Kozlowski resigns amid reports that he is being investigated for tax evasion
Monday, June 3rd 2002, 12:00 am
By: News On 6
EXETER, N.H. (AP) _ L. Dennis Kozlowski unexpectedly resigned as chairman and chief executive of Tyco International Ltd. amid reports that he is being investigated for avoiding paying New York State sales taxes.
The company, whose stock has plunged this year amid questions about its accounting practices and its business strategy, announced Monday that Kozlowski had stepped down for ``personal reasons.'' The announcement did not specify when he resigned.
It said board member John Fort, who headed Tyco from 1982-1992, would take over immediately as interim chief executive.
The New York Times reported Monday that Kozlowski has been under criminal investigation by the office of the Manhattan district attorney for several months.
Prosecutors believe Kozlowski moved hundreds of millions of dollars into family trusts, then used the trusts to buy goods and services without paying state sales taxes, lawyers involved in the investigation told the Times.
In the last few weeks, a grand jury has issued subpoenas and taken testimony, the lawyers told the newspaper. No criminal charges have been filed.
Kozlowski's lawyer, Stephen Kaufman, had no comment. Tyco officials also had no comment on the investigation.
The resignation comes as Tyco struggles with plunging stock prices and loss of investor confidence, caused by questions about accounting practices involving its acquisitions. Critics say Tyco uses accounting tricks when it buys companies to make its own profits appear to be growing faster than they really are.
Tyco officials defended Kozlowski's performance at the company.
``During his tenure, Dennis Kozlowski grew Tyco to a $36 billion manufacturer and service provider operating in over 100 countries,'' Fort said in a statement.
Kozlowski, a former accountant, built Tyco into one of the world's largest companies and also gained a personal fortune by selling Tyco stock during the boom years of the late 1990s. However, the stock has lost more than half its value since January.
He announced a plan to break Tyco into four separate companies in January, then reversed course in April.
Tyco, which manufactures electronic equipment, fire and security systems and disposable medical supplies, plans to sell its finance unit by the end of June and use the proceeds to help pay off $10 billion in debt, company officials said Monday.
The company employed 277,000 people as of April 1.