Tyco International

IN 1960, Tyco was established by Arthur J. Rosenburg, who started it as an investment and holding company in Waltham, Massachusetts (not be confused with the Tyco Toy, Inc., the well-known toy company). The company had two main holdings: the Materials Research Laboratory and Tyco Semiconductor. The company's primary function was performing experimental research for the government sector.

In 1962, Rosenburg incorporated the business, changing its name to Tyco Laboratories and merging Tyco Semiconductor and the Materials Research Laboratory. After the merger, Tyco still relied heavily on U.S. government research contracts. The main concentration of the company soon changed, from governmental research to the commercial sector, for which high-technology materials as well as science and energy conversion products were produced. As the company grew, it became public in 1964, and its expansion continued.

Tyco again altered is focus, and in 1965, it started to purchase other companies to meet its development and distribution network needs. It was during this phase that Tyco's purpose morphed into the manufacturing of industrial products. By 1968, a total of 16 companies had been acquired by Tyco Laboratories.

During the period of 1973–82, the company continued to experience tremendous growth through the acquisition of even more affiliated businesses. In 1974, Tyco's stock was listed on the New York Stock Exchange, and by 1982, its sales exceeded $500 million and its net worth surpassed $140 million. In 1976, the company hired L. Dennis Kozlowski. Major acquisitions of the company during this period included Simplex Technologies (1974); Grinnell Fire Protection Systems (1976); Armin Plastics (1984); and Ludlow Corporation (1981).

Between the years of 1986 and 2000, many significant changes occurred, including a name change from Tyco Laboratories to Tyco International Ltd. in 1993, which was a reflection of its increasingly global presence. These changes set the stage for the company's four business segments: electrical and electronic components, healthcare and specialty products, fire and security services, and flow control. Kozlowski became the company's chief executive officer (CEO) in 1992.

Tyco continued to experience success, attributed in part to the business practices of Kozlowski. In 1999, the Securities and Exchange Commission (SEC) initiated an inquiry into Tyco's practices, resulting in a restatement of Tyco's earnings in 2000. The SEC abandoned its probe in July 2000, and the company boasted revenues in excess of $6 billion for fiscal year 2001. In January 2002, the bright picture changed when its many questionable accounting practices were revealed, adding the name Tyco to a series of corporate crime scandals. It was during this time that Tyco posted a negative cash flow, and subsequently set a plan to break into four companies. This plan was deserted in April, during the[Page 820] course of an investigation by the Manhattan, New York City, district attorney's office.

The investigation revealed Kozlowski's involvement in many questionable activities, such as a $19 million, no-interest loan from Tyco in 1998, which the company forgave as part of a special bonus program. Tyco also covered Kozlowski's income taxes on the forgiven loan, which amounted to $13 million. Kozlowski's extravagant lifestyle, financed by Tyco, included multiple estates in Nantucket, Massachusetts, Rye, New Hampshire, and Boca Raton, Florida, as well as lavish parties, a 130-foot racing yacht, and charitable donations with company funds in Kozlowski's name. Estimates indicated that Kozlowski financed these activities by looting over $75 million from Tyco; none of this was made public to the company's shareholders.

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