'Tyco International Scandal' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
The Tyco International scandal refers to the 2002 theft by former company CEO and Chairman Dennis Kozlowski and former corporate Chief Financial Officer Mark Swartz of as much as $600 million from the firm. The scandal turned into a long, drawn out trial as the two accused men vigorously denied any wrongdoing and fought the charges vehemently. In their march 2004 trial, they argued strenuously that the then-board of directors of Tyco had authorized the principle questionable $150 million they had received as compensation for services rendered. The trial ended in mistrial and a retrial occurred in 2005. At this second trial, they were both declared guilty of more than 30 individual corporate violations.
The first trial ended in mistrial because of a suspicious incident that happened during the final jury deliberations. Ruth Jordan a juror made an “okay” sign on the defense table as she passed through the courtroom. While she insisted that had not been the gesture she made, the publicity of incident by the Wall Street Journal led many people to believe it had been a set up for the defendants. The presiding Judge Michael Obus declared a mistrial over the incident on April 4th of 2004.
In the June 17th jury verdict of the second trial on the Tyco International scandal in 2005, the pair Kozlowski and Swartz received convictions on every one but a single one of the over 30 counts leveled against them. The verdicts brought possible jail times of as many as 25 years in state level incarceration. Kozlowski received a minimum of eight years and four months of jail time with a maximum sentence of 25 years possible. Swartz experienced the exact same sentence for his role in the Tyco International scandal.
A class action lawsuit followed the Tyco International scandal criminal trial with a verdict handed down by Federal District Court Judge Paul Barbadoro in May of 2007. Tyco consented to pay out $2.92 billion to a class of the cheated shareholders. Their corporate auditors Pricewaterhouse Coopers also agreed to pay $225 million in damages to the injured investors.
January 17, 2014 saw Kozlowski received his parole from the Lincoln Correctional Jail in New York City. This did not change the fact that the two men had to pay an enormous amount of money back in restitution and fines for the benefit of the thousands of injured share holders who suffered from the Tyco International scandal. State Supreme Court Judge Michael Obus had mandated that Kozlowski and Swartz repay $134 million as restitution and forfeit another $70 million in fines from Kozlowski and an additional $35 million in fines from Swartz.
The executives had only made their guilt seem more obvious by the ridiculously extravagant lifestyle which they had lived during the years when they supposedly absconded with the up to $600 million from the international giant’s corporate treasury. Kozlowski had thrown an unbelievably lavish international toga birthday party for his wife on a rented Mediterranean island for an eye watering $2 million. They had also maintained an $18 million apartment together in Manhattan that came complete with a $6,000 shower curtain.
Their counts on which they were convicted included the full gamut of corporate theft and deception. These were such well known corporate crimes as grand larceny, securities fraud, falsifying business records, and conspiracy. The two corporate officers were only the latest executives and examples caught up in a wave of company scandals that rocked corporate United States’ companies and sullied their reputations with the enraged public. Thousands of individual middle class Americans and their families had either lost their means of employment or their entire retirement life savings in the corporate thefts, scandals, and frauds.
Among these were WorldCom, Adelphia Communications Corp, and Enron. Former Chairman Bernard Ebbers of WorldCom received as much as a 25 year prison term for his $11 billion worth of accounting fraud which caused the MCI Inc. telecommunications firm to fall apart.
Founder of Adelphia Communications Corp John Rigas received a 15 year jail sentence for his part in fraud and looting of the treasury at the mega cable TV corporation. Former finance chief and son Timothy Rigas similarly received 20 years jail time for his complicity in the affair.
Enron Corporation one-time CEO Jeffrey Skilling, founder Kenneth Lay, and lead accountant Richard Causey also went to trial and received lengthy prison terms. Kenneth Lay died of a heart attack before he could begin to serve out his sentence. The Tyco defendants and their attorneys were quick to mention that unlike the fraud and theft at Enron and WorldCom, Tyco managed to thrive and prosper following their clients’ scandal and alleged theft of the up to $600 million.
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