Sound The Alarm

Remember the CEO that spent $16,000 on his own personal umbrella stand and he did it by stealing from his own company. This bone head had a neurotic need to accumulate stuff to the tune of $600 million. Cars, houses, travel, furnishings , it did not matter. After he had everything and he ran out of space, he bought another multimillion dollar house and stuffed it with more stuff. The umbrella stand was peanuts. The rest of us just use the bath tub, perfect for wet umbrellas. Right?

Dennis Kozlowski was CEO of Tyco International, a company that sold burglar alarm systems. How appropriate! Dennis and his Chief Financial Officer are now languishing in prison for fraud and theft.

It happens that the burglar alarm business is highly profitable because the taxpayer provides the profit. Now how is that? Well, when you buy the burglar alarm system, you have the option of paying for monitoring. That means when the alarm sounds, a call goes into the monitoring center. The technician then calls you and if he doesn't get the right answer he calls the police. So Tyco collects the monitoring fee, approximately $30 a month average per customer and they don't even call the police because that is outsourced to a monitoring center at a very low cost to Tyco. The profit on the monitoring fee is huge. But when the police check out an alarm, it costs the taxpayer at least $50.00; multiply that by 38 million alarms per year nationally and the total cost to the taxpayer is $1.9 billion. Tyco pockets the profit on the alarm system as well as most of the monitoring fee and doesn't even have to make a call. It is left to the local police department to check out the alarm. Moreover, 99% of the alarms are false and 60% of the false alarms are made by the customer themselves setting the alarm incorrectly or whatever. So we have a gigantic public subsidy to a private corporation that profits hugely from a system that in the end has no purpose.

Tyco's profit increased by a half billion dollars per year due to the free labor provided by the police. If Tyco had to pay this cost, their profit would drop considerably as would the price of their stock. Tyco executives, as a result, would receive less compensation and bonuses. And Kozlowski would have had considerably less money to steal and waste.

Furthermore, while the police were spending more time on false burglar alarms, they were spending less time on murders and other violent crimes. More killers walked away free while the police were checking out alarms for companies like Tyco. So the rich get obscenely richer and you and I get less protection and stuck with the bill.

One comic observer suggested a dead-end business would be a shoe shine stand at the beach. If Dennis ever gets out of prison, wouldn't that be a great career for him?


References:

George Carlin
David Kay Johnston. Free Lunch
Wikipedia