- The Washington Times - Wednesday, June 5, 2002

CONCORD, N.H. (AP) Tyco International Ltd. must trim its debt quickly and bring in someone from outside the company to end the crisis in confidence left by just-departed Chief Executive Officer Dennis Kozlowski, business experts said yesterday.
The shock of Mr. Kozlowski's resignation after 10 years at the helm was still being felt yesterday at the huge conglomerate's offices in Exeter, where executives began an internal investigation. Prosecutors in New York said yesterday that Mr. Kozlowski had unidentified employees sign false documents to help him avoid paying New York sales taxes on multimillion-dollar paintings he bought.
"Right now Tyco is in a high state of instability," said turnaround specialist William Brandt. "Is it going to go under? The near-term lever that will determine that is how fast they can restore financial health."
Rob Plaza, an analyst with Morningstar Inc. in Chicago, said Tyco should bring in an outsider to lead the company. Board member and former chief executive John Fort, who was named interim chief, won't be able to restore investor confidence, Mr. Plaza said.
"The fear is some of Kozlowski's behavior spilled over into his professional life," Mr. Plaza said. "The best way to look at it is guilt by association. You really need to bring in an outside leader with some credibility who wouldn't be afraid to clean house."
In a decade as chairman, Mr. Kozlowski built Tyco into a massive conglomerate with as many as 277,000 employees.
Based in Bermuda but run from Exeter, Tyco's divisions include plastics, electronics, telecommunications and health care products. Its products range from electronic equipment, fire and security systems and disposable medical supplies, to undersea fiber-optic cable and coat hangers.
Tyco already was under fire for Enron-inspired questions about how it accounted for the huge number of corporate acquisitions Mr. Kozlowski made in the 1990s. Critics say Tyco used accounting tricks when it bought companies to make its profits appear to grow faster than they actually did, a charge Tyco denied.
Tyco said in January it planned to split into four parts, but its stock kept falling and it abruptly scrapped the plan in April a reversal that raised new questions about leadership.
At the time, Tyco said it would lay off 7,100 people instead. Tyco blamed a "fierce decline" in the electronics and telecommunications markets.
Tyco stock rose 72 cents, or 4.5 percent, to close yesterday on the New York Stock Exchance at $16.77, a fraction of its 27 percent plunge the day before as the investigation was revealed and Mr. Kozlowski resigned. The shares have fallen more than 70 percent from their 52-week high of $60.09 late last year.
Tyco Executive Vice President Brad McGee said Tyco is reviewing Mr. Kozlowski's activities at the company to determine whether other employees were involved.
"Tyco is conducting an internal investigation and is cooperating with the Manhattan District Attorney's Office," Mr. McGee said. "We will make our findings public when we are done."
He could not say how long the process would take. He said the company had not been informed by prosecutors that other employees were targets of the investigation.
Mr. McGee said the search for a permanent chief executive could take several months, and that Mr. Fort would remain the interim chief in the meantime.
"The object is not speed. The object is finding a qualified candidate," he said. "And we owe it to our shareholders to make sure that happens."
Mr. Fort, 60, was Tyco's chief executive from 1983 to 1992. He became a senior vice president after joining the company in 1979 and previously held management positions in the wire and cable industry.
Steven Altman, an analyst with Commerzbank in New York, said Tyco must follow through by the end of June with its planned sale or spinoff of its lending division, CIT, to help pay down the company's $27 billion in debt.
"Mister Fort is an interim solution," Mr. Altman said. "Tyco needs to look for a seasoned executive from the outside to restore credibility. I would think that would be mandatory."

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