Heroes to Heels

By Julie Rawe

How bad are they? --Thoroughly rotten --Strong stench --A little fishy

TYCO The company's market cap has fallen $90 billion since January 2001

EXECUTIVE COMPENSATION [Strong stench] CEO Dennis Kozlowski, who resigned last week, made $62 million last year, including stock options. Unlike many other CEOs, he didn't waive the $75,000 fee for serving on his board of directors

AGGRESSIVE ACCOUNTING [Strong stench] Tyco has been accused of "spring-loading": padding earnings growth by acquiring companies after making them prepay expenses and forgo new revenue. The SEC found no wrongdoing

INSIDER STOCK SELLING [Strong stench] Kozlowski and his chief financial officer have sold more than $500 million of Tyco stock back to the company since 1999 while publicly declaring that they rarely, if ever, unloaded their shares

TAX AVOIDANCE [Strong stench] By incorporating Tyco in Bermuda, the ex-CEO, who was indicted last week for evading sales taxes on his personal art collection, saved Tyco more than $400 million in taxes last year

BOARD INDEPENDENCE [A little fishy] Several board members used to work for Tyco or companies it acquired. An outside director was paid $10 million last year for helping arrange Tyco's $10 billion purchase of CIT Group

CEO CONTRITION [A little fishy] No contrition here, no comments to the press, not even a blanket denial. The only pleading Kozlowski has done so far is a terse "not guilty" in court last Tuesday

ENRON The bankrupt energy firm is worth $66 billion less than in September 2000

[EXECUTIVE COMPENSATION] [Strong stench] Former chairman Ken Lay collected some $200 million in Enron compensation from 1999 until he resigned in January, including a $7 million annual incentive in 2000

[AGGRESSIVE ACCOUNTING] [Thoroughly rotten] Enron used hundreds of off-balance-sheet partnerships to hide billions in debt. The firm also sold dubious assets to these partnerships at jacked-up prices to create bogus income

[INSIDER STOCK SELLING] [Strong stench] Lay unloaded more than $100 million of Enron stock in the past three years. Last year alone, he sold $25.7 million in company stock as the share price fell from $80 to less than $50

[TAX AVOIDANCE] [Thoroughly rotten] Enron paid no income taxes in four of the past five years. It reportedly saved $1 billion in taxes by using a series of loans and transfers with some of its 600 subsidiaries in the Cayman Islands

[BOARD INDEPENDENCE] [Strong stench] Enron made generous payments to its directors and institutions linked to them. A board member, who resigned in May 2001, made nearly $200,000 a year consulting for Enron

[CEO CONTRITION] [Thoroughly rotten] Before pleading the Fifth, Lay told Congress about his "profound sadness about what has happened to Enron." He sent his tearful wife Linda to tell viewers on NBC that "we've lost everything"

GLOBAL CROSSING The telecom's shareholder value is down $39 billion since December 1999

[EXECUTIVE COMPENSATION] [A little fishy] Compared with other high-flying execs, chairman Gary Winnick made a relatively paltry $3.7 million in 2000, according to executive compensation firm Pearl Meyer & Partners

[AGGRESSIVE ACCOUNTING] [Strong stench] The telecom boosted its reported profits by "swapping" network capacity with another carrier. Global booked the sales revenue immediately and spread out the cost of purchases

[INSIDER STOCK SELLING] [Thoroughly rotten] From 1999 to last November, Global Crossing executives sold more than $1.3 billion of company stock, with Winnick cashing in some $735 million worth

[TAX AVOIDANCE] [Strong stench] Global Crossing is run primarily out of its office in Beverly Hills, Calif., but the company is incorporated in Bermuda to avoid U.S. corporate tax on overseas income

[BOARD INDEPENDENCE] [Strong stench] Half the current board members are present or former Global Crossing executives. The board has an unusually high turnover rate: 10 directors quit last year alone

[CEO CONTRITION] [Strong stench] Winnick has said zip about unloading so much company stock. Major construction continued at his Bel Air, Calif., estate even as the firm struggled through bankruptcy proceedings

ADELPHIA The cable-TV provider is worth $7.7 billion less than in January 2001

[EXECUTIVE COMPENSATION] [Thoroughly rotten] Adelphia guaranteed $3.1 billion in loans to off-balance-sheet partnerships owned by founder John Rigas' family. Some of the money was used to build the Rigases a golf course

[AGGRESSIVE ACCOUNTING] [A little fishy] The company announced in March that it would restate its earnings for the past three years to account for the off-balance-sheet partnerships owned by the Rigas family

[INSIDER STOCK SELLING] [A little fishy] The family borrowed $1.8 billion from Adelphia to buy more of its stock and convertible bonds and subsequently used corporate funds to cover $241 million in margin calls

[TAX AVOIDANCE] [A little fishy] The Rigases could face tax penalties for the guaranteed loans and any transactions that were not conducted at arm's length between Adelphia and Rigas-owned businesses

[BOARD INDEPENDENCE] [Thoroughly rotten] Before they resigned last month, Rigas and his three sons accounted for four of the company's nine board members. Rigas' son-in-law refused to step down despite calls for his resignation

[CEO CONTRITION] [Strong stench] The elder Rigas hasn't gone public but reportedly wept in front of creditors after agreeing to relinquish control of his company

--By Julie Rawe