Shares of Tyco International Ltd. plummeted more than 20 percent Tuesday, wiping out $16.7 billion of market value, as investor confidence crumbled on concerns about the conglomerate's corporate ethics and a sudden U-turn in strategy.

"Basically, you've got panic selling," said Brian Langenberg, an analyst at Wachovia Securities.

Fueling the plunge was Tyco's disclosure Monday in a proxy statement that it paid $20 million to outside director Frank Walsh and a charity of which he is a trustee for his help in securing an acquisition last year.

The worse close in three months for U.S. stocks also weighed on Tyco, as confidence about the soundness of corporate accounting slid. Investors are skittish about nagging accounting concerns at Tyco, especially in the wake of the scandal surrounding energy trader Enron Corp.

Tyco Chairman Dennis Kozlowski defended the payment to Walsh in a late-afternoon press release. But that had little effect on frenzied selling that saw more than 137 million shares change hands as the volume leader on the New York Stock Exchange.

Also fueling Tyco's free-fall was Kozlowski's unexpected plans announced last week to break the company into four publicly traded units, abandoning a long-held strategy to build a "recession proof" conglomerate through acquisitions.

More than $50 billion in Tyco shareholder value has been erased in January alone.

Bob Armknecht, who manages the $1.3 billion Galaxy Equity Growth fund, said investors were running scared after the collapse of Enron, the onetime Wall Street darling that filed the biggest bankruptcy in U.S. history in December.

"Fear has taken over greed as the dominant emotion. Everyone's worried about another Enron," he said. "You could make the case that the decision to break up the company is an admission that they have run out of rabbits to pull out of their hat, or ask yourself how many of the rabbits have fleas."

SWEET DEAL

Tyco said Walsh received a $10 million cash fee because he was "instrumental" in securing its nearly $10 billion acquisition of CIT Group Inc. Tyco also made a $10 million contribution to the charity at Walsh's request.

Walsh also owned 50,000 shares of CIT at the time of the acquisition, calling into question the independence of his judgment on the deal. Tyco ultimately paid a 74 percent premium for CIT shares when the deal closed in June.

Word of Walsh's holdings went unnoticed by many investors as it was reported to the U.S. Securities and Exchange Commission on Nov. 7, about five months after the deal closed. Tyco called the late disclosure an "administrative error."

Kozlowski said Tyco's stock plunge was "unjustified."

"Clearly we are in an environment where people are intensely skeptical of corporate America, and for that matter, of Tyco," he said in a statement..

Kozlowski, who holds about 13.4 million Tyco shares, has witnessed the value of his holding drop to $442 million from about $789 million in the past month.

Tyco tumbled $8.35 to $33.65 on Tuesday, and is off nearly 43 percent since closing at $58.90 on Dec. 31. The last time it traded this low was in February 2000, when it hit $35.69.

AGGRESSIVE ACCOUNTING

Langenberg said the confidence of long-term holders of Tyco stock has been shaken by rumors swirling around the acquisitive conglomerate, which makes everything from ADT burglar alarms to plastic hangers.

Tyco executives have failed to distance the company from whispers that it has used aggressive purchase accounting methods and acquisitions to boost earnings and mask slower growth among its wide-reaching operations.

Tyco has denied such practices, but short sellers, who make money when stock prices fall, have circled Tyco, fresh from recent successes in sniffing out problems at Enron and retailer Kmart Corp.

"In some cases, people are selling even if they are true believers in Tyco's story," Langenberg said.

Armknecht said he believed Tyco's businesses were sound, and that he and the analysts at his company were unaware of any accounting irregularities at Tyco.

"I don't think anyone can deny that they have employed aggressive accounting procedures. They are not alone," said Armknecht, who would not comment on whether he owned any Tyco shares. But he pointed to a recent Securities and Exchange Commission probe that ended with no action as evidence Tyco was not another Enron.

Even so, there were legitimate reasons to sell the stock.

"There are people who owned it because it was a growth by acquisition company and that's no longer a reason to own it," he said.