Tyco was founded in 1960 by Arthur J. Rosenberg as a small research laboratory that did testing for the government. Throughout the 1960's Tyco began to focus on the commercial sector by producing new technology and materials as well as energy conversion products. The company went public in 1964, and it began to quickly expand by acquiring other organizations. The newly acquired organizations helped Tyco International improve in their particular industry, offering new products and services. These organizations were able to fill gaps in the company's distribution network. As time went on, Tyco continued its growth through the acquisition of companies and by advancing their technology. This expansion continued throughout the 1990's during the Internet boom. The CEO of Tyco International, Dennis Kozlowski, was named the most successful CEO and honored by magazines such as Time (www.referenceforbusiness.com). In 2002, Kozlowski and Tyco CFO Mark Swartz were accused of stealing over $600 million in corporate money through a variety of dishonest business practices and schemes. In 2005, both men were convicted on various charges and were sentenced to 8 1/3-25 years in prison. The scandal that occurred at Tyco International demonstrates the importance of business ethics, and it proves that stronger internal controls are essential to corporate honesty.
[...] Tyco was valued at approximately $140 million, and sales topped $500 million a year (Tyco.com). In 1993, the company changed its name from Tyco Laboratories, Inc. to Tyco International Ltd. representing the new global presence of the company. Dennis Kozlowski was a major player in developing the company and taking business risks that yielded excellent results. During the late 1980's and early 1990's, Tyco's success can be attributed to a variety of wise business decisions. Tyco management believed in consolidating companies, they worked best in a decentralized environment, and companies that were unprofitable for Tyco were quickly sold. [...]
[...] In the case of Tyco International, we have seen what corporate greed can eventually lead to. After this scandal as well other scandals such as the Enron and WorldCom scandals, many citizens lost trust in corporations. In order to reestablish trust and prevent future executives from acting dishonest, the Sarbanes-Oxley Act was passed, and more internal control are now being implemented. In the future, if an executive is confident enough to try and bypass the regulations and steal money from an organization, he will face even more serious charges. [...]
[...] In June of 2005, Kozlowski and Swartz were both found guilty of stealing over $150 million from Tyco for their personal use. They were both sentenced to 8 1/3 to 25 years in prison by Judge Michael Obus. On top of this penalty, the men were also ordered to pay $134 million in restitution. Until the end, Kozlowski and his defense team were unable to accept defeat and tried whatever was in their power prevent prison time: “Kozlowski asked the judge to be as ‘lenient as possible' and to consider the positive things I have done in my life. [...]
[...] The tax evasion case was the result of a suspicious wire transfer of approximately million from a Tyco account to an art dealer, and later into an account in the Bahamas (www.referenceforbusiness.com). This incident made Kozlowski appear even more dishonest and leads directly into a new investigation on a much greater scale. In September of 2002, Morgenthau Attorney's office announced that Kozlowski will be indicted on numerous charges that include theft and fraud. According to www.usatoday.com, the attorney's office “announces a criminal indictment accusing Kozlowski and Swartz of enterprise corruption for allegedly stealing more than $170 million from Tyco and obtaining $430 million by fraud in the sale of company shares” (www.usatoday.com). [...]
[...] It is highly possible that Kozlowski felt that since he made Tyco a powerful, competitive company, he deserves more compensation than he is currently receiving. He was able to justify the larceny he did in his head by telling himself that Tyco would be nothing without his leadership, and that he is not hurting the company by falsifying records or giving himself and Swartz a bonus. Kozlowski, however, did not think far ahead enough and did not realize that his actions would come back to haunt him. [...]
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