TYCO CEO Kozlowski's $600 million
 

So, what do you all think about the former Tyco CEO Kozlowski's fall from reaches to rags? Actually, that may not be so accurate. I imagine he will still be wealthy but may not be so free at this time. How do you engage in $600 million dollar deceit? I can see $6,000 shower curtain here and there but $600 million? :eek3:

http://www.usatoday.com/money/industries/m...i-verdict_x.htm

ya, you would think after having a net worth of $50M or so most people would be content.....not these dickheads..... I think it is great that they are all getting caught (rite aid, adelphia cable, tyco, enron, world com, etc.....)

I think I would be pretty happy stopping at about $10M and living a nice stress free life.....

Mr. Kozlowski...this is bubba.....bubba.... this is Mr. Kozlowski.....:)

Here is the real kicker....

"Prosecutors learned that Kozlowski, at the time a budding art collector, had bought paintings by Claude Monet and other masters through dealers in London and New York.

In a June 2002 indictment unsealed the day after he resigned from Tyco, a Manhattan grand jury charged him with conspiring to duck sales taxes by having the paintings shipped to Tyco facilities in New Hampshire. Company employees signed for the art there, and then sent it on to Kozlowski's apartment in New York City."

The overarching greed and disregard for ethics Kozlowski demonstrated is bad enough, but to get busted just because he was too cheap to use missaproprated funds to pay SALES TAX :eek3: . Whatta dumbass. The worst part is that he would probably never have been caught if not for his false economy. :rolleyes:

Where were the board of directors and accountants (hmmm Rob)? I really hope that the oversight in TYCO has gone through a serious overhaul because it has certainly cost every other corporation and business in the U.S. untold billions of dollars of expenditures in order to comply with the flurry of new regulations spawned by these examples of power-lust and greed.

Jeff,

I think the bigger black eye, and the better example for the accounting profession is the Enron fraud. None the less, you are correct in asking where the accountants were. You are also correct in asking where the board of directors were. The board, in fact, might've had a bigger role in detecting the fraud.

Out of fairness, however, the general public needs to understand that an audit of the financial statements was never designed to detect fraud, it was only designed to attest to the fact that the "financial statements fairly represent" the financial condition of the company. Some of the great misunderstandings that the general public has is that an audit is meant to guarantee that the numbers are exact, that there is no fraud, and an unqualified opinion is a seal of approval that the company will continue to do well. None of that is the case. Again, an audit is only designed to attest to the fact the the "financial statements fairly represent". If in the course of the audit, the auditors detected fraud they were responsible to report it to management and the board of directors, but, that is not what they were looking for.

When you have the chance, pick up any annual report, from any company, and very carefully read the auditors report. The wording is very precise and is there for a reason.

That is now finally changing. Because of these cases the accounting profession is now putting a greater emphasis on fraud detection, and is approaching each and every audit with the idea that fraud is a possiblilty and the auditors need to do more than wait to stumble on it.

I think the Enron case is a far better example for a few reasons. For one, you had a lack of independence on the part of the auditors. Anderson was acting as both the consultant and the auditor. In effect, viewed as one company (Consulting and Auditing) they were auditing their own work. Whereas they may not have intended to do wrong, this is a very bad relationship. The issue of independence has once again become paramount to the accounting industry.

Secondly, regardless of who invented the partnerships and "off balance sheet" debt structure, the result was financial reporting that was far too convaluted for anyone to understand. The first rule of good accounting should be that if you can't understand a fiancial report, neither can anyone else and it is far too complicated to be real or useful. Here the accountants should have insisted on more clarity (assuming that they weren't actually a part of the scheme) and that would have unmasked some of the fraud.

Finally, the auditors were way too easily hoodwinked. When shown, for example, the fake trading floors with the contrived activity, they too easily accepted what they saw as truth. They should have looked deeper.

Needless to say, not one of us in the profession is proud of the role that accountants played in the Enron case. In the Tyco case it's questionable as to whether or not we could have/should have done better. What is good to know is that there is now emerging a set of rules to insure that we in fact do better.

Still, there will continue to be frauds, and us auditors and accountants will never be able to detect every one before they get to be big.

Rob,

Your poimts about auditting in general and Enron in particular are spot on. But I do have to wonder why no one in Accounts Payable or Cost Accounting raised a red flag at some of the expenditures Kozlowski was charging back to the company. I've gotten questions about restaurant tips before. :rolleyes:

[QUOTE=anarky,Jun 19 2005, 11:47 AM] Rob,

Your poimts about auditting in general and Enron in particular are spot on. But I do have to wonder why no one in Accounts Payable or Cost Accounting raised a red flag at some of the expenditures Kozlowski was charging back to the company. I've gotten questions about restaurant tips before.

:iagree:

:hello: Happy Father's Day to all the Dads out there!


Rob, without trying to sound as though there are any excuses for the behavior of "off the chart greedy corporate executives", the issue is more rooted in "who invented" such things as off balance sheet debt structure than one might think. Where do you think these characters got the idea, in the first place?

From the master of "off balance sheet" debt structure.

The United States Government.

It just isn't too far a leap to go from, "if it's ok for the government, then it's ok for business". THAT is why boards of directors become complicit in such things.... THAT is why accounting firms support such 'creativity'. They are all motivated by making the "bottom line" look as strong as they can.... making the stockholders happy enough so they don't make waves. Few of them ever look beyond the amount of time they expect to spend at a company. Few give a moment's thought to the "long haul".

It was government regulations that created the climate for today's "financial creativity". You don't have to just look at executive greed.... you can also look at executive irresponsibility. The S&L fiasco was a grand example. The coming bombshell of underfunded pensions is another (hey guys, if Uncle Sam can borrow $$$ from Social Security... for something that has nothing to do with SS.... then why can't we borrow $$$ from the company's pension fund?).

These overpaid execs who have "gone over the top" are getting a piece of their deserved comeuppance.... but it had to happen... they are the result of the total lack of ethical financial leadership from the government (read: our system) for more than 50 years.

We needed some creativity to get us out of the depression years.... that creativity should have been stopped once the economy was back moving again. It wasn't.

....My 2

Roy,

I don't disagree with you, and, whether it is our government or business, there needs to be accountablility and responsibility. This form of creative "off of the Balance Sheet" reporting should not be permitted. There are some new rule emerging to deal with this in the area of financial accounting.

I know you agree with me in that whether or not the government does this is not an excuse or a franchise for business to do this.

Here is an area where those of us in the accounting profession are guilty. We should have, long ago, made an effort to make financial accounting more understandable. It shouldn't be that the average person needs a degree in accounting or finance to understand an annual report. For those reports to have any meaning, the average investor should be able to read them and understand what they mean. It shouldn't be quite so easy for corporate execs (with or without the help of their accountants) to hide items or come up with such "creative" accounting.

The folks in corp. accounting were working for the company. Why should they bite the hand feeding them? Only an external auditor can actually be trusted; and when kickbacks are allowed even that goes out the window.

Times were good. Money was flowing. Why should they worry?

What scares me is that if the market hadn't "corrected" itself, these things would still be going on -- no one would be paying attention.

The moral of the story: Get filthy goddam rich while times are good, and then get the hell out before the company tanks. Buy and island and retire. ;)

[QUOTE=Chazmo,Jun 19 2005, 04:26 PM] The folks in corp. accounting were working for the company.