Word: tyco
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Dennis Kozlowski is fond of saying that "money is the only way to keep score." And by that measure, as CEO of the conglomerate Tyco, he often came out on top. He took home more than $300 million in total compensation in the past three years. He amassed an impressive collection of toys: three Harley-Davidson motorcycles; a 130-ft. classic 1930s sailing yacht; a private plane; lavish homes in New York City, coastal New Hampshire, Nantucket and Boca Raton, Fla.; and a small stake in the New Jersey Devils and the New Jersey Nets. Most important, in the past...
Unfortunately for Kozlowski, government watchdogs and prosecutors have started keeping score in much the same way he does. They are looking hard at his and Tyco's finances to determine if the game has been rigged. Kozlowski, 55, resigned last week from the helm of Tyco just before the Manhattan district attorney charged him with evading $1 million in sales taxes on more than $13 million in art, including paintings by Renoir and Monet, that he bought in the past 10 months. Kozlowski pleaded not guilty, and neither he nor his attorney would comment on the charges. "He sounded like...
Like most market crazes, this one started in the U.S. Sales and spin-offs accounted for 35% of M and A activity on Wall Street last year, up from 21% in 2000. Companies like Tyco International and Citigroup are jettisoning divisions; others, including GE, the Hilton Group and Motorola, are expected to offload units soon. In Europe, the market is smaller, but it's growing exponentially. According to J.P. Morgan, sales and spin-offs represented 8.2% of pan-European M and A activity last year, up from 2.8% in 1999. In the same period, Europe's entire...
...Meanwhile, Wall Street wasn't waiting around for lawmakers to make the new rules. Investors went ahead Monday with their own brand of accounting and disclosure reform - knee-jerk selling. Companies with dark accounting clouds (Tyco, Global Crossing, Enterasys Networks), questionable earnings details (Amazon.com) or simply lots of complicated ways of making money (GE) all took baths Monday as "Enronitis" fueled a 220-point selloff of the Dow and a 55-point drop in the NASDAQ...
MANAGED EARNINGS Critics of Tyco, which has bought hundreds of companies over the years, charge that it inflates write-downs for the costs of its acquisitions, in effect creating stored earnings it can summon at will to pump up quarterly results in a way that makes earnings growth appear to be the result of expanding sales or higher margins. These allegations are "totally inaccurate," Kozlowski says. But those denials aren't persuasive to David Tice, who runs the Prudent Bear Fund and practices short selling, a technique that bets on a stock to fall. He has sold Tyco stock short...