Tyco Case Flashcards

1
Q

When did Tyco get into trouble?

A

After Enron

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2
Q

What did investigators notice about Tyco?

A

That they were in deep debt despite them reporting strong cash flow

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3
Q

Why was Tyco reporting strong cash flow?

A

They were misusing goodwill and spring loading

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4
Q

What 2 types of earnings management did Tyco use?

A
  1. The misuse of goodwill

2. Spring Loading

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5
Q

How did Tyco misuse goodwill?

A

When they acquired a company and they would record their assets as goodwill

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6
Q

What was the benefit of recording assets as goodwill?

A

Their value wouldn’t deteriorate over time, so they would make profit when they sold it in the future

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7
Q

What is Spring Loading?

A

Acquirign a new company and making them pay off all their debt before they merged

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8
Q

Who noticed Tyco’s fishy accounting practices?

A

William McLucas

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9
Q

What did Tyco do for Kozlowski?

A

They were paying for and recording Kozlowski’s personal expenditures as business expenses

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10
Q

Who was the CEO of Tyco?

A

Dennis Kozlowski

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11
Q

How was Tyco’s KELP program being misused?

A

Higher ups were using it to steal from the company

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12
Q

How were higher ups stealing from the company through the KELP program?

A
  1. It was used to pay for taxes

2. Executives were given loans for personal expenditures and for relocation

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13
Q

What did Kozlowski do when it was reported that he was being investigated for sales tax evasion?

A

He resigned

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14
Q

What were Kozlowski and Swartz tried and convicted of?

A

22 counts of grand larceny, conspiracy and securities fraud

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15
Q

What is the ethical dilemma in the Tyco case?

A

Should Tyco be misusing goodwill, spring loading, and paying for Kozlowski’s personal expenses?

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