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Thursday, 6 June, 2002, 21:19 GMT 22:19 UK
Problems mount for Tyco
Tyco products and services
Mr Kozlowski built up Tyco through acquisitions
The fire alarms to medical equipment giant Tyco lost about $5.4bn (3.71bn), or 15%, of its value in just a few hours of share trading on Thursday.

Investors ditched the share as the US District Attorney extended a criminal investigation of the firm's former chief executive, Dennis Kozlowski.

Mr Kozlowski, the man behind the creation of Tyco, has been charged with avoiding $1m in New York state sales taxes on purchases of artwork worth $13m.

"I think you're going to have a more aggressive review of all of the company's operating policies," said Prudential Securities analyst Nicholas Heymann.

"And that, in turn, opens up the question of 'What else is there?'".

Regulator involved?

Also spooking investors was a report in the business newspaper Wall Street Journal which said the US stock market regulator Securities and Exchange Commission has launched a preliminary investigation into the affair.

The SEC declined to comment on the report, but analysts said if it was indeed going ahead, it could be seen as an indication that the firm, not just its ex-chief, had acted improperly.

Tyco lent Mr Kozlowski $23m in low interest loans.

"The company has a duty to disclose to its shareholders these types of loan arrangements, and if there was some misrepresentation regarding the nature of the loan, that could give rise to a criminal violation of the securities laws," said McCarter & English partner Robert Mintz, a former federal prosecutor.

"I think the DA's office is going to be casting a broad net and looking at all of the financial transactions to see if there were any other irregularities."

Tyco's shares are worth $87bn less than they were half a year ago.

See also:

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04 Jun 02 | Business
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