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Family Trusts as Cookie Jars?

Tyco CEO steps down; said to be under investigation for tax evasion. Up north, Canadian finance minister Martin ousted. Plus: Will Starz new CFO offer premium service?
Lisa Yoon, CFO.com | US
June 3, 2002

>> Tyco International CEO L. Dennis Kozlowski resigned this morning… According to Tyco, Kozlowski left top job, plus seat on company's board, for "personal reasons..."

Tyco management didn't elaborate on what those reasons were, but legal problems seem likely to be at the top of the list… Kozlowski reportedly under criminal investigation for allegedly avoiding paying New York State sales taxes… . New York Times article cites lawyers who say Manhattan district attorney Robert Morgenthau is investigating possibility that Kozlowski moved hundreds of million of dollars into family trusts, then used those trusts to buy goods and services—without paying state sales tax… If true, would be height of irony… As you know, Tyco has been roundly criticized of late for aggressive bookkeeping practices…

Investigation by Morgenthau's office said to have began several months ago, lawyers involved in case told the Times... In past few weeks, sources say investigation has grown increasingly serious, with grand jury issuing subpoenas and taking testimony… No charges filed yet....

Kozlowski's departure latest in string of problems for Tyco, whose stock price has been battered since January… That's when questions about company's aggressive accounting practices first surfaced and company announced a major restructuring effort in which Tyco would be split into four companies… . (For an in-depth look at Tyco's recent struggles, see "Deconstructing Tyco.")

Since then, Kozlowski reversed his decision, saying Tyco better off as one company... Tyco, based in Bermuda with headquarters in Exeter, N.H., was one of the first big companies to move offshore to lower U.S. taxes… Company also raised eyebrows in January when it admitted it paid one of its independent directors $10 million last year as finder's fee for a merger... John Fort, who served as Tyco CEO from 1982 to 1992, will hold down the fort until permanent replacement can be hired... Share price of Tyco tumbled on Kozlowski news, down nearly 20 percent in early trading…

>> Cable guy William D. Myers was named SVP of finance and CFO for pay-TV movie provider Starz Encore Group… Myers previously was EVP, CFO, and treasurer of On Command Corp., subsidiary of Liberty Satellite and Technology Inc.... He replaces Glenn Curtis, who resigned in April…

Denver-based Starz, a subsidiary of Liberty Media Corp., posted $863 million in revenue last year with cash flow of $313 million…

>> Software company Citrix Systems Inc. said CFO John Cunningham was retiring immediately due to "personal matters." VP and corporate controller David Urbani is taking over as interim CFO... Urbani joined Citrix in 2000 from washing-machine maker Maytag Corp., where he was VP and treasurer… Before Maytag, he held a treasury position at Air Products and Chemicals Inc… .

Fort Lauderdale-based Citrix had said in May that Cunningham, 64, would retire at the end of calendar year… On Friday, however, company said Cunningham's affairs "require his full-time attention," but did not give further details… Citrix makes software that enables PCs and wireless devices to access applications remotely…

>> Travelers Express/MoneyGram hired David Parrin as new finance chief, replacing Sue Nelson… Nelson now serving as VP of finance and accounting at payment-services company, a subsidiary of Phoenix-based Viad Corp....

Parrin, former EVP and CFO at RBC Dain Rauscher in Minneapolis, left investment firm this spring after its sale to Royal Bank of Canada... Before that, he was SVP and corporate controller at U.S. Bancorp... Company banking on Parrin's long experience in financial services to help it grow… "David is recognized as a talented and accomplished leader in financial circles," says CEO Philip Milne. "We are a growing organization that can greatly benefit from his wealth of experience."

>> Canadian Finance Minister Paul Martin was ousted by Prime Minister Jean Chretien in latest move in 12-year battle for Liberal Party leadership between the two men... Martin, widely considered most likely to succeed Chretien in power, has been giving Chretien run for his money for years... Martin replaced by Deputy Prime Minister John Manley, a former tax lawyer and loyal Chretien ally...

Martin's ouster will likely have huge negative impact on Canadian economy… Martin, 63, was one of the most respected members of the Cabinet… Credited with reining in government deficit, which stood at more than $20 billion in 1994… Martin also lauded by Canadian and foreign investors for substantially reducing government spending in health and education... Canada's credit ratings and the Canadian dollar have rebounded in recent months, accompanied by a large infusion of investment in manufacturing and firmer stock market prices…


Apparently, Martin has Oprah-like effect on Canadian economy... On April Fools' Day, for instance, political gossip Web site announced that he was resigning, according to New York Times. Though it was a joke, Canadian dollar tumbled as result of false alarm... Liberal Party leaders have warned in recent days that his departure may do lasting damage to the Canadian currency and economy…




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