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dirty little secret, a loan program once milked for millions by top brass, has now gotten a full airing. But some people still don't like the smell.

Following a high-profile internal investigation, Tyco released an extensive report Tuesday that portrays jaw-dropping greed by ousted managers led by ex-chief Dennis Kozlowski. But the company, whose shares have more than doubled since CEO Edward Breen led a new management team in this summer to lead a cleanup of the conglomerate, continues to be vulnerable to further surprises, some investors say.

"I think there's another accounting shoe to drop," says David Tice, a Dallas fund manager who is short the stock. Tice scored headlines long before the current scandal as one of the first critics to question Tyco's finances.

Considering the glaring ethical lapses by the company's former top officers, some observers say it would hardly come as a shock if Tyco's financials turned out to fall short of the mark as well. Tyco shares were flat at midafternoon Tuesday after a weak opening.

Lend-Lease Policy

In Tuesday's filing with the

Securities and Exchange Commission

, the company revealed a sham relocation loan program that showered dozens of hand-picked employees with large sums of money that could -- and often was -- used for discretionary expenses unrelated to moving. In total, Tyco doled out $95 million to 51 employees through the unauthorized loans. The company says those loans were completely forgiven under Kozlowski's orders.

Some Tyco executives repaid their loans prior to Tuesday's filing. But Kozlowski, who himself borrowed more than one-third of that $95 million, easily emerged as the largest beneficiary of Tyco's unauthorized generosity.

Charles M. Elson, chair of the Center for Corporate Governance at the University of Delaware, says Tyco's abuses illustrate the dangers of insider loans.

"A company is not a bank," Elson says. "This is inappropriate use of shareholder assets."

Elson said he strongly opposes forgiving loans, particularly for those who can afford to pay them back. He expressed primary concern about the loans to Tyco's top executives, although some people have dwelled on the unusual loans made to lower-level employees as well.

Peter Cohan, a Massachusetts author and investment strategist, questions why Tyco would spread perks normally reserved for top brass into its lower ranks.

"You've got to wonder why they got these loans," says Cohan, who has no financial position in the stock. "Maybe it was a payoff to buy their silence and keep them from going to the authorities."

Tuesday's filing revealed that Tyco employees were, in fact, required to sign confidentiality agreements promising silence about the forgiven loans. But Cohan speculated that the employees may have additional information that could prove worthwhile.

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For now, Tyco has already made some

startling disclosures. Tuesday's report revealed a number of lavish, company-funded purchases -- a $15,000 umbrella stand, a $6,000 shower curtain, a $2,200 trash can -- that benefited Kozlowski but lacked any legitimate business purpose.

All told, the report alleges that Kozlowski and other top brass -- including former Chief Financial Officer Mark Swartz and former Chief Corporate Counsel Mark Belnick -- robbed Tyco of hundreds of millions of dollars that rightfully belong to the company. All three former executives have already been indicted and face civil suits from Tyco as well.

Thus far, Tyco has indicated that the alleged looting -- while extensive -- should have no material affect on the company's financial statements.

"The amount of money improperly diverted by Tyco's former executives from the company to themselves is very small in comparison with Tyco's total revenues and profits," the report stated. "But it is very large by any other relevant comparison."

Besides Kozlowski, the report blasted Swartz for, among other things, falsely attesting to employees that Tyco directors had blessed the company's unauthorized loan programs. (Tyco provided sham loans for stock purchases, as well as relocation.) The report also hammered on Belnick, who had strong incentive to push Kozlowski's compensation to the limit.

Through a secret agreement, undisclosed to company directors, Kozlowski promised to give Belnick special bonuses that were at least equal to one-third of Kozlowski's own bonuses.

"Adding the $4 million in bonuses to Mr. Belnick's base compensation made Mr. Belnick one of Tyco's four highest-paid executive officers other than the chief executive officer," the report stated.

Tyco's previous regulatory filings failed to disclose that the company's attorney -- whose total compensation approached $17 million last year -- was so highly paid, however.

More Data

Tuesday's report offered a number of other noteworthy revelations as well:

  • Kozlowski sold one of his homes to Tyco in 2000 for about three times its market value, resulting in a $3 million writedown for the company. He conducted a number of other real estate transactions, sometimes with board members, in which Tyco picked up his end of the tab.
  • Kozlowski routinely used Tyco funds to make sizable charitable contributions on his own behalf. The most egregious: A $1.3 million donation to the Nantucket Conservation Foundation, which rewarded Kozlowski with acreage adjacent to his own property meant to enhance the value of his home.
  • Kozlowski tapped company funds to finance his personal interests, including, among other things, a $700,000 investment in the film "Endurance."

Some observers described Tyco's detailed list of executive transgressions as unprecedented. But Tyco itself referred to that disclosure as necessary.

"In the interest of restoring confidence in the company," the report stated, "the extent of the company's disclosures in this filing will go beyond what the law requires, or what might ordinarily be disclosed in other circumstances."

The detailed filing represents Tyco's latest step in a recovery effort led by a new, well-respected team of officers and directors. So far, that overhaul has helped Tyco shares rally from this summer's single-digit lows.

But bears are bracing for more disasters ahead. For now, Cohan marvels that investors are already betting on Tyco's stock with such restored confidence.

"I would think that any numbers reported by Tyco would have to be suspect," Cohan says. "If executives are willing to steal from a company like that, you have to assume they have no moral scruples against cooking the books, either.

"After all, there are a lot more executives that have cooked the books than have stolen $600 million. I've never seen anything like this."