Daniel J.

Graham IV Tyco Case

How was the fraud in the Tyco cause perpetrated?

In early 2012 Tycos financial statements were under review after a tip that suggested some illegal transactions had been taking place. Later that year in June, the CEO of Tyco L. Dennis Kozolowski resigned just before he was later accused of tax evasion. A few months following, on September 12, 2002 the (SEC) Securities and Exchange Commission formally filled civil fraud and theft charges against three former Tyco International executives for over five years of fraud. The three former executives charged with these crimes were former (CEO) Chief Executive Officer L. Dennis Kozolowski, former (CFO) Mark H. Swartz and former Chief Legal Officer Mark A. Belnich. The three executives were accused of stealing up to as much as $500 million dollars from the company. They did so through giving themselves unapproved bonuses and interest free loans that were never disclosed to its shareholders or approved by the board. With these unapproved bonuses and loans the executives funded an extravagant personal life, items including luxury 5th avenue apartment in New York City valued at $14 million dollars and funding vacations using millions of Tycos dollars. Tyco later forgave tens of millions of dollars that the three executives had borrowed, again not disclosing this to its investors. The three executives were also accused of selling their shares of company stocks without disclosing the amounts to Tycos investors, which is required by Securities and Exchange Commission. Stephen M. Cutler, the SEC's Director of Enforcement was quoted in September of 2012 about the three former Tyco executives,saying quote Kozlowski, Swartz and Belnick treated Tyco as their private bank, taking out hundreds of millions of dollars of loans and compensation without ever telling investors.

SOURCES Nelson, S. B. (2002, Sep 18). Tyco filing details alleged fraud by former CEO, other executives. Knight Ridder Tribune Business News. Retrieved from http://search.proquest.com.jproxy.lib.ecu.edu/docview/464523606?accountid=10639 Countryman, A. (2002, Sep 13). Former tyco chief executive is charged with massive fraud. Knight Ridder Tribune Business News. Retrieved from http://search.proquest.com.jproxy.lib.ecu.edu/docview/464515223?accountid=10639

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