysis of the article titled 'Two former Tyco executives found guilty' which concerns the court verdict of Tyco International's employees in a fraud, grand larceny and conspiracy case.

             Ethical Business Issue.

             The past three years have witnessed stunning financial collapses in many companies that were ranked among the most admired companies in America. Sunbeam, Enron, WorldCom, Tyco, and HealthSouth were lauded, imitated, and studied for their stunning performances. Now they are studied for their failures. What went wrong? How could so much go so wrong? And, the inevitable question, where were the auditors and the accountants as these financial statements of well-being were released?.

             Introduction and Facts.

             Tyco International CEO Dennis Kozlowski, former CFO Mark Swartz, and former general counsel Mark Belnick were all indicted on charges that Kozlowski and Swartz, among others, stole $170 million from the company and pocketing $430 million from the fraudulent sale of Tyco stock. Belnick was charged with hiding $14 million in loans to himself. Tyco's management fired back as well. It filed a lawsuit against Kozlowski looking to recoup $244 million in pay and benefits. Tyco, over the period between 1964 and 2001, went from a small research firm based in New Hampshire to a conglomerate with a presence in over 100 countries and over 250,000 employees. Between 1991 and 2001, then-CEO Dennis Kozlowski took Tyco from $3 billion in annual sales to $36 billion in 2001 with over 200 acquisitions at a cost of $60 billion. .

             It was through its expansive acquisition program that Tyco's accounting pushed the envelope. Tyco made its acquisitions look as anemic as possible. Called "spring-loading," the goal was to have the acquired company seem to be a nonperformer in terms of earnings, much below its actual performance. However, if the acquired company then simply performs normally the following year, Tyco enjoys a boost to both its growth as well as respect for its management ability.

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