This presentation was made by Chowdhury Raiyan Tasin for the presentation of their group for their Accounting and Information (AIS) course at Jatiya Kabi Kazi Nazrul Islam University, Mymensingh, Bangladesh. 

1. Tyco
Scandal
2002
In 2002, the world was shaken by the unfolding of a massive corporate
scandal at Tyco International, a global conglomerate. This presentation
will delve into the intricate details of the Tyco scandal, exploring how a
culture of greed and deception led to the downfall of a once-thriving
company.

2. Chowdhury Raiyan
Tasin
Presented by:

3. Company History
 Arthur J. Rosenburg founded it.
 Originally funded by contracts for government research.
 It came public as a company in 1964.
 By 1968, it controlled sixteen companies.
 The NYSE listed its shares in 1974.
 From 1982 until 2000, it underwent multiple subdivisions.

4. Tyco engages in a variety of industries
Electronics
Fire & Security
Healthcare
Plastics & Adhesives
Engineered Products and
services

5. Fraud!
Former CEO Dennis Kozlowski, CFO Mark Swartz, and
General Counsel Mark Belnick were charged with
making low-interest loans to themselves. These loans
were never approved by the Tyco board and were
occasionally passed off as bonuses. Never were these
loans returned.
These three were also charged with selling Tyco stock
to investors without disclosing information. The
Securities and Exchange Commission (SEC) has rules
that this violates.

6. Main Players/Fraudsters
 Graduated from New Jersey's Seton Hall University.
 Started working at Tyco in 1976.
 Accepting the role of CEO in 1992.
 Played a crucial role in the $850 million acquisition of AT &
T's underwater fiber-optic cable business.
DENNIS
KOZLOWSKI

7.  Previously worked at Deloitte & Touche.
 Started working with Tyco in 1991.
 He was appointed CFO in 1995.
 In 2000, he was a nominee for the CFO
Excellence Award.
MARK SWARTZ

8. A Titan's Rise
1
Prior to 1992
Net profit $95 was million,
Return on sales was 3.1 % and
share price was $4.30 2 July 2001
Net profit was $5.1 Billion, return
on sale was 13.8% and share
price was $58.00.
3
Growth
From 1992 to 2001 net profits
grow 54 times, return on sales
grow 4.5 times and share price
grow 13.5 times.

9. First Investigation
 The SEC opened its first inquiry in 1999.
 Findings, Excessive the anticipated
expense of acquiring a new asset.
 Outcomes, Strictly speaking, no laws
were breached.
 Tyco consented to restate earnings and
to have no penalties or fines applied.
Second Investigation
 Early in 2002, the SEC opened a second
inquiry into CFO Mark Swartz and CEO
Dennis Kozloski.
 Evading taxes
 Misuse of corporate cash.
 Directors received payoffs in order to
conceal the misuse of funds.
 $430 million in undisclosed stock sales was
made by Kozlowski and Swartz.

10. Charges
 $567 million was added to operational income.
 Undervaluing acquired assets and overvaluing acquired liabilities
constitutes improper acquisition accounting.
 Used reserves to smooth and make adjustments in publicly released
data to satisfy earnings projections.
 In annual reports, the company failed to disclose its former top
management's linked party transactions, debt, and executive salaries.

11. CEO & CFO
Not paying the $1 million sales
tax
Omission of $19 million in
forgiven loans
Misappropriating $170 million
in funds
The CEO made $280 million
by selling 5.5 million shares.
CFO made $125 million by
selling two million shares. Not
a single sale was made public.

12. CLO-MARK BELNICK
It is reported that he
took a 17 million dollar
present from the
corporation in
exchange for his
silence.
For forging business
records, he was
charged with a crime.
He chose to risk going
to jail in order to have
his record cleaned,
and on July 15, 2004
he was found not
guilty.

13. Punishments
$50 million civil fine for
TYCO
CEO & CFO,
8-25 years of prison
$240 million fine
 CLO-Cleared of all
allegations

14. Where did the money go?
$106 million in loan forgiveness and relocation benefits to staff
members.
Tyco was charged $2.1 million for Kozlowski's wife's birthday
celebration.
After spending $14 million on rare artwork, Kozlowski utilized
Tyco to avoid paying about $1 million in import taxes.
$5 million for property in Massachusetts, $900,0000 for property
in Connecticut, $2.5 million for a residence in Florida, $9 million
for further property, and $240,000 for jewelry belonging to Mrs.
Kozlowski.
Unauthorized bonuses of $81 million were given to Kozlowski.
In exchange for providing Tyco with aircraft and pilot services,
Stephen Foss was paid $751,101.
The commission received by Frank E. Walsh, Jr. was $20
million.

15. Stock price 1999-2005
 Prior to Kozlowski
becoming CEO:
$4.30 a share was
the stock price.
 Ten Years later:
Stock- $58 per share
 Post Kozlowski:
Stock - $ 16.05 per
share

16. The Aftermath and Impact
Financial Fallout
The Tyco scandal caused
the company's stock price
to crash from over $50 per
share to just a few pennies,
erasing billions of dollars'
worth of shareholder value.
Reputational
Damage
The Tyco scandal wiped out
billions of dollars in
shareholder value by
plunging the company's
stock price from over $50
per share to just a few
pennies.
Regulatory Reforms
Stricter rules and
governance standards, such
the Sarbanes-Oxley Act,
were put into place in
response to the Tyco
incident and other well-
known corporate scandals
of the early 2000s. The goal
was to stop future abuses
of this kind.

17. Weakness in Internal control structure
Inadequate records
Inadequate rules and guidelines to stop executives from
acting inappropriately.
Insufficient protocols for validating business
authorizations.
Inadequate documentation and approval processes.
Senior management's absence of supervision at the
corporate level
aggressive accounting and false auditor auditing.

18. Rebuilding
 The company filed a more than $100 million lawsuit against the CFO and
CEO. Nine of the executives on their board were let go.
CEO- Edward Breen
CFO- David J. Fitz Patrick
 Investor confidence was restored after the CEO and CFO refunded part of
the monies they had took.
 The chairman of the board and the executive agreement for the future will
be appointed by the new board of directors, not the Tyco CEO.
 As vice president of corporate governance, Eric Pillmore was appointed.

19. Lessons Learned
Importance of
Accountability
Strong corporate governance,
accountability, and openness
are essential for safeguarding
the interests of the public and
shareholders, as the Tyco
affair made clear.
Culture of Integrity
The Tyco case demonstrated
how crucial it is to foster a
corporate culture that values
moral conduct and ties
leaders' incentives to the
organization's long-term
success.
Regulatory Oversight
Strong regulatory supervision
and enforcement are
necessary to prevent
corporate misbehavior and
hold leaders accountable for
their actions, as the Tyco affair
made clear.

20. Reflecting on the Tyco Scandal
Greed and Hubris
The Tyco affair is a sobering
reminder of how even the
most powerful corporations
can fail due to unbridled
ambition and a disdain for
moral business conduct.
Importance of
Governance
The case emphasizes how
crucial strong corporate
governance and efficient
regulatory supervision are to
maintaining publicly traded
companies' integrity and
safeguarding the interests of
the public and investors.
Lasting Impact
The case highlights the
critical importance of robust
corporate governance and
effective regulatory
oversight in upholding the
integrity of publicly traded
companies and protecting
the interests of investors and
the general public.

21. Conclusion
A sobering reminder of the results of corporate greed and dishonesty is provided by the Tyco scandal.
Through a close examination of the case's many nuances, we can learn important lessons about the value
of moral leadership, strong corporate governance, and strict regulatory monitoring to stop abuses of this
kind from happening in the future.

22. Thank You!
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