Accounting report: No Ã¢â‚¬Å“significantÃ¢â‚¬Â fraud at Tyco
January 2, 2003
NEW YORK - An internal review of the financials of troubled conglomerate Tyco found no signs of significant fraud, company officials said, but pointed out accounting errors that will force the company to take a $382 million charge in 2002. A large portion of that charge, about $186 million, is related to payments to ADT dealers in 1999-2001, the report said.
Conducted by the high-profile firm of Boies, Schiller & Flexner, the report found a Ã¢â‚¬Å“pattern of aggressive accountingÃ¢â‚¬Â that was executed to increase reported results and pressure management into increasing earnings. However, Ã¢â‚¬Å“aggressive accounting is not necessarily improper accounting,Ã¢â‚¬Â the report said, but how Tyco implemented the accounting measures tended to favor measures that would, for example, increase reported earnings after an acquisition rather than identifying adjustments after an acquisition that would reduce reported earnings.
Officials said the accounting improprieties were carried out under prior management, which includes former executives of the company indicted on charges of bilking the company of more than $600 million.
Tyco officials said in a conference call Tuesday, following MondayÃ¢â‚¬â„¢s release of the report, that the company was facing a $3.6 billion funding gap at the end of 2003 but that the company was confident it would secure new bank financing. The projected gap is more than double the companyÃ¢â‚¬â„¢s earlier debt estimates, which were about $1.5 billion.
The company still faces an ongoing investigation by the Securities & Exchange Commission, which recently received one million pages of documents from the company.