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Sarbanes Oxley Act Of 2002 Summary

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The Sarbanes Oxley Act of 2002 was passed as a result of the large accounting scandals, in hopes to address corporate governance around the quality, integrity, transparency and reliability of financial reports and provide accountability to accounting responsibilities (Wells, 2014). This was during the same time when Tyco’s actions had come to light but shows how much this added governance was required. Tyco’s leaders, L. Dennis Kozlowski (Chief Executive Officer), Mark Swartz (Chief Financial Officer), and Mark Belnick (Principal Legal Officer), knowingly or recklessly failed to disclose loans, cash bonuses, loan forgiveness, profits from stock, related party transactions from the sale and purchase of homes and perquisites from Tyco, investors …show more content…

In all of these instances according to the federal securities laws must be reported on Tyco’s annual reports and proxy statements filed with the Commission. Frank Walsh Jr. the Chairman of the Board Compensation Committee also misleads Tyco and CIT Group shareholders by registering misleading statements during the acquisition (Securities and Exchange Commission v. Frank E. Walsh, Jr,. Civil Action No 02-CV-9921, 2002). These leaders repeated directed others to falsify the books and records to hide compensation and offset costs with other unrelated gains (Securities and Exchange Commission, Plantiff v. L. Dennis Kozowski, Mark H. Swartz and Mark A. Belnick, Defendants, 2002). The laws implemented by the Sarbanes Oxley Act of 2002 will not excuse ignorance of the accounting rules and policies as these leaders claimed their …show more content…

SEC settled a civil injunctive action against Tyco International Ltd. Alleging that Tyco inflated its operating income by $ 567 million between 1998 and 2002 as a result of their improper accounting practices. Tyco also failed to disclose executive compensation in its annual reports and proxy statements and violated the Foreign Corruption Policy Act when payments were made to officials for retaining business. Penalties imposed to Tyco were $ 50 million for civil penalty and $ 1 for disgorgement (SEC Brings Settled Charges Against Tyco International Ltd. Alleging Billion Dollar Accounting Fraud). For Kozlowski, Swartz and Belnick, they are ordered to disgorge all ill-gotten gains and pay interest on all gains, pay a civil penalty and permanently restrain them from serving as any officer or director of a publicly held company. Kozlowski and Swartz were also sentenced to serve 8 to 25 years in prison (Securities and Exchange Commission, Plantiff v. L. Dennis Kozowski, Mark H. Swartz and Mark A. Belnick, Defendants, 2002). Frank Welsh was ordered to pay restitution of $ 20 million and is also permanently restrained from serving as an officer in any publicly held company (Securities and Exchange Commission v. Frank E. Walsh, Jr,. Civil Action No 02-CV-9921, 2002). Scalzo the led auditor is no longer able to practice as an accountant (U.S. Securities and Exchange Commissions, 2003). In addition, Tyco was forced to pay out $ 2.9 billion to investors

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