US - The State of Michigan is suing manufacturer Tyco International, its auditors and four former executives for over US$50m in losses to state pension funds.
The complaint alleges that Tyco, which manufactures a wide variety of products, from electric components to healthcare products, continually inflated its earnings and manipulated its books to hide excessive executive compensation.
In addition, it claimed Tyco misled its investors by implementing improper accounting practices, which they internally referred to as "financial engineering".
As a result, Tyco stock hit an all-time high in 2001. But Michigan pension funds lost more than $50m when a stream of financial disclosures sent Tyco stock plummeting.
Tyco's former chief executive, Dennis Kozlowski, and chief financial officer, Mark Swartz, were convicted in New York of grand larceny, falsification of business records, and conspiracy, and are currently serving lengthy federal prison sentences. A former director pled guilty to securities fraud.
State treasurer Robert J. Kleine said: "Nearly 600,000 participants and beneficiaries are depending on state pension funds to secure their retirement. We take our obligation to protect those funds very seriously."
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