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Tyco International Essay

3902 words - 16 pages

Introduction
On September 12, 2002, national television showcased Tyco International’s former chief executive officer (CEO) L. Dennis Kozlowski and former chief financial officer (CFO) Mark H. Swartz in handcuffs after being arrested and charged with misappropriating more than $170 million from the company. They were also accused of stealing more than $430 million through fraudulent sales of Tyco stock and concealing the information from shareholders. The two executives were charged with more than thirty counts of misconduct, including grand larceny, enterprise corruption, and falsifying business records. Another executive, former general counsel Mark A. Belnick, was charged with concealing ...view middle of the document...

The company subsequently shifted its focus from growth to profits within its three primary divisions: fire protection, electronics, and packaging. Kozlowski joined Tyco's board in 1987 and became president and chief operating officer two years later. Kozlowski engineered a coup to become Tyco's chief executive officer (CEO) in 1992 and the chair of the board in 1993. He diversified the company, branching into health care. Tyco eventually became the second largest producer of medical devices in the United States. On December 5, 2001, the Tyco shares were trading for 59.76 on the NYSE.

DURING: The Fraud
* The Main Players in the Scandal

The primary people that were identified responsible of the scandal were Dennis Kozlowski and finance chief, Mark Swartz.

Kozlowski joined the company in 1975 as an assistant controller at Tyco. He worked in the company during a time of rapid expansion and moved to the board of directors in 1987, become CEO in1992, and became chairman of the board in 1993. Kozlowski was known for his vicious acquisitions, and gained a lot of attention by his extremely lavish lifestyle.

Mark Swartz was the Chief Finance Officer of the company and worked under Kozlowski. from 1995 through August 2002, and a Tyco director from February 2001 through August 2002. It was determined during trial that the two had worked synonymously in committing fraud, and working against the shareholders.

Mark Belnick was served as Tyco's Executive Vice President and Chief Corporate Counsel from September 1998 until June 10, 2002. Who helped lauch efforts Mr. Kozlowski, made the Board Committees do not realize the fraud and closed off from the public.

* THE RISE OF DENNIS KOZLOWSKI

In 1975, armed with a degree in accounting, Dennis Kozlowski went to work for Tyco, following brief stints at SCM Corporation and Nashua Corporation. He soon found a friend and mentor in then CEO Joseph Gaziano. Kozlowski was impressed by Gaziano’s lavish lifestyle—company jets, extravagant vacations, company cars, and country club memberships. However, Gaziano’s reign ended abruptly in 1982 when he died of cancer. Gaziano was replaced by John F. Fort III, who differed sharply in management style. Where Gaziano had been extravagant, Fort was analytical and thrifty. His goal was to increase profits for shareholders and cut the extravagant spending characterizing Gaziano’s tenure, and Wall Street responded positively to Tyco’s new direction.

Kozlowski, who had thrived under Gaziano, was forced to adapt to the abrupt change in leadership. Adept at crunching numbers, Kozlowski focused on helping to achieve Fort’s vision of putting shareholders first. He soon gained Fort’s attention, and was promoted to president of Grinnell Fire Protection Systems Company, Tyco’s largest division. At Grinnell, Kozlowski reduced overhead, eliminated 98 percent of paperwork, and revised compensation programs. Although he slashed managers’ salaries, he also...

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