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Tyco May Report $1.2 Billion in Fresh Accounting Problems

Apr 30, 2003 | The Wall Street Journal

Tyco International Ltd. is likely to disclose that it has found roughly $1.2 billion in fresh accounting problems when it announces fiscal second-quarter earnings Thursday, people familiar with the matter told The Wall Street Journal.

As recently as December, the company had assured investors that a months-long internal probe led by lawyer David Boies had failed to find any "significant fraud" at Tyco, a Bermuda-registered conglomerate that is being managed from executive offices in New York City.

The disclosure would vindicate many Tyco critics, who had contended that the conglomerate for years puffed up earnings through all manner of accounting legerdemain.

In addition, the disclosure may raise questions about whether investors who paid $4.5 billion for Tyco convertible bonds in a January private placement were given a full picture of the company's finances.

The roughly $1.2 billion in fresh problems comes on top of an additional $265 million to $325 million in charges Tyco announced in March, bringing the total accounting problems identified in the quarter to about $1.5 billion or more. It couldn't be determined whether the fresh accounting issues will result in new charges or a restatement of past results, or a combination of the two.

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