...The Traitorous Tyco Scandal: Sentencing of L. Dennis Kozlowski and Mark Swartz Business Law 447-A Written By: Lindsey Proffitt White collar crime is not a victimless crime, and affects many people. These crimes can devastate a company, force investors to lose billions of dollars, and destroy people’s life savings. Through L. Dennis Kozlowski’s and Mark Swartz’s scandal reported in 2002, the Tyco Company lost over $28 billion dollars in debt. However, the biggest lash came to its shareholders who lost over $90 billion. The Tyco two were tried and found guilty in 2005, and are currently serving a 25- year- sentence. Crime never pays and it is only a matter of time before one is caught. The damage done affects all people involved including the innocent families of the victims and criminals. These two may not have ruined the company, but they ruined themselves. The question is was it worth it? Partners in Crime: The Tyco Threesome When people think of criminals; they tend to stereotype this to involve thugs and the lower class. However, this is not always the case. Participants of the privileged society are also capable of criminal behavior, but usually in a more complex manner. One of the more popular high society crimes involves business scandals and is termed “white-collar.” These crimes stem from greedy business and government professionals who become financially motivated to commit a nonviolent work related crime that usually includes hoarding large amounts of money...
Words: 3453 - Pages: 14
...Case Paper 4 Danielle Long Indiana Institute of Technology Enron, World Com, & Tyco Scandals Three of the biggest frauds in American history, were committed by the companies Enron, World Com and Tyco. All three CEO/CFO’ks of these companies’ indulged in malicious intend to create a better financial standing within the company and for themselves. All of them were ethically wrong, regardless of the details. These individuals violated many different ethical principles which lead them all to be charged with criminal offenses and jail time. Enron used an accounting method known as “mark to market.” With this practice, the price or value of a security was recorded on a daily basis to calculate the profits and losses. Using this method allowed Enron to count projected earnings from long-term energy contracts as current income. This was money that might not be collected for many years. It is a thought that this was used to inflate revenue numbers by manipulating projections for future revenue. Sherron Watkins, an Eron VP, wrote an anonymous letter suggesting that the CEO had left the company because of improprieties and other illegal actions. She questioned the accounting methods and specifically citied certain transactions. Once Enron’s stock began to fall below a certain point, the results started to show on the financial statements. Finally in November of 2001 Enron officials admitted to overstating company earnings and filed for bankruptcy. This resulted...
Words: 947 - Pages: 4
...Abstract According to the phase 2 individual project assignment instructions, each student is asked to look at two scenarios and answer the related ethical questions following each one (CTU Online, 2013). Additionally, it is asked that each student provide a discussion on the new GAAP guidelines for consolidating entities, and to provide an example of a firm that has experienced trouble for failure to comply with the GAAP guidelines. Ethical Dilemmas in Partnerships Scenario 1: In the first scenario, there are two partners in an antique business, Mr. Right and Mr. Wrong. Mr. Right manages the store, and Mr. Wrong travels and purchases antiques to add to their store inventory. The each may borrow items from the inventory on occasion for one reason or another. While Mr. Right was out of town Mr Wrong’s daughter was married and had a desire for one of the inventory items valued at $5,000. So Mr. Wrong took the item from inventory and gave it to his daughter as a wedding gift. He recorded the item as a debit from the COGS for $5,000. The question is asked what are the ethical aspects of Mr. Wrong’s actions and how should he have recorded the transaction? To begin with, they are both wrong for allowing the other to take unpaid for inventory items from the store. It should be made clear in the partnership agreement that any inventory product removed from the store for any purpose...
Words: 1368 - Pages: 6
...Resolution It was possible that Kozlowski and Swartz could have settled before going to trial, but they claimed throughout the proceedings that they were entitled to all the bonuses and loan forgiveness from Tyco. They were charged with 12 counts of first degree grand larceny, 8 counts of first degree falsifying business records, one count of first degree conspiracy, and one Martin Act count of securities fraud. The trial of Dennis Kozlowski and Mark Swartz began October 7, 2003. The jury was shown the extravagance and lifestyle of Kozlowski, including videos of his wife’s $2.1 million birthday party. Pictures were also shown of his $6000 shower curtain and other lavish items purchased with Tyco’s money for himself. However, during the trial, one of the jurors appeared to make an “ok” sign to the defense team. The court was unable to determine exactly what meaning was behind the gesture, but a mistrial was declared. The juror later received death threats, although no connection with the defendants was ever proven. The next trial for Kozlowski and Swartz did not begin until January 26, 2005. The prosecution changed tactics this time around and focused less on the extravagant lifestyles and concentrated on the theft of Tyco funds. This may have been a more effective strategy as it is not illegal to live extravagantly. They wouldn’t make $6000 shower curtains if no one would buy them. Kozlowski would wind up taking the stand in his own defense and reiterate his claims that he...
Words: 514 - Pages: 3
...Group Paper 1-Tyco Company TYCO - Starting with a Clean Slate In 2002, Tyco International Ltd. was involved in one of the top ten largest accounting scandals in US history. CEO Dennis Kozlowski and CFO Mark Swartz were found guilty of siphoning money through unapproved loans and fraudulent stock sales. Not only did the SEC find questionable accounting practices but during the investigation there were findings of abnormally large executive bonuses and grand lavish parties paid for on the company’s dime. The former CEO and CFO were sentenced to 8 to 25 years in prison both of whom have since been released. Right after that news scandal broke, Tyco replaced its CEO with former Motorola CEO Ed Breen. In a move never done before, Ed Breen’s first move was to get rid of the entire board of directors. The message the new CEO wanted to send was that the entire corporate management and structure needed to be changed to put trust back in the company (1). In the next year Ed Breen would hire over 60 new senior executives to try and turn the company around (1). He hired top rate talent who were mostly former employees of other fortune 500 companies. According to the outside world, this made it clear that Ed Breen was interested in establishing new systems and setting a new strategic direction. With the new team assembled, Tyco’s first goal was to see were they went wrong. They performed several phases of exhausting audit reviews from the financial, operational and accounting departments...
Words: 858 - Pages: 4
...Enron, Tyco, and World-com have in common Intro The purpose of this work is to show you what happens when you try to cheat the system. the reason the government does audits and checks for so many frauds is because people nowadays will do whatever it takes to make a little extra money. What these companies did not only hurt themselves in the long run but hurt the millions of workers and families that were connected with them. The Companies Enron was formed in 1985 by two gas companies, Houston Natural Gas and Nebraska InterNorth.Enron incurred massive debt and, as the result of deregulation, no longer had exclusive rights to its pipelines. In order to survive, the company had to come up with a new and innovative business strategy to generate profits and cash flow. To try to fix this Enron came up with the idea of becoming a “gas bank” to try to fix its problems. They would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for the transactions and assuming the associated risks. This became so successful that they decided to apply this to other things instead of just gas like, coal, paper, steel, water and even weather. In 2001 CEO Kenneth Lay retired and named Jeffrey Skilling president and CEO of Enron. On October 16th 2001 They reported their first quarterly loss in over four years and went downhill until the company filed for bankruptcy on December 2 2001. Tyco labs originally...
Words: 1088 - Pages: 5
...Enron, Tyco International caught the public eye. One must first have an understanding of what it is to be ethical and moral. Once there is an understanding of these two terms, one may gain an appreciation of the occurrences in the corporate business world in the early 2000’s. One occurrence in particular is Tyco International. Tyco International will be evaluated. This evaluation will include the historical aspects, the corporate spending and the loans obtained, the outcome of events, and the punishments imposed. Further, the question of is it difficult to see ethical breaches that we may commit will be discussed. Ethics and morality are interconnected and thus integrity is also linked. According to Stephens, one cannot be defined without the other being in the definition. Stephens states many definitions of ethics have morals within the definition. One may differ with Stephens. While both ethics and morals relate to right and wrong, ethics is set rules of conduct that spells out how things are based on the rules for a specified group or action and morals are based on a person’s habits or principles and ideals as to their conduct. Integrity is a rigid adherence to a code of behavior. Ethics is society driven and is flexible to a point. Morals and integrity are internalized within self and are found to be fairly consistent unless a person changes their belief. Now with the understanding of ethics, morals, and integrity, we can focus on the history of Tyco International...
Words: 1675 - Pages: 7
...“Forensic Accounting” is a term that you do not hear every day so let’s examine its definition. The Strayer University BUS508 textbook defines accounting as, “The process of measuring, interpreting, and communicating financial information to enable people inside and outside the firm to make informed decisions.” Merriam-Webster defines forensic as, “suitable for a court of law.” Our textbook defines forensic accounting as, “Forensic accounting is accounting performed in preparation for legal review.” The textbook also describes it as, "focus on uncovering potential fraud in a variety of organizations.” The Business Dictionary defines it as a, “Criminal investigation practice whereby investigators analyze financial documents and activities to determine if and how a crime, such as fraud, has been committed by an organization. Tactics include tax analysis, financial reporting review and banking activity oversight.” This also includes white collar crimes such as embezzlement, stock market manipulation and price fixing schemes. This can include the financial impact of marketplace events, such as intellectual property infringement, anti-trust actions, financial reporting fraud, asset impairment and business valuation (Neumann, O'Connor, 2008). It also includes matters of family law, such as matrimonial disputes. In short, "Forensic accounting is the use of accounting, auditing, and investigative skills to assist in legal matters.” They use accounting skills following the GAAP (generally...
Words: 4286 - Pages: 18
...A Matter of Ethics John Hilger Ashford University Personal and Organizational Ethics PHI 445 Stephen Carter February 07, 2014 A Matter of Ethics Business ethics is something that all companies and organizations need to be mindful of. It isn’t something that just the large and powerful for-profit organizations need to worry about, but it is something that not for-profit organizations have to be cautious as well. I plan to show how two large well known institutions failed to live up to these. Penn State is one of the more widely recognized leaders in higher education. It first came into existence in 1855, when the Commonwealth chartered it as one of the nation’s first colleges of agricultural science. And it’s goal was to apply scientific principles to farming. Penn State’s main campus is located in the small city of State College; State College is a quintessential college town with small eateries and quirky little shops that line the streets. There are a total of 24 locations of the campus throughout the Pennsylvania area. Penn State’s tax exempt status is the same as most not for profit state schools and the company is 501c3. Through my research I was unable to find out the date that it was granted or if there was an umbrella organization. According to Penn State’s Alumni Insider from their December 2009 Issue, there are 44,000 full-time and part-time employees at all of the locations. One of the biggest obstacles that any and all institutions of higher learning...
Words: 1742 - Pages: 7
...During his reign as CEO, Dennis Kozlowski, who was reported as one of the top 25 corporate managers by BusinessWeek, siphoned hordes of money from Tyco, in the form of unapproved loans and fraudulent stock sales. In early 2002, the scandal slowly began to unravel and Tyco's share price plummeted nearly 80% in a six-week period. Kozlowski was convicted of crimes related to his receipt of $81 million in unauthorized bonuses, the purchase of art for $14.725 million and the payment by Tyco of a $20 million investment banking fee to Frank Walsh, a former Tyco director. He was sentenced to up to 25 years in prison. Tyco’s primary stakeholders included their shareholders, employees and customers. Their secondary stakeholders proved to be the SEC, the District Attorney of Manhattan, NY and the media, just to name a few. #1: Dennis Kozlowski, CEO. A: I believe that Kozlowski was in level one- the pre-conventional level of moral development. This is the level in which focus is generally on the self and where ethical egoism is dominant. Ethical egoism is based on the idea that the individual seeks to maximize his/her own self-interests; and this is exactly what Kozlowski did. Stage two of moral development is the seeking-of-rewards stage. At this stage, individuals might not completely understand the moral idea of “right” and “wrong” but rather learn to behave in accordance with the punishments or rewards that follow. Kozlowski enjoyed the rewards that came to him in terms of a lavish...
Words: 2751 - Pages: 12
...Tyco International | Week 8 Final Project | | | 4/26/2013 | 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 $14 million in personal loans. Months after the initial arrests, charges and lawsuits were still being filed—making the Tyco scandal one of the most notorious of the early 2000s. Founded in 1960 by Arthur J. Rosenberg, Tyco began as an investment and holding company focused on solid-state science and energy conversion. In 1964, Tyco became a publicly traded company. It also began a series of rapid acquisitions – sixteen companies by 1968. The expansion continued through 1982, as the company sought to fill gaps in its development and distribution networks. Between 1973 and 1982, the company grew from $34 million to $500 million in consolidated sales. In 1982, Tyco was reorganized into three business segments: Fire Protection...
Words: 2324 - Pages: 10
...TYCO: THE PRECURSOR, THE SCANDAL, THE REBIRTH By Anya Davies, Student MGMT/103 Facilitator: Dr. Charles A. von Urff Week 2 assignment Individual Written Paper Due September 31, 2014 Submitted September 31, 2014 Introduction Every year or so we hear about big corporate accounting scandals, most of which originate in the United States. “Corporate malfeasance has earned a place among the defining themes of the last decade-and-a-half, helping give birth to the present global recession and the Occupy Wall Street Movement”. Based on the amount of money stolen and on how unethical and illegal its ground was, Tyco Scandal, happened in 2002, is definitely the most notorious (The 10 Worst Corporate Accounting Scandals). The Precursor Arthur J. Rosenberg founded Tyco Incorporated in 1960, in Waltham, Massachusetts. In 1982 Tyco was divided into three business segments: fire protection, electronics and packaging. In the 1990s Tyco was reorganized and comprised “electrical and electronic components, health-care and specialty products, fire and security services, and flow control. By 2000, Tyco Inc. had acquired more than three major companies such as ADT, the CIT Group, and Raychem” (Unethical Issues). Leo Dennis Kozlowski became the CEO in 1992, after being the company’s CFO. He “became the personification of the acquisition mania of the 1990s, and assumed the qualities necessary for the task—brutishness, aggressiveness, and a commitment to the accumulation of...
Words: 1238 - Pages: 5
...NHBR: 30 years and counting: Tyco scandal and its aftermath By Kenny, Jack Publication: New Hampshire Business Review Date: Friday, October 10 2008 No petty thieves, Tyco International Ltd. chief executive Dennis Kozlowski and chief financial officer Mark Swartz took over $170 millions in "loans" from the company without the shareholders knowledge. A Securities and Exchange Commission investigation in 2002 also found the pair had made more than $400 million in stock sales without disclosure. All told, losses from fraudulent practices were estimated at $600 million. Kozlowski and Swartz both resigned in the summer of 2002. On June 17, 2005, a Manhattan jury found both men guilty of stealing more than $150 million from Tyco, a conglomerate that at the time of the crimes was based in Exeter. Kozlowski, whose name will long be associated with the $6,000 shower curtain and a $2 million birthday party, obviously had big dreams and large ambitions. But he never imagined the kind of house he would be living in when he was interviewed by Morley Safer of CBS's 60 Minutes" in March of last year. "In my wildest imagination, when I would project myself into my late 50s and early 60s, where I would be or what I would be doing. If I make a list of a hundred different places, or a hundred different things, here would never make that list," Kozlowski told Safer. He was speaking from his residence at the Mid-State Correctional Facility in the state of New York. As "60 Minutes" noted...
Words: 1450 - Pages: 6
...Tyco International: Ethical Dilemma, Yes or No Tabitha Taylor Financial Accounting Aaron Pennington- Professor Introduction By definition, ethics is a term that refers to a code or moral system that provides criteria for evaluating what a person or organization deems is right or wrong. It is a code of conduct in which people govern their lives and the perimeter of standards that guides and hold their existent together. Basically, ethics is just persons, who make up the business world, doing the right thing. Dr. Michael Walsh, a Consultant for Edmund Rice Business Ethics Initiative suggests that ethics is “concerned with the kind of people we are. This could be called the “ethics of being”. It is also concerned with the things we do or fail to do. This could be called the “ethics of doing”. This short statement has the latter as it focus – what we do, and how we decide what we ought or ought not to do” (Walsh, 2003). Ethical decision-making and living applies to organizations as well, organism; living, breathing, and growing entities. Businesses establish values, ethical codes of conduct that must be or should be adhered to by all the employees of a said organization. However, the catastrophes of live can make ethical behavior wavier. The predicament that faces most corporations today is economical tribulation and budget constraints. The demands for products cause the supply to fall below the projected profit margin that an organization has forecasted...
Words: 1397 - Pages: 6
...Examining a Business Failure - Tyco International Ltd Organizational behavior is defined as the study of the behavior of individuals, groups and structure and the impact to an organization. Organizational behavior uses the information gathered from this study to improve the organization’s effectiveness (Robbins, 2011). Organizational behavior focuses on a number of areas including the behavior of leaders, inter-personal communication, processes and structure within the organization, conflict and employee motivation. The behavioral disciplines of psychology, social psychology, sociology and anthropology form the basis for the study of organizational behavior. Psychology and social psychology studies the impact of conditions in the workplace and the impact to the employees’ performance. Within these sciences, learning theorists also studies the impact of change and how to reduce the challenges of change in the work environment [ (Robbins, 2011, p. 12) ]. According to the authors, sociology, and anthropology contributes to the study of organizational behavior by focusing on the relationship of employees as a group and the impact to the organizational structure. The culture and group dynamic of the employees will direct the level of motivation that in turn will negatively or positively impact the performance of the organization [ (Robbins, 2011, p. 12) ]. Psychology evaluates changes in individuals’ behavior and the impact to learning, Emotions, leadership, and decision-making...
Words: 1292 - Pages: 6
