Center hashes out plans for Tyco money

More than two years after Tyco International Ltd. agreed to pay $5 million to fund an investor education and corporate governance program to settle claims related to one of the biggest corporate scandals in history, it has been finally decided how to spend at least some of the money.

And, for the time being at least, the emphasis will be on education, although Secretary of State William Gardner says that the settlement-funded Center for Public Responsibility and Corporate Citizenship’s work is not done yet.

“This is still a work in progress,” emphasized Gardner, who chairs the center.

Shortly before Christmas, the board decided to fund at least three educational programs: development of a curriculum to teach children about financial literacy; a public television series aimed at teaching the public about financial management; and a series of workshops designed to teach people about the basics of investing and financial planning.

The board is still developing plans to fund a higher-level course in business ethics to be taught at the University of New Hampshire as well as recruiting a nationally known expert to serve as a visiting professor at UNH who could launch a program at the university whose focus would be corporate governance issues.

What the national expert would do would depend on what kind of person the board landed, but the intention – said Gardner – would be to attract someone of the caliber and experience of former Treasury Secretary Robert Rubin or former Federal Reserve Board Chairman Paul Volcker, or even billionaire investor Warren Buffett.

Tyco, once headquartered in Exeter, attracted national attention in the wake of the indictment and subsequent trial of former CEO Dennis Kozlowski and former CFO Mark Swartz on charges that they looted the corporate treasury of some $600 million. Kozlowski and Swartz’s trial ended in a mistrial. They face a new trial that’s expected to begin Jan. 18.

As the charges against the Tyco executives were fleshed out in 2002, the New Hampshire Bureau of Securities Regulation went after the Tyco board for neglecting its fiduciary duties in failing to oversee Kozlowski and Swartz’s actions. The bureau’s efforts resulted in board members’ resignations as well as the $5 million settlement, which was announced in October 2002.

The settlement was unique not just because of its size – the largest reached with any state regulator at the time – but because it was earmarked specifically to be used to further corporate governance-related efforts.

Spending the money

But almost from the beginning, the center’s board has been in a quandary about what to do with the money. At first, it thought it might sponsor a presidential debate about corporate governance while the media spotlight was on the first-in-the-nation primary, but most candidates brushed it off, although it did sponsor a series of interviews on corporate governance, conducted by Business Review editor Jeff Feingold, with most of the major Democratic candidates.

While the center was quietly debating what to do, major corporate scandals – from mutual funds’ market timing, to insurance company kickbacks – marched across the headlines. Even locally, the former CEO of Pennichuck Corp. and the company itself were fined hundreds of thousands of dollars for not revealing that his family benefited from the company’s real estate investments.

But the center’s first efforts won’t address these kind of issues, at least directly.

First, the center plans to give $250,000 — $62,500 in the first year – to Jump$tart, a program that teaches financial literacy to children, to develop a curriculum that the state Department of Education would push to the school districts.

Jump$tart will conduct a state needs assessment, and then work on creating a course that focuses on those needs – with particular attention to investing, and perhaps sponsoring student contests and investment clubs throughout the state. The program should be ready for implementation by the summer of 2006.

The center also will grant to New Hampshire Public Television $36,000 to launch a 12-part series in conjunction with Citizens Bank (and input from Jump$tart) on “financial questions that New Hampshire citizens face every day,” ranging from how to use credit wisely and auto financing, to how to start a small business and options available for investment.

The center also plans to spend $65,000 the first year to finance a UNH Whittemore School of Business and Economics-backed series of three workshops at five locations around the state, aimed at residents who are investing in various retirement plans or who are juggling debt.

The first workshop will be on analyzing corporate financial statements. The second workshop will deal with stock market mechanics and the third will focus on financial planning.

The emphasis of some of these workshops might shift to corporate governance issues in future years, Gardner said.

With less than $165,000 earmarked for the first year, that would leave the bulk of the Tyco money to be used for other projects that have yet to be worked out thoroughly.

One idea, said Gardner, is the development of a multi-disciplinary course consisting of classics (including readings by Plato and Aristotle), political science and business.

The national figure or visiting professor might teach some of this course, but more likely would give a series of lectures or present a forum or conference dealing with various corporate governance issue, he said.

That could cost a lot of money, Gardner said. He would not give an estimate of how much, but said he hoped to find someone by next fall.

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