When Edward Breen came on board as chairman of scandal-ridden Tyco International last summer, he vowed to clean up the company. But nine months later, accounting problems keep popping up. In March, Mr. Breen estimated the company would take a $300 million charge for the first quarter. This week, the company announced a final after-tax charge for the quarter of $1.5 billion and a net loss of $468 million.
This newest revelation marks the fourth time since October that the company has disclosed accounting problems, for a total of $2 billion. In March, Mr. Breen promised investors and analysts that he would get rid of the "crap" and "heads would roll" if he uncovered any more accounting problems.
Tyco, a Bermuda-based conglomerate, has been plagued with financial woes in the last year. Last September, the Securities and Exchange Commission filed suit against three former top executives. The executives are accused of looting $600 million from the company through unauthorized pay and illicit stock sales.
Tyco's recent problems have come from the company's fire and security division, mainly the ADT security alarm unit. The Boston Globe reports that an internal investigation led by prosecutor David Boies revealed that there had been "financial engineering" and aggressive accounting to pump up numbers. Internal auditors had also uncovered problems that resulted in this week's write-off.
Tyco's inability to count numbers properly extends even beyond dollar signs. A new method to determine the square footage of its global properties shows that its earlier assessments of office space were way off. In 2001, Tyco listed its total floor space of 89.5 million square feet. Due to a change in the systems for reporting space, for 2002, the number has been revised to 126.5 million square feet.