Editor's Note: Herb Greenberg's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Jan. 28 on RealMoney.

In this post-

Enron

(ENRNQ)

world, you can never suspect too much, and investors of very complicated companies should ask more questions, not fewer -- especially when offshore subsidiaries are involved and the company is run by a former auditor who is known for his financial engineering.

Tyco

(TYC)

holds itself out as very transparent, and in one sense it is: Its 10-K includes a 47-page list of about 2,000 subsidiaries, of which about 70% are offshore, in countries including Belgium, Cyprus, the Isle of Man, Luxembourg, and (of course!) Bermuda, where Tyco (whose headquarters is in New Hampshire) is incorporated.

But you can't help but wonder why there are so many offshore subs and what their purposes are. Some have strange names like 919551 Ontario Inc. and Tyco (Bermuda) Unlimited No. 2 and Mauritius (

Mauritius?

) Tyco Asia Investments Limited. Are any of these investment partnerships or limited partnerships involving related parties or financial dealings that artificially inflate Tyco's financial performance?

Many of these subs came with acquired companies, but when any company gets

that

complicated, you have to wonder what else is going on.

Consider, for example, what

Business Week

reported last year before Tyco was a hot topic: "Tyco also has set up a Luxembourg-based subsidiary to finance most of Tyco's debt. In a process known as income-stripping, the Luxembourg subsidiary makes loans to Tyco units in the U.S. and elsewhere, which then deduct the interest payments from their taxable income. Together, these ploys sliced Tyco's effective tax rate to 25% last year

Tyco's fiscal year 2000, from 36%" in 1997.

You can't argue about a company trying to lower its taxes, but lowering taxes by financial engineering -- especially in so many far-flung parts of the world -- is not considered sustainable, and from a fundamental standpoint, results in low-quality earnings. (Could it be that Congress will start trying to button up some of

these

kinds of tax loopholes? Oops, forgot, Tyco isn't a U.S. company.)

Why, you have to wonder, does Tyco finance its debt through Luxembourg? Better yet, why does it have 16 subsidiaries in Luxembourg, which stakes its claim on making it impossible for outsiders to get almost any financial data about companies? Its banks tend to pay lower interest than banks in other countries, for the trade-off of secrecy. (Remember what happened when J.P. Morgan tried to get details of

A.C.L.N

's

(ASW)

banking accounts there? It encountered a brick wall!) Why did Tyco purchase

Lucent's

(LU)

Power Systems biz for $2.5 billion through a Luxembourg sub?

That's not all: Both Tyco and Tyco Capital disclosed that on Sept. 30 -- the last day of Tyco's fiscal year -- Tyco Capital sold certain international subsidiaries that had assets of $1.8 billion and liabilities of $1.5 billion to a non-U.S. subsidiary of Tyco, for a promissory note of $295 million. The details, which were available only in Tyco Capital's "Annual Transitional Report," say it was a noncash transfer. Why do it? (To help lower taxes?)

Tyco officials couldn't be reached.

Lights, camera: Catch me on CNBC at 11:50 a.m. EST Monday, where I'll be waving the red flags.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback and invites you to send any to

Herb Greenberg. Greenberg also writes a monthly column for Fortune.

Brian Harris and Mark Martinez assisted with the reporting of this column.