Misappropriation of Assets

* Jerry, President/CEO, started with 180,000 investment, lost half a million before selling company to UroHealth

The major conspiracy was uncovered by Manhattan District Attorney, Robert Morgenthau, who was investigating Kozlowski for income tax evasion for some fine art work that he had purchased. As Morgenthau kept digging into the record keeping of Tyco and Kozlowski, it was determined that there were other situations that had occurred, such as a 10 million dollar loan that was totally forgiven by Tyco, and all interest was billed to the corporation. It became apparent on January

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

On this project, we did different calculations on John Barton’s net cash flow and net worth. We were able to analyze John’s current financial position and current cash flow situation. Looking at both of those documents, it is obvious that John is spending money that he does not have.

There existed a rule that ACC could only remove a maximum amount of money from Lincoln equivalent to Lincoln’s income, so ACC constructed a scheme to create fictitious income and paper profits in the form of real estate transactions among ACC, Lincoln, and third party entities. Henry Gonzalez and Kenneth Leventhal & Co. investigated these deals such as the Hidden Valley transaction involving a web of nonrecourse notes that allowed Lincoln to book multimillion-dollar paper gains. Dozens of similar deals would allow ACC to withdraw huge sums of cash ultimately funded by the FDIC. The withdrawals would count as losses on Lincoln’s books and simply be resolved with more profits from additional deals. This endless cycle would lead to the downfall of Lincoln, an inevitable event in which ACC had little

Of the $600 million that was stolen, Kozlowski and Swartz used the money for personal purchases, such as paying for an expensive apartment located on Park Avenue, houses in Boca Raton, Florida, which is a very wealthy location, and high-end jewelry (Sorkin, 2002). There was also an occurrence of Kozlowski hosting a birthday party for his wife that cost millions, and even having Tyco pay for half of the tab (Sorkin, 2002). The party was located on an island in Italy called Sardinia (Sorkin, 2002). It’s not surprising that the two men used the money they stole to buy luxurious items, but if it’s apparent to others that the cost of all the purchases don’t exactly match their salary people are going to become suspicious (Sorkin, 2002). Kozlowski

Apollo’s minutes of June 30, 2007 shows that Apollo approved an advance of $1,000,000 to Mr. Lancaster (CEO of Apollo Shoes) as a personal loan to cover personal legal expenses. Mr. Unum later reclassified the loan as other receivable. This information gives us a “red flag” for possible misclassification. Further investigation is

No petty thieves, Tyco International Ltd. chief executive Dennis Kozlowski and chief financial officer Mark Swartz took over $170 millions in "loans" from the company without the shareholders knowledge. A Securities and Exchange Commission investigation in 2002 also found the pair had made more than $400 million in stock sales without disclosure.

Internal fraud can also be classified into two categories misappropriation of funds and fraudulent financial statement. Assets misappropriation appears to be the most common fraud in non profit organization such as:

Kozlowski became scandalous for his lavish lifestyle, and he was summoned for tax fraud with respect to purchases of fine art. Mr. Kozlowski was convicted of fraud and grand larceny for misappropriating more than $400 million of Tyco’s money for his personal use, including buying a $6,000 shower curtain and throwing a lavish birthday party for his wife on the island of Sardinia (Dealbook, 2008).

Ironically, he was the only analyst who used Enron’s cash flow chicanery to correctly identify the scam. Using cash flow analysis, he determined the firm had few tangible assets and generated sham profits spawned by contrived financial flimflam produced with hundreds of off-balance sheet entities.

On September 12, 2002, national television showcased Tyco International’s former chief executive officer (CEO) L. Dennis Kozlowski and former chief financial officer (CFO) Mark H. Swartz in handcuffs after being arrested and charged with misappropriating more than $170 million from the company. They were also accused of stealing more than $430 million through fraudulent sales of Tyco stock and concealing the information from shareholders. The two executives were charged with more than thirty counts of misconduct, including grand larceny, enterprise corruption, and falsifying business records. Another executive, former general counsel Mark A. Belnick, was charged

Off Balance Sheet Techniques. The research of Giroux (2008) revealed that Enron resourced to complex and deceptive initiatives of fabricating fictitious and guaranteeing its own Special Purpose Entities (SPE) and off-shore accounts to move debt off the balance sheet and transfers the liabilities of the special purpose entity by recording cash as a cash from operations rather than cash from financing (p.1216). The research of Ahmad et al. (2013) on WorldCom indicated that the top executives overstated earnings by routinely manipulating and treating operation expenses as capital (pp.8-10). Likewise, Crumbley et al. (2013) research on WorldCom indicated that the internal auditor discovered the shift of line cost expenses to capital accounts (p.4121). The research of Crumbley et al. (2013) on Adelphia Communication specified that the company’s management and owners falsified number of cable TV subscribers, created false management fees and were hiding off-balance sheet debt from investors (p.4191). Ahmad et al. (2013) research on Tyco International showed that the companies inflated its cash flow by improperly recording booking expenses as capital (pp.8-10).

In June 2002, Kozlowski was accused by the Manhattan district attorney Robert Morgenthau, of evading $1 million in sales tax on the purchase of rare artwork (Timeline of the Tyco International scandal, 2005). This investigation opened up a can of worms indicting Kozlowski along with Tyco’s former chief financial officer (CFO) Mark H. Swartz of looting millions of dollars from the company, misconstruing financial records and doctoring business records (Brickey, 2008). In September 2002, Kozlowski and Swartz were accused of stealing more than $170 million dollars from Tyco and swindling $430 million in the sale of company shares.

Minkow’s phony financial statements enabled him to borrow more and more money and expand the number of