Tyco Allegedly Pushed ADT Security Systems in Poor Areas; May Have Recognized Canceled Accounts
Reuters reports that Tyco Int’l Ltd. aggressively
signed up clients in poor neighborhoods for its ADT burglar
alarms to jump-start growth in its home security division,
and may have improperly accounted for contracts that were
canceled, according to a published report Nov. 15.
In addition, Tyco fired two dealers of ADT burglar alarms after learning the dealers were convicted felons, according to the Wall Street Journal.
When Tyco bought ADT in 1997, it deliberately penetrated poor neighborhoods as part of a drive to boost sales, the Journal reported.
But many of those customers could not afford to pay their bills and canceled the contracts. Now, the issue of whether Tyco accounted for those canceled contracts as if they were valuable assets is the subject of an internal company investigation, according to the newspaper, citing people familiar with the situation.
New Tyco management insisted that none of its operating units had been involved in any unethical business practices. But in October, Tyco disclosed that its auditors had found that Tyco had exaggerated income from certain fees ADT charges its dealers.
As a result, Tyco restated its results for the first three quarters of the year, including $135 million worth of pretax revenue.
In addition, Tyco recently cut its ties with ADT dealers Crime & Fire Prevention Consultants Inc. of Overland Park, Kan., and Nashville-based Alert America of Tennessee after learning their owners were convicted felons, the Journal reported.
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