CFO of Troubled Tyco to Depart
Tyco International Ltd. said Thursday its chief financial officer, the main defender of the troubled company’s accounting, is leaving the firm, a week after the appointment of a new chief executive.
Tyco’s new CEO, Edward D. Breen, said CFO Mark H. Swartz and temporary General Counsel Irving Gutin, known for his keen negotiating skills, would depart after successors are found.
The announcement comes just four days after Breen, who resigned last week as president and chief operating officer of Motorola Inc., started work at Tyco.
Investors and analysts have urged Tyco to clean house amid persistent worries over its accounting, strategic flip-flops and the resignation of its longtime chairman, L. Dennis Kozlowski, all of which helped Tyco’s market capitalization fall $90 billion this year.
Breen, in a letter to employees, pledged an “absolute” commitment to integrity and trustworthiness. He also said Tyco had hired a professor from the Wharton School at the University of Pennsylvania to implement new corporate governance practices and ensure that the changes are instituted quickly.
Investors are awaiting the outcomes of three separate investigations into allegations corporate funds were improperly used to enrich executives.
Kozlowski resigned just before a criminal indictment on charges he conspired to avoid paying sales taxes on artwork purchases. Gutin stepped in as general counsel when Mark Belnick was dismissed from the Pembroke, Bermuda-based company.
Swartz, named CFO in 1995, has been on the hot seat of late as he was quizzed about Tyco’s accounting during lengthy conference calls with investors and analysts. He was a key advisor in Kozlowski’s decade-long acquisition binge to build Tyco into one of the world’s largest manufacturing conglomerates. Tyco’s accounting has drawn fire as opaque and misleading, and some investors worried it was used to artificially boost earnings.
The SEC investigated Tyco in 1999, but took no action.
Perceptions of Tyco’s accounting suffered another setback last month when Goldman Sachs, a key financial advisor to the company, said it would no longer offer an investment opinion on Tyco, citing “heightened concern” about the SEC renewing an investigation into Tyco’s accounting.
Tyco’s shares closed up 1 cent at $12.81 on the New York Stock Exchange. In after-hours trading following the announcement, the shares fell 5.4% on Instinet.
