Former Tyco Boss Sheltered Stock Option Gains In Disputed Tax Shelter

by Mike Godfrey, Tax-News.com, Washington

29 July 2002

It has been alleged that former Tyco International Chairman, Dennis Kozlowski may have used a tax sheltering arrangement currently being examined by the Internal Revenue Service to defer taxes on $208 million in stock option profits.

Kozlowski, who resigned from the company the day before he was charged with evading over $1 million in New York sales taxes, reportedly sold the options to partnerships consisting of himself and family members, in order to get around an IRS rule which states that taxes are due on stock options the year that they are exercised.

Speaking to the Bloomberg news service last week, IRS Chief Counsel, John Williams revealed that the IRS is 'looking into' such tax sheltering arrangements. Both Mr Kozlowski's lawyer and a spokesman for Tyco International refused to comment on whether the former CEO had, in fact, paid the taxes due on the stock options.

Meanwhile, the beleaguered company on Thursday announced the appointment of outgoing Motorola President, Edward D. Breen as its new Chairman and Chief Executive.

It is hoped that the appointment of Mr Breen will herald a new start for the company, which has recently faced questions about its accounting policy and investigations involving several top officers.

Speaking to the Associated Press last week, interim Chief Executive, John Fort explained that: 'The appointment of Ed Breen as Chairman and CEO is a defining moment for Tyco. Ed has a superb record of tackling very difficult and complex business challenges, creating effective strategies and methodically executing his plans.'

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