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Forensic Report On Tyco Expected Soon

ADT Likely To Be Major Focus of Long Investigation Into Company Accounting Practices

Dec 3, 2002 | Boca Raton News A top Wall Street follower of Tyco International Inc. expects the troubled conglomerate will issue a long awaited report on company accounting practices as early as today.
Tyco’s ADT Security Services unit, which is based in Boca Raton, is expected to play a big part in the eagerly anticipated report. The security alarm firm is suspected of improperly accounting for dubious contracts following its acquisition by Tyco.

The investigation into Tyco’s accounting practices has been going on for months and comes in the wake of charges that the company was looted on a massive scale by its former top two executives, Dennis Kozlowki and Mark Swartz.
A report released Monday by Credit Suisse First Boston analyst Michael Regan said that the results of an intensive investigation into the deal making of the men deal making that created the Tyco of today could come as early as today, according to Reuters news agency.

Tyco investors are keen on finding out whether ADT has been a central element of the “forensic” accounting investigation’s focus. The company has denied that it pushed unethical sales tactics in order to quickly boost revenues immediately after being acquiring by Tyco in 1998.

“Such tactics have never been authorized,” said Tyco spokesman Gary Holmes, who spoke of behalf of ADT two weeks ago.

The denial came in response to reports that accused ADT of aggressively targeting poor neighborhoods for fast growth. ADT may also have improperly accounted for canceled contracts after much of that low-income business turned sour, according to the reports.

Boca Raton has been a major focus of the looting investigation, because Kozlowksi is accused of illegally forgiving nearly $100 million of allegedly unauthorized Boca Raton company relocation loans, including $32 million for himself. The forensic report will show if Boca Raton, through ADT, has become a focus of the accounting investigation as well.

ADT has already admitted that it overstated income from various fees charged to outside dealers, which resulted in a large $130 million charge against profits for this year’s first three quarters.

In October, the company scored a major victory when it landed a five-year, $135 million contract from the U.S. Marshals Service to help protect federal courtrooms. John Kraus, chief of judicial security contracts with the Marshals Service, told Reuters news agency that ADT had “come back clean” from an audit undertaken by the Defense Contract Audit Agency.

ADT, which forms part of Tyco’s $10 billion-a-year-in revenues, Boca Raton-based Fire and Security Division has a long history stretching back to 1874, when the firm was in the telegraph business. Advances in telegraph technology allowed for ADT, then called American District Telegraph, to enter the electronic protection business in the 1890s. Later, American District was acquired by Western Union, which shortly afterward came under the control of AT&T.

Western Union spun off ADT into a publicly traded company in 1969.
A British firm called Hawley Group, controlled by controversial businessman Michael Ashcroft, acquired ADT in 1987.

Ashcroft, who resigned last week from Tyco’s board amid an effort to rid the board of Kozlowski-era directors, sold ADT to Tyco when Kozlowski was building the conglomerate into a $30 billion behemoth.

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