When Dennis Kozlowski became CEO of Tyco International he reincorporated the aggressive management style and lavish lifestyle of mentor and former CEO Joseph Gaziano. During his tenure as CEO, Kozlowski seemed to have a lot of control over what the company did. He acquired many acquisitions, one of which was to expand the company into noncyclical industries since cyclical industries were one of the company’s weak points. He did this by acquiring and reviving Kendall Company from bankruptcy and rebuilt the company to be the core of the “new Tyco Healthcare Group.” This double earnings, which pleased the board of directors, who gave Kozlowski a salary increase. Kozlowski also acquired ADT Security Services, which happened to be a British-owned company located in Bermuda. This allowed Tyco to create offshore subsidiaries to shelter their foreign income from U.S. tax. Sheltering foreign income from U.S. tax is not illegal, but it can certainly be considered unethical. Under U.S law, there are two provisions that allow companies certain benefits with regard to foreign income. One of these benefits is the foreign tax credit, which allows a company to reduce the U.S. marginal tax rate by the foreign marginal tax rate, so the company is not double taxed. The other provision allows companies to delay paying taxes on foreign income indefinitely unless the profits are brought onto the parent company’s books. So, while Tyco sheltering its foreign income is not illegal, it is unethical because it prevents the government from collecting taxes. Another thing that Kozlowski did that can be considered unethical was selecting trusted individuals and giving them key positions. He promoted Mark Swartz to CFO and hired Mark Belnick to be Tyco’s general counsel. The board of directors was also a problem, because most of them were on the board for longer than ten years and were accustomed to Kozlowski’s business practices. A few members had close relationships to some of the board members, which was uncovered after Kozlowski and Swartz’s arrests. Lord Michael Ashcroft used $2.5 million of Tyco funds to purchase a home, Frank E. Walsh Jr. received $20 million for help in acquiring CIT Group without other member’s knowledge. Walsh also had controlling interest in two firms that leased aircrafts and piloting services to Tyco. Stephen Foss received more than $750,000 for supplying Cessna aircraft and piloting services, and Richard Bodman invested $5 million in a private stock fund that he controlled for Kozlowski. Kozlowski even opened a Manhattan office, unbeknownst to the public. The board of directors is there to protect the shareholders, but since some members had a close relationship with Kozlowski and an office was opened unbeknownst to the public, it does not seem the board had the shareholder’s best interest in mind. An analyst from Merrill Lynch, named Jeanne Terrile was concerned about Tyco’s performance. Her job was to advise investors, both current and potential, what to do with certain stocks. She recommended to advisors that they should “accumulate” their shares and gave a negative review of Tyco’s acquisitions. Kozlowski met with the CEO of Merrill Lynch after this, and coincidentally enough, Terrile was replaced by Phua Young and Merril’s recommendation changed to “buy.” The subject of the meeting was never confirmed, but it showed that anyone who threw red flags at Tyco were shot down. Terrile was not the only case in this happening. A short seller named David W. Tice was concerned if Tyco was obscuring financial reports, but was shot down before it got anywhere. The SEC even investigated the company unbeknownst to the public, but it only led to Tyco amending its earnings per share for two quarters.