(TYC - Get Report)
shares slid Tuesday morning after the company detailed millions of dollars in unauthorized spending by former CEO Dennis Kozlowski and his top two lieutenants.
The selloff came as Tyco disclosed the findings of an internal inquiry led by prominent lawyer David Boies. Tyco said the probe turned up no evidence that the company will need to restate financial results as a result of the execs' "improper conduct." But the company noted that a separate inquiry into its accounting over the last three years remains open.
Tyco shares have plunged in 2002 as the company became embroiled in a web of accounting and corporate governance scandals. The stock, which fell as low as $6.98 earlier this summer from a January high of around $60, has begun recovering with the house-cleaning efforts of new CEO Edward Breen. But some investors continue to worry about skeletons in Tyco's closets, while others wonder about shareholder lawsuits and the company's heavy debt load. Tyco dropped 52 cents to $16.02.
Tuesday's findings focused on the alleged misappropriation of funds by the conglomerate's former top three officers: Kozlowski, ex-financial chief Mark Swartz and former general counsel Mark Belnick. The three executives were indicted in Manhattan last week on charges that they looted the company of hundreds of millions of dollars. Tyco has filed a lawsuit seeking to recover money taken by the executives.
In a press release accompanying the 8-K filing with the
Securities and Exchange Commission
, Tyco said the executives' actions damaged Tyco and its reputation with investors and lenders. The company said the execs hid their "illegal and improper" actions from the board and its committees.
|Adds shareholder value to any room.
"This pattern of improper and illegal activity occurred for at least five years prior to June 3, 2002," when Kozlowski resigned after he was indicted on tax-evasion charges, Tyco said. "The amount of money improperly diverted by Tyco's former senior executives from the Company to themselves is very small in comparison with Tyco's total revenues and profits, but it is very large by any other relevant comparison."
Pin and Spin
Tyco said Kozlowski alone misused an interest-free corporate relocation loan account to the tune of $62 million. Swartz took $31 million in improper loans and Belnick $15 million.
Among other alleged misdeeds, the company said that Kozlowski caused Tyco to pay a special, unapproved bonus to 51 employees who had relocation loans with the company.
The executives' expense-account shenanigans have been noted in news accounts, but Tyco's filing adds new detail. The company lays out how much Tyco shareholders unknowingly paid for decorating accessories at Kozlowski's Fifth Avenue apartment, including a $15,000 dog umbrella stand, a $1,650 notebook and a $445 pincushion.