1. Questionable Actions by the Chairman of Tyco International Limited Group 1: Rachel Alexander, Jonathan Crawford, Matt Kambic, You-Chen Lu, and Brittany Snyder

2. Overview Introduction and Summary of Situation – Matt Kambic Benefits and Harms – You-Chen Lu Rights Involved – Brittany Snyder Economic, Legal, and Ethical Situation – Rachel Alexander Moral Solution and Conclusion – Jonathan Crawford Q & A – Group

3. Company Information for Tyco International Limited Domestic Manufacturer Electronics Electronics Fire and Security Technology Fire and Security Technology Healthcare Healthcare Engineered Products and Services Engineered Products and Services Among market leaders in all industries Global company

4. Company Performance History Prior to July 1992 Net Profits = $95 million Net Profits = $95 million Return on Sales = 3.1% Return on Sales = 3.1% Stock Price $4.30 Stock Price $4.30 July 1992 Hired Dennis Kozlowski as CEO and President of Operations Hired Dennis Kozlowski as CEO and President of Operations July 2001 Net Profits = $5.1 billion Net Profits = $5.1 billion Return on Sales = 13.8% Return on Sales = 13.8% Share Price = $58.00 Share Price = $58.00

5. Kozlowskis Rewards Praised for company performance Substantially rewarded $25 million salary $25 million salary $86 million stocks options sales $86 million stocks options sales

6. First Investigation SEC launched investigation in late 1999 Findings Overstated expected costs of new acquisitions Overstated expected costs of new acquisitions Made acquisitions appear financially unstable Made acquisitions appear financially unstableResults Technically no laws were broken Technically no laws were broken Tyco agreed to restate earnings Tyco agreed to restate earnings No fines assessed or penalties imposed No fines assessed or penalties imposed

7. Second Investigation June 2004 CEO Dennis Kozlowski and CFO Mark Swartz Tax Evasion Improper use of company funds See Next Slide See Next Slide Payoffs were paid to directors to cover up Undisclosed stock sales $430 million made by Kozlowski and Swartz $430 million made by Kozlowski and Swartz

8. Use of Company Funds for Private Purposes $13.8 million for paintings $2.5 million for a home in Florida $9 million for additional property $5 million for Massachusetts property $900,000 for Connecticut property $240,000 jewelry for Mrs. Kozlowski Many more…

9. Ethical Question How wrong were Kozlowski and Swartz? Totally Wrong ? Totally Wrong ? Somewhat Wrong, still did good for company? Somewhat Wrong, still did good for company? NOT WRONG AT ALL SOMEWHAT WRONG COMPLETELY WRONG

10. Benefit to Some Companys CEO Dennis Kozlowski, and CFO Mark Swartz Inside and outside directors who were involved Company saves on taxes Company and employees Customers

11. Harm to Others TycoGovernment Integrity of the companys CEO and CFO Companys reputation Performance Performance Stock price Stock price Employees and their families Employees and their families Executives that were not involved Executives that were not involved Stockholders Stockholders

12. Rights Exercised Kozlowskis right to live lavishly Boards right to spend the companys money as it sees fit Right to overestimate future costs Right of the SEC to investigate

13. Rights Denied Right of the government to tax its citizens Rights of the citizens of New York for fair taxes Rights of the companys employees and shareholders to fair, honest reporting Spending of corporate dollars Spending of corporate dollars Acquisitions Acquisitions

14. Moral Questions Is it right to make another company appear more unstable that it really is? Is it right to use corporate money for personal use? Is it right to bribe board members? Is it right to have undisclosed sales of stocks?

15. Economic Outcomes Pre Kozlowski: Stock - $4.30 per share Ten years later: Stock - $58 per share Post Kozlowski: Stock – $16.05 per share

16. Economic Outcomes Extravagant purchases helped to boost economy Purchases took away profit from Tyco International Ltd., its employees, and shareholders

17. Legal Requirements No law against overstating future cost Tyco would restate earnings June 2004: Tax evasion charges Personal purchases as companies expense What is legal, is not always right!

18. Ethical Duties Public Company: Financial Statements – Overstating expenses Acquisitions Undisclosed sales of stock Company funds for personal expenses Special bonuses to keep quiet! Kozlowski, CEO – Tax Evasion

19. Kozlowski and Social Responsibility Kozlowski falls between the Obstructionist and Defensive Approaches

20. The Courts Decision: CONVICTED Fraud against shareholders of over $400 million 22 counts of grand larceny for unauthorized bonuses totaling over $150 million Currently serving 8 to 25 years in prison

21. Moral Solution Support the Courts decision Superstar status among CEOs does not forgive ethical misconduct Was aware of the fine print and knowingly Cheated Cheated Lied Lied Broke the law Broke the law Not isolated incidents

22. Conclusion Matt Kambic - Introduction and History of Company You-Chen Lu - Benefits and Harms Brittany Snyder - Rights Exercised / Rights Denied Rachel Alexander - Economic Outcomes/Legal Requirements/Ethical Duties Jonathan Crawford - Moral Solution

23. Q & A