Tyco CEO Kozlowski Resigns


Tyco Int’l Inc. CEO and Chairman Dennis Kozlowski resigned from his position today, the same day a report in The New York Times stated he is the subject of a grand jury investigation into whether he avoided New York state sales taxes. In the last few weeks, a grand jury has issued subpoenas and taken testimony, the lawyers told the newspaper. However, no criminal charges have been filed.

According to The Times, prosecutors are said to believe Kozlowski moved hundreds of millions of dollars into family trusts, then used the trusts to buy goods and services in the state of New York without paying sales taxes.

Until a replacement for Kozlowski can be found , Tyco says John Fort, a former Tyco chairman and CEO from 1982 to 1992, will assume executive responsibilities. Since 1992, Fort has been an active board member and is currently the lead director, acting as the primary liaison between management and the outside directors.

Rumors of Kozlowski’s resignation surfaced Friday, but at the time the company dismissed them as “absolutely false.” Tyco made no reference to any investigation in the press release announcing the resignation. The company said Kozlowski was leaving for personal reasons, adding, “During his tenure, Dennis Kozlowski grew Tyco to a $36 billion manufacturer and service provider operating in more than 100 countries. We wish him well and thank him for his contributions.”

Calls for Kozlowski’s resignation began to surface this spring after Tyco unveiled and then shelved an ambitious plan to split itself into four parts as a way to reduce its heavy debt load. In the last six months, Tyco shareholders have seen the value of their investment fall sharply as questions arose about the way the accounted for and disclosed an acquisition binge that built the company into one of the biggest in the world. As of April 1, Tyco employed some 277,000 people worldwide.

Tyco says it is still committed to sell or spin off its CIT Financial unit, a plan key to relieve the company’s debt burden. “We plan to complete the IPO of CIT by the end of June,” Fort stated. “We will continue with our plans to make return on capital a key part of our compensation system along with earnings growth and cash flow.”

Security Sales & Integration will continue to follow-up on any future developments regarding this story.

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