Tyco Corporate Scandal Case Analysis 2022

Running Head: TYCO SCAM
1
TYCO CORPORATE SCANDAL
INTRODUCTION
The Tyco International Scam case was brought into light in the year 2002. The company used to
operate in more than 100 countries and largely produced electrical components, such as fire
protection, plastics and adhesives, electronic security services and most importantly, the medical
products. In the year 2002, this scam was highlighted in which the accounting theft was done by
Dennis Kozlowski, the former CEO of the company and Mark Swartz, the former corporate
Chief Financial Officer of the company.
The TYCO International Scandal of the year 2002 is all about the theft done by Dennis
Kozlowski, the former CEO of the company and Mark Swartz, the former corporate Chief
Financial Officer of the company. The company was involved into two primary business sectors,
that is, security solutions and the fire protection. The then CEO, Kozlowski was indulged into
many of the financial transactions which were not declared in the financial reports of the
company. Kozlowski including with many other officers were involved in this fraudulent
transactions. ("Unethical Issues or Legal Issues in Tyco International", 2019)
The system of common law and the civil statutory law of the United States are both different in
legislations. The rulings in both the system depend on the rulings which have been made prior in
similar cases. Tyco International, according to the U.S. Federal Securities Laws had violated the
laws by preaching improper accounting practices. (Atiyah & Summers, 1987)

Running Head: TYCO SCAM
2
Both the CEO and the CFO had been found guilty of reaping $600 million through the
racketeering scheme which involved unauthenticated bonuses, fraud in the stock records and the
incorrect expense accounts. The company’s former general counsel was also charged that he had
misled the company records and had concealed $14 million under the head of improper loans to
himself. ("Tyco International| Bartleby", 2019) They were included in more than 30 counts of
Fraud. Major fraud counts included:
● Bribery
● Inaccurate discharge of employees
● Failure of accounting policies
Both the accused men were imprisoned for not less than 25 years in the light of the above
scam according to the laws of the United States. ("Tyco Corporate Scandal of 2002 (Ethics
Case Analysis) - Panmore Institute", 2019)
SAUDI ARABIA (RELIGIOUS LAW SYSTEM)
Assuming the case had taken place in Saudi Arabia, then the laws would have been different.
Saudi Arabia does not have specific penal code of conduct and does not have any principle
that any corporate organization is criminally liable under the Islamic Laws preached in the
Kingdom. Saudi merely depends on the paramount body of law called the Shariah, which is
derived from the Holy Quran and the Sunna, earning the words and actions of the Prophet
Mohammed. Let’s assume, Kozlowski was working in the Arabian country and had
committed the fraud in any company with similar circumstances, then the laws could have
been different. If any such company or officer is said to have committed organizational

Running Head: TYCO SCAM
3
crimes such as bribery or money laundering or anything else, then the company would be
subjected to a fine imposition of up to 10 times the value of the bribe and a ban would be
levied of minimum 5 years on the company when it will not be able to carry out its
operations.
Violation of laws might lead to the imposition of penalties and also confiscation of the
property and sale proceeds. ("Saudi Arabia Update March 2018 - Criminal Law - Saudi
Arabia", 2019)
Saudi Arabia, as already mentioned works on the Shari’ah principle based on the holy books
of the Arabian laws, there does not specify the rules for the arrest warrant, detention or
imprisonment for the cases which unless are related to the murder or unless specified by the
law. No penal punishment would also be imposed on the guilty unless stated by the law. The
Anti Money Laundering Law, issued pursuant to Royal Decree No.M/39, imposes criminal
liability on the person found guilty if violated the money laundering rules. Such as case of
Tyco International, where the CEO and the CFO of the company themselves were included
in the fraud, then according to the Arabian laws and also referring to the Anti Commercial
Fraud Laws pursuant to Royal Decree No. M/19 would attract and be punished according to
the law.According to the aforementioned laws, such officers if involved in the fraud case as
of Tyco would be liable as follows:
• The officers would be subject to fine upto times the value of the funds stolen from the
company

Running Head: TYCO SCAM
4
• The Law could withdraw the license agreement of the company and also possibly
blacklist the said guilty officers.
• The officers for the violation of laws would be fined and their personal property
including the proceeds of such fraudulent action would be confiscated according to the Anti
Money Laundering Act.
Interim injunctions and specific performances could also have been applied for such breach
of the company laws against such guilty and accused officers.(Brand, 1986)
GERMANY (CIVIL LAW SYSTEM)
Germany runs in a different way from the other countries. In this country offices of the
public prosecutor are held responsible for the prosecution of all the general offences. They
are supposed to act in the regional level. The Germany law container a risk based concept as
this law sets out very stringent requirement for the companies in regard to prevent the
practice of money laundering. If the case similar to what had happened in Tyco International
takes place in Germany, then administrative fines are attracted on the accused, which is very
significant ranging to a maximum amount of 5 million Euros and also pertains to the rules
like,
● Suspension from performing the managerial activities for the person found
guilty in the case
● The accused would be blacklisted in the sense that his or her name would be
published on the Federal Financial Supervisory Authority’s website.

Running Head: TYCO SCAM
5
In general, there is no civil law enforcement by the public authorities. In case of the
aggrieved companies, that is who has been cheated by its officers may file law civil suit
where asset recovery could be done by seizing the assets of the fraudulent persons and
also freezing their personal bank accounts. As per the laws, German law does not
facilitate for the jury decisions. There has been the most controversial case in Germany
where the few of the bank managers who had made fraud business decisions. This case
was regarded as a criminal offence. Companies can according to the Germany laws be
held liable for the corruption offences. ("Anti-money laundering and fraud in Germany |
Lexology", 2019)
Like the other countries have, Germany does not have a centralized Anti-Corruption agency.
Investigations in the case are only conducted by the regular State Prosecutors and the police
forces with the help of tax investigation service. Unlike United States, they have created
specialized units or centralized investigations for the study of the instances like in Tyco case
of the United States. Referring to the Sec. 266 StGB- Untreue of the German Laws, Lets
say, Tyco Case had been taken place in Germany, then the regular punishment was upto three
years and/or fine could have been imposed too with the added law that his personal property
could have also been attached. In the German legal system, there are no particular
investigation and investment procedures for the cases of bribery and embezzlement. The
German Code of Civil Procedure (StPO) only applies. Also referring to the earlier Siemens
Scandal of Germany where the company was challenged for hiding the bank accounts,the
German criminal law also allows the skimming of the proceeds the company has obtained
from the illegal and unlawful transaction. In the Tyco case, Kozlowski had unlawfully sold
the shares by inflating its market price. He sold the shares at that inflated price and had

Running Head: TYCO SCAM
6
earned unfair price from the public which was not disclosed in the books of the company.
Such a case in Germany is treated as offences under the German criminal laws and the
compliance efforts. Such officer will be held criminally liable for the offence and imposed
with the penalty leading to monetary fines and imprisonment. (WALMSLEY, 2019)
CONCLUSION
Tyco International Company has faced lot of unethical issues. The company had the major
issue of sustainability and was almost dismantled by the company leaders. Ethics in all, is the
key role player in maintaining a company. The chief officers are treated to be the backbone
of the company and its always said if backbone is only lean and weak, then there is no
chance for the survival of the individual or organization. To conclude, companies must be
run ethically with high standards so as to avoid the scams from taking place. In order to sum
up, the common issues of the case as discussed are bribery, accounting fraud and embezzling
fund.
REFERENCES:
1. Unethical Issues or Legal Issues in Tyco International. (2019). Retrieved 24 August 2019,
from https://www.lawteacher.net/free-law-essays/company-law/unethical-issues-or-legal-issues-
in-tyco-international-company-law-essay.php
2. Tyco International | Bartleby. (2019). Retrieved 24 August 2019, from
https://www.bartleby.com/essay/Tyco-International-Case-Study-FKBBRJSX7KU4Z

Running Head: TYCO SCAM
7
3. Tyco Corporate Scandal of 2002 (Ethics Case Analysis) - Panmore Institute. (2019). Retrieved
24 August 2019, from http://panmore.com/tyco-corporate-scandal-2002-case-analysis
4. Crime, W. (2019). Corporate Liability in Saudi Arabia - Global Compliance News. Retrieved
24 August 2019, from https://globalcompliancenews.com/white-collar-crime/corporate-liability-
in-saudi-arabia/
5. Saudi Arabia Update � March 2018 - Criminal Law - Saudi Arabia. (2019). Retrieved 24
August 2019, from
http://www.mondaq.com/saudiarabia/x/687736/White+Collar+Crime+Fraud/
Global+Employment+Lawyer
6. Anti-money laundering and fraud in Germany | Lexology. (2019). Retrieved 24 August 2019,
from https://www.lexology.com/library/detail.aspx?g=2df09da9-88a8-44b0-9d4f-3174b94368e6
7. Butterworths Company Law Handbook 2019
8. Brand, J. (1986). Aspects of Saudi Arabian Law and Practice. Boston College Law School.
9. Atiyah, P., & Summers, R. (1987). Form and substance in Anglo-American law. Oxford:
Clarendon Press.