Tyco International was a security systems company incorporated in Cork, Ireland, with operations headquartered in Princeton, New Jersey. The company sold fire and burglar alarms, primarily marketing to small businesses and churches. They have since been merged with Johnson Controls, and no longer exist as a separate entity.
2002 Accounting Scandal
Tyco International made headlines in 2002 when it was revealed that the former CEO, Dennis Kozlowski, and the former CFO, Mark H. Swartz, had secretly stolen more than $150 million from the company. However, the accused men argued that the Board of Directors had authorized the money as payment to the CEO and CFO.
The ensuing trial was something of a media circus after one of the jurors, Ruth Jones, appeared to flash an “okay” sign at the defendants during jury deliberation. This resulted in the judge ultimately declaring a mistrial, and Kozlowski and Swartz would have to stand trial yet again for their alleged misdeeds.
In 2005, the two former executives stood trial for allegedly taking over $600 million from Tyco, both as improper compensation and as outright theft. In the 2005 case, the defendants were found guilty on all but one of the 30 counts they were charged with. This resulted in jail sentences up to 25 years, though the two men ended up receiving around eight years each.
A class action suit by defrauded shareholders was represented by Grant & Eisenhofer P.A., Schiffrin, Barroway, Topaz & Kessler, and Milberg Weiss & Bershad. The legal team sought reparations to be paid out to the class of shareholders on the basis of Tyco’s stock taking a hit after the scandal broke. This, in turn, led to shareholders taking considerable financial losses due to Swartz and Kozlowski’s misdeeds.
In 2007, a federal judge gave final approval for the settlement in the class action, in which Tyco agreed o pay $3 billion to the class of shareholders. Pricewaterhouse Coopers, the accounting firm that was implicated in the scandal, also paid around $225 million to the class. Swartz and Kozlowski, both of whom also got jail time, would end up paying around $72 million and $167 million in fines, respectively.