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Tyco Fraud Essay

3507 words - 14 pages

Contents3About TYCO 5The Fraud 6The Rise of TYCO 7The Fall of Tyco 2002 8Executive' lavish lives 10Discovery of the fraud 11Tyco investigation Timeline 12Charges laid: 13A different kind of corruption case 14Ethical and Legal issues at Tyco 15Theory Applicable: 16Rebuilding Tyco 18Lessons Learnt 19Conclusion About TYCOTyco International is a diversified, global company that provides vital products and services to customers in more than 60 countries around the world. Tyco is a leading provider of security products and services, fire protection and detection products and services, and industrial valves and controls. Tyco International Ltd. was founded in 1960 by Arthur J. Rosenburg.With 2011 revenue of more than $17 billion, Tyco employs approximately 100,000 people across three business segments: Security Solutions, Fire Protection and Flow Control. Since 1986, Tyco has claimed over 40 major acquisitions as well as many minor acquisitions.Kozlowski a long-time Tyco employee, starting in 1976 as an internal auditor, worked his way up to CEO in 1992. With Kozlowski at the helm, Tyco massively expanded during the late 1990s. He became the chair of the board in 1993. He diversified the company, branching into health care.Tyco was affected by corporate scandal in 2002 when members of the company's management used company's money improperly. Tyco's then CEO was convicted in 2005 on 22 of the 23 counts he facedThe FraudThe company, Tyco manufactured a wide variety of products, from electronic components to healthcare products .The conglomerate operated in over a 240,000 people. During 2002, exchange and securities commission began an investigation at Tyco's top executives. Inquiry into the accuracy of the company's book began in January. As investigation continued, it uncovered that Dennis Dozlowski, Tyco former CEO, Mark Swartz Tyco's former CFO and Mark Belnick the company's chief legal officer had taken over $170 million in loans from Tyco without receiving appropriate approval from Tyco's compensation committee and notifying shareholders. For the most part these loans were taken with low to no interest. Many of them were offset as bonuses without open approval. Kozlowski and Swartz also sold seven and a half million shares of Tyco stock for $430 million without telling investors. Formal charges were made by the SEC September 12, 2002.According to the Tyco Fraud Information Center, an internal investigation concluded that there were accounting errors, but that there was no systematic fraud problem at Tyco. Tyco's former CEO Dennis Kozlowski, former CFO Mark Swartz, and former General Counsel Mark Belnick were accused ofGiving them interest-free or very low 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...

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