This document summarizes a corporate governance failure at Tyco International. It provides background on Tyco's history and industries. In 2002, the CEO Dennis Kozlowski and CFO Mark Swartz were charged with fraud for misusing company funds totaling $600 million for personal expenses like art purchases and unauthorized bonuses. Both were later sentenced to prison. The scandal led to a drop in Tyco's stock price and replacement of top executives. It highlights the need for stronger internal controls, corporate governance, and government oversight to prevent such failures.

1. A Corporate Governance Failure
Lakshay Anand : 17
Jeet Sonowal
Alka
Samarth

2. Company History:
• Founded in 1960 by Arthur J. Rosenburg
•Initially supported by government research contracts
•In 1964 , it became a publicly owned company
•It was in control of 16 other companies by 1968.
•In 1974 , its stock was listed on the NYSE.
•Between 1982 and 2000 it undertook several subdivisions.

3. Company Overview:
•Participates in different industries:
•Electronics
•Fire & Security
•Healthcare
•Plastics and Adhesives
•Engineering products and services
•It employees over 2,67,000 people
•Its services and products are provided worldwide
•Among the market leaders in all the industries.

4. People involved in TYCO International scam
2002
DENNIS KOZLOWSKI
• Graduate of Seton Hall University, New
Jersey
• Began work at Tyco in 1976.
Kozlowski's job was to fix up some of
the floundering acquisitions of the
company at that time.
• Worked his way up through the
company, becoming CEO in 1992.
• Was key in an $850 million dollar
purchase of an under seas fibre-optic
cable business from AT&T.

5. MARK SWARTZ
•Previously worked for Deloitte & Touché.
• Started working at Tyco in 1991.
• In 1995 he became the CFO.
• He was nominated for a CFO Excellence Award
in 2000

6. WHAT WENT
WRONG
$3.2 billion
Tax evasion of
$13 million for
purchase of Art
works
Sale of $575
million in stock.
Unlimited Power
to choose own
Board.
Bribery
• Bonuses worth
$120 million
$103mio
loan-forgiveness
program

7. AFTERMATH
• In Restitution
• Additionally, Koslowski was
fined $70 mio Swartz was
fined $35 mio.
$134 million
• Prison Sentence
8.4- 25 years
• Drop in Share prices from January to December
$60 $18
• Headquarters staff replaced.
90%

9. 1999
SEC Begins an informal
enquiry over questionable
practices reported by an
analyst.
January,2
002
$20mn paid to Director
Frank Walsh Jr.
June,2002
Avoiding Sales Tax on art
work worth $1mn.
September
2002
CEO, CFO and General Counsel
charged with $600mn fraud.
2005
Sentenced to 25 years in
Jail
T I M E L I N E

11. RECOMMENDATIONS
Tyco international Scam

12. THE SITUATION OF THE COMPANY COULD HAVE BEEN
AVOIDED THROUGH:
Internal Control
Corporate
Governance
Centralized
vs Decentralized

13. MORAL QUESTIONS TO BE
CONSIDERED
Is it right to use corporate money for personal use?
Is it right to bribe board members?
Is it right to have unrevealed sales of stock?
Is it right to pay loans even the company didn’t approve the
seeker?

14. PRECAUTIONS/LESSONS/L
EARNING
Companies should more closely monitor their employees for
unethical conduct.
The government should monitor accounting practices of
companies more closely.
Any executive of companies who exhibit suspicious
behaviour should be closely watched.
Government should monitor the Financial Statements of
companies periodically.

15. This Photo by Unknown Author is licensed under CC BY-SA