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Two Tyco Executives Charged

They are accused of fraud in Mexico

Mar 19, 2003 | AP

Two Tyco International Ltd. executives have been charged with fraud in Mexico for their handling of the company's ADT security-alarm operations there.

Warrants were issued March 6 for Phillip McVey, president of Tyco Fire & Security Latin America, and Patricio Gonzalez, head of ADT's Mexican operations. McVey is an American and Gonzalez is Mexican.

Gary Holmes, a Tyco spokesman based in New York, declined to comment on the whereabouts of McVey and Gonzalez; however, he said the two would have no comment.

Holmes referred to the charges as a contractual dispute, a civil matter.

"Under our contracts with (security alarm) dealers, there is an arbitration clause that calls for an arbitrated resolution to this, and we're prepared to do that," Holmes said. "But these dealers have abused the Mexican justice system to leverage it into a criminal case.

"We have confidence this dispute will be resolved in favor of our employees. Meantime, we're doing everything we can to protect our employees and resolve this matter."

David Hart, a Miami lawyer representing four of the largest dealers in Latin America, agreed that part of the action is to get the company's attention.

"Nevertheless, these are legitimate criminal claims," he said. "If American dealers were in the United States, they could do exactly the same thing.

"There are plenty of examples of people who may have civil litigation, and discover there is some criminal element to a case and bring it to authorities who have the responsibilities to act upon it."

He said the contracts that call for arbitration are void because of actions taken by the company.

The arrest warrants are the latest trouble for the conglomerate, which has been beset by accounting problems and criminal charges against two former top corporate executives. Its stock has tumbled dramatically in the past year.

Most recently, the company fired the head of its fire and security systems division, which includes the ADT home security business. ADT has been involved in the bookkeeping problems revealed by Tyco that required a charge of between $265 million and $325 million in the current quarter.

Holmes said those problems dealt only with the unit's European operations, and had nothing to do with the problems in Mexico.

Hart said his clients claim losses of more than $30 million.

He said one of the issues involved 3,000 to 4,000 alarm systems installed in customers' premises that legally are owned by the dealers, but ADT removed them. He said it amounted to theft of the dealers' property.

Tyco is a collection of companies that makes products ranging from coat hangers to medical devices, with about $36 billion in revenue last year.

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