SEC Settles Fraud Charges With Tyco Exec, Charges 2 Others
A former Tyco International executive agreed to pay $450,000 to settle financial reporting and record-keeping charges connected to a fraud case in which Tyco overstated income by more than $500 million, the U.S. Securities and Exchange Commission said on Thursday.
Richard "Skip" Heger, who oversaw the finances of the company's fire and security services division, settled with the SEC without admitting or denying the charges.
The SEC also charged two former executives, Richard Power and Edward Federman, with fraud in the case.
Tyco settled with the SEC earlier this year, agreeing to pay $50 million to settle accounting fraud charges. The SEC had said Tyco overstated its results by $1 billion between 1996 and 2002 in a fraud that was orchestrated by the company's top officials.
Former Tyco Chief Executive Dennis Kozlowski is serving a sentence of up to 25 years for his role in looting $600 million from Tyco.
Power and Federman were involved in Tyco's financial reporting, the SEC said, with Power reporting directly to Kozlowski and Federman serving as chief financial officer of a major division.
The SEC said Power and Federman inflated Tyco's operating income by hundreds of millions of dollars through a sham transaction.
Under the deal, Tyco charged authorized dealers of Tyco's ADT Security Services Inc. subsidiary with a "dealer connection fee" whenever Tyco bought security contracts from them. That fee was then fully offset by a simultaneous price increase in the contracts, making it a sham, the agency said.
The SEC also said Power and Federman further inflated the company's operating income through fraudulent acquisition accounting.
Heger oversaw the financial results of Tyco's security monitoring division and approved the results that he knew, or was reckless in not knowing, were improper, the SEC said.
Attempts to reach attorneys for the defendants were not immediately successful.