Shades of Enron at Tyco

June 6, 2002 ( - While Tyco's troubles may mirror Enron's, workers there are comforted by the knowledge that their situation is not as dire as that of Enron workers, an article in USA Today finds.

A slew of differences give Tyco’s employees some breathing room. Enron’s employees watched their retirement savings dwindle to nothing because of their heavy investments in company stock, while Tyco’s workers were protected by a 25% cap on company stock ownership in their 401(k) accounts.

Shortly before Enron’s stock began plummeting, more than 60% of the company’s 401(k) plan assets were invested in Enron stock. Meanwhile, only about 20% of Tyco’s $3.4 billion in retirement plan assets were invested in Tyco stock, according to the company’s 2000 government filings.

Currently, Enron stock is worthless. Though Tyco’s has lost 70% of its value, is still trading at around $17.30.

Not Bad, Not Good

Tyco’s former CEO, Dennis Kozlowski, was indicted on Tuesday on charges of failing to pay more than $1 million in sales tax on artwork, and the company’s accounting practices are being investigated. Tyco is under suspicion for sketchy accounting of acquisitions made under Kozlowski’s leadership in the last decade.

To add insult to injury, two lawsuits have been filed by Tyco workers in the US District Court for the Southern District of New York, charging that the company of breached its fiduciary duty to the 401(k) plan by manipulating its accounting practices to boost its revenue.

One lawsuit filed on behalf of Edmund Dunne, a former Tyco employee in its ADT security services division, charges that Tyco failed to tell workers that the stock was unreasonably risky. A second lawsuit says Tyco shouldn’t have let workers buy the stock when it became an imprudent investment.

A Tyco spokesman did not comment on the suits but reportedly said that Tyco was different from other companies in that its matching contributions are not automatically invested in its stock.

However, many employees invested in additional Tyco stock through an employee stock purchase program that allowed them purchase the stock at a 15% discount.