Essay Example on Tyco International Ltd is a manufacturing and service company with five main operating groups

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Tyco International Ltd is a manufacturing and service company with five main operating groups These groups consist of Tyco Fire and Security Tyco Electronics Tyco Healthcare Tyco Engineered Products and Services and Tyco Plastics and Adhesives Tyco International Ltd Company Profile Information Business Description History Background Information on Tyco International Ltd n d Tyco International Ltd is based in Switzerland with operations around the world UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d One of the biggest industry specific challenges Tyco faced was growth Throughout the 1960 s Tyco started to acquire companies throughout the world With these acquisitions Tyco s sales increased from less than 1 billion to over 41 billion by 1969 Tyco International Ltd Company Profile Information Business Description History Background Information on Tyco International Ltd n d At this time Tyco s growth strategy was to grow through acquisitions This resulted in a decentralized company which was hard to control According to the fraud triangle one of the factors that lead to fraud is pressure In 2002 Tyco underwent an investigation that exposed a corporate culture that invigorated managers to push the rules of accounting to try to deceive investors about Tyco s financials 



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Employees were pressured to find cost savings by financial engineering and to create stories to validate an accounting variation that would improve Tyco s earnings Sorkin A R Berenson A 2002 December 30 These pressures could have been avoided if the company allowed employees to anonymously voice their concerns without retribution Tyco had poor documentation poor procedures and policies to prevent the misconduct of senior executives poor procedures for corporate authorizations and poor approval procedures and documentation Sorkin A R Berenson A 2002 December 30 In April 2006 the SEC filed an accounting fraud disclosure and FCPA Foreign Corrupt Practices Act action against Tyco for poor periodic reporting books and records poor internal controls and anti bribery requirements of the federal securities laws This initial review included 454 entities in 50 separate countries These records were incorporated into Tyco s books and records stating that Tyco violated Section 13 b 2 A of the SEC Act UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d 



Tyco also failed to maintain sufficient internal controls to ensure that all transactions are properly recorded in the company s books and records This violates Section 13 b 2 B of the SEC Act UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d The Exchange Act requires each company to develop internal controls to be able to ensure that all dealings are recorded to properly formulate financial statements Since Tyco was unable to retain good internal controls they were unable to distinguish SEC or FCPA abuses UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d The Exchange Act also entails all companies to keep records and accounts that justly reflect the company Tyco through its employees failed to keep correct records and accounts which justly reflect the company UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d Tyco worked to improve their weaknesses by incorporating new fundamentals into their culture such as strong and ethical corporate leadership responsibility and behavior tracking processes Tyco also created an anonymous hotline where employees can report any misconduct without retaliation from upper management By including employees Tyco is giving them an opportunity to contribute to the company s ethical programs Tyco International Leadership Crisis n d Additional financial analysis showed one anomaly to Tyco s financial statements was that the CEO L Dennis Kozlowski created a fictitious account for relocation costs This relocation account consisted of non qualifying relocation loans to purchase various properties throughout the U S UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D C 20549 n d Another anomaly was Tyco had growth which was a result of a false increase of Tyco s short term earnings

To do this Tyco pressured other companies that they were acquiring to report lower earnings just before being bought By doing this Tyco was able to increase its earnings as soon as the acquisition was finished Sorkin A R Berenson A 2002 December 30 Tyco International underwent multiple SEC and FCPA violations in 2002 These violations allowed top executives to pressure their employees to work unethically Tyco was charged with multiple offenses such as bribery poor internal controls and bad documentation of their financial statements When Tyco s CEO L Dennis Kozlowski was fired new processes were put in place to help ensure these violations do not occur again References Sorkin A R Berenson A 2002 December 30 Tyco Admits Using Accounting Tricks To Inflate Earnings Retrieved December 24 2017 from http www nytimes com 2002 12 31 business corporate conduct overview tyco admits using accounting tricks inflate earnings html Tyco International Leadership Crisis n d Retrieved December 24 2017 from https danielsethics mgt unm edu pdf Tyco 20Case pdf Tyco International Ltd Company Profile Information Business Description History Background Information on Tyco International Ltd n d Retrieved December 24 2017 from http www referenceforbusiness com history2 97 Tyco International Ltd html UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION VS TYCO INTERNATIONAL LTD n d Retrieved December 24 2017 from https www sec gov litigation complaints 2012 comp pr2012 196 pdf UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D C 20549 n d Retrieved December 24 2017 from https www sec gov Archives edgar data 833444 000091205702035700 a2089398z8 k txt



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