1. Under the leadership Dennis Kozlowski, Tyco grew rapidly for a decade. Why do you think Kozlowski pursued his growth through acquisition strategy? How did it benefit Tyco? How did it benefit Kozlowski?

2. What do you think leads top managers to engage in accounting manipulations to pad earnings, as apparently happened at Tyco?

3. During the period when Tyco’s profits were apparently overstated to the tune of $1.5 billion, its accounts were audited every year by a major independent accounting firm that signed off on them. Why do you think that the accounting firm did not catch the manipulations at Tyco?

4. Why do you think Kozlowski and Swartz, both bright successful businessmen, engaged in the behavior that they did? What motivated them to take such risks? How risky do you think they thought their behavior was?

THE RISE AND FALL OF DENNIS KOZLOWSKI

Under the leadership of Dennis Kozlowski, Tyco underwent a series of unrelated acquisitions. The company grew in revenues from $3.1 billion to almost $40 billion in just over ten years. The acquisitions significantly increased Tyco’s debt load as well. Questions arose as to the company’s ability to service its debt and many felt that the company was manipulating its books to make the company appear more profitable than it was. Kozlowski was forced out by the board in 2002 and subsequently tried and convicted of twenty-three counts of grand larceny, conspiracy, securities fraud and falsifying business records. Kozlowski used the company as his own piggy bank, charging Tyco for his wife’s birthday party and furnishings for his home. The company took a $1.5 billion charge against earnings for accounting errors in 2003. Under the new CEO the company has been broken up into three parts to deal with the strategic incoherence of the conglomerate model.