What kind of noncash asset misappropriation scheme was perpetrated by Mr. Kozlowski? 

FRAUD CASEBOOK

Tyco

Read the following articles or other related articles regarding the Tyco case and then answer the questions below:

Sources:

Taub, Stephen, “Tyco on Tyco: Errors Made, But No Fraud,” CFO.com, December 31, 2002.

Hamilton, Walter, “Tyco Details Extravagance of Ex-CEO,” Los Angeles Times, September 18, 2002.

Bayot, Jennifer and Andrew Ross Sorkin, “2 Tyco Officials Get up to 25 Years for Fraud,” International Herald Tribune, September 19, 2005.

Sorkin, Andre Ross, “Figure Pays $22.5 Million in Guilty Plea,” New York Times, December 18, 2002.

Johnson, Linda, “PwC Settles Tyco Investors’ Suit Over Fraud,” Washington Post, July 7, 2007.

Anonymous, “Ex-Tyco CEO Kozlowski’s Fraud Conviction Upheld,” The Star-Ledger Business Desk, October 16, 2008.

Short Answer Questions

1. What event sparked the drop in the value of Tyco stock in 2002?

2.Who was the Tyco Chief Executive Officer at the time of the investigation?

3.How many shares of stock did Kozlowski and Swartz sell without proper disclosure?

4.What corporate governance body was criticized for failing to set appropriate standards of ethics, integrity, accounting, and corporate governance?

5. For how much did Tyco settle their shareholder lawsuits?

6.In what prison system were the Tyco executives prosecuted?

Discussion Questions

1. What kind of noncash asset misappropriation scheme was perpetrated by Mr. Kozlowski?

2. Why does the venue for the criminal prosecution matter? Given that Mr. Kozlowski was prosecuted in state court, how does he likely benefit and how is he likely to suffer in contrast to being prosecuted in the Federal system?

3. Mr. Kozlowski forgave relocation loans given to 51 employees and paid their corresponding income taxes at a cost to Tyco shareholders of $96 million. How would you hypothesize that this act impacted the fraud, if at all, and why?