Jurors Get First Glimpse of Tyco Document
NEW YORK (AP) _ Jurors got their first glimpse of a document prosecutors say led to the disclosure that two Tyco International executives had looted the company of hundreds of millions of dollars.
The document was introduced Wednesday at the trial of L. Dennis Kozlowski, the company’s former CEO, and Mark Swartz, its ex-chief financial officer, who are accused of stealing $600 million from the company.
The document, dated Dec. 21, 2001, shows that former Tyco board member Frank E. Walsh Jr. was paid $10 million for brokering Tyco’s $9.5 billion purchase of CIT Group Inc. and that he received 50,000 shares of CIT stock for 34,000 Tyco shares.
The document said that a prior submission by Walsh had been inaccurate because he did not mention that ``Tyco paid me a fee of $10 million for banking services rendered.″
Tyco also paid another $10 million to a charity of Walsh’s choice, the Community Foundation of New Jersey, in July 2001, but Tyco’s board did not learn of the payments until Walsh’s December 2001 document.
Last December, Walsh, 61, pleaded guilty to securities fraud, admitting that he illegally failed to tell fellow members of Tyco’s board of directors about his payment for the CIT deal. He avoided jail after agreeing to repay Tyco the $20 million he and the charity received, plus a $2.5 million fine.
Manhattan District Attorney Robert Morgenthau, whose office prosecuted Walsh, said Tyco lost about $7 billion in buying CIT, a giant insurance conglomerate.
To settle a related Securities and Exchange Commission lawsuit, Walsh agreed that he would never again serve as an officer of a publicly traded company.
Assistant District Attorney Kenneth Chalifoux said on Tuesday the storm that followed the Walsh disclosure was ``the beginning of the end″ for Kozlowski and Swartz.
``The light of truth did not penetrate the darkness of deceit″ until Walsh came clean in his revised questionnaire, Chalifoux said.
Kozlowski, 56, and Swartz, 45, are charged with larceny and enterprise corruption _ a charge usually aimed at organized crime figures _ and lesser offenses that include filing false business records and conspiracy.
Each could get up to 30 years in prison if convicted.
Prosecutors say Kozlowski and Swartz stole $170 million by claiming unauthorized compensation and made another $430 million on their Tyco shares by lying about the conglomerate’s financial condition from 1995 into 2002.
Kozlowski came to the attention of law enforcement when he was charged in August 2002 with evading more than $1 million in New York state sales tax on $13 million worth of art _ including Renoir and Monet paintings _ he had bought.
A closer look at the CEO and his company by Morgenthau’s office and the SEC revealed huge expenditures, payments and loans financed by Tyco that prosecutors say were illegal.
Tyco, which has about 270,000 employees and $36 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business. It is nominally based in Bermuda but has its operations headquarters in Portsmouth, N.H.