Despite Tyco being a security systems and services company, its CEO Dennis Kozlowski managed to embezzle over 100 million dollars from the company before finally being caught in 2012. Kozlowski utilized commingling of assets to keep his fraudulent purchases hidden. He would use Tyco as a secondary bank account in which he could spend at will. These purchases including millions of dollars in artwork, all of which avoided sales tax in order to not raise any red flags. Furthermore, Kozlowski spent a whopping 2 million dollars just on his second wife’s birthday party, and much more on various properties he purchased.
Kozlowski’s crime was not solely based around him, but also members of the companies Board of Directors. By having higher ranking officials commingle funds at a lesser extent, he was able to make the practice a normal aspect of the company. Furthermore the auditing firms lack of due diligence allowed this fraudulent activity to continue. When it was all said and done, Tyco had to repay 2.92 billion dollars to investors and Kozlowski was sentenced to 8-25 years in prison. What do you believe was the biggest financial weakness within Tyco and was there any singular way to prevent this fraud from happening?
Romero, Jonathan. “Tyco Corporate Scandal of 2002 (Ethics Case Analysis).” Panmore Institute. N.p., 09 Aug. 2015. Web. 26 Feb. 2017.
Website: http://panmore.com/tyco-corporate-scandal-2002-case-analysis