Ex-Tyco director: Board didn't forgive loans
Published March 1, 2005
NEW YORK - A former Tyco International Ltd. director testified Monday that the company's compensation committee didn't approve millions of dollars of loan forgiveness to L. Dennis Kozlowski and Mark H. Swartz.
Under questioning by prosecutors, Stephen W. Foss also said that neither Kozlowski, Tyco's former chief executive, or Swartz, its former chief financial officer, had the authority to forgive their own loans as bonuses.
"Did the compensation committee approve a bonus of loan forgiveness to Dennis Kozlowski and Mark Swartz in fall 2000?" Assistant District Attorney Ann Donnelly asked.
"No," said Foss, a former compensation committee member.
Prosecutors have alleged that Kozlowski and Swartz forgave millions of dollars in loans to themselves without proper authorization by Tyco's compensation committee in 1999 and 2000.
Kozlowski, 58, and Swartz, 44, are on trial in New York State Supreme Court, facing charges of grand larceny, securities fraud and other crimes in connection with huge bonuses and other compensation they received while working as Tyco's top executives. They each face up to 25 years in prison on the most serious charge of grand larceny. They have denied wrongdoing.
Their first trial ended in a mistrial in April after a juror reported receiving a phone call and letter about the case during deliberations. The juror's name had been disclosed by several news organizations after she appeared to give an "okay" signal to the defense.
Monday, Foss said Phil Hampton, one-time compensation committee chairman, never said that he had approved such loan forgiveness to the two executives on his own. It would have exceeded his authority and would have been in contrast to Hampton's normal operating procedure, Foss said.
Several former Tyco employees have testified that Swartz told them Hampton had signed off on the loan forgiveness. Hampton, who has since died.
Meanwhile, Foss said Kozlowski's purchase authority at the conglomerate was only related to making acquisitions on the company's behalf, not for the purchase of artwork or personal apartments.
Foss said Kozlowski was initially granted the authority to make acquisitions of up to $50-million on Tyco's behalf in a time of vast growth at the company. That authority was later increased to $200-million. However, the acquisitions were reviewed by the boardat its next regular meeting, Foss said.
Prosecutors have alleged the Kozlowski and Swartz used Tyco's loan programs as personal lines of credit, buying homes, artwork and making investments. Much of those loans were later forgiven without proper approval, the government has alleged.
Tyco has its headquarters in Bermuda, but now operates out of West Windsor, N.J.
[Last modified March 1, 2005, 01:10:14]
[an error occurred while processing this directive]