The Tax Games Tyco Played

The criminal indictment of L. Dennis Kozlowski paints a stunning portrait of complex schemes the former chief of Tyco International Ltd. (TYC ) allegedly used to evade New York State and City sales taxes on $13.2 million worth of personal artwork. To beat the 8.25% tax, the June 4 indictment charges, Kozlowski and his co-conspirators used such tactics as preparing false invoices and shipping empty boxes to the conglomerate's executive offices in New Hampshire.

That scheme was child's play compared with the apparently legal methods Tyco has used to avoid corporate income taxes. Under Kozlowski, tax avoidance became a way of life and a key corporate strategy. It's not just that Tyco five years ago moved to the now-famous tax haven of Bermuda. Since then, it has gone to extraordinary lengths to amass subsidiaries in such tax-friendly locales as Barbados, the Cayman Islands, and Jersey. From 2000 to 2001 alone, the number doubled to more than 150.