,,,,,,,Renoir anyone?? LOL Probe of Former Tyco Chief Focuses on Improper Use of Company Funds
New York prosecutors are looking into whether Tyco International (NYSE: TYC - News) Ltd.'s former chief executive improperly used company funds to purchase his $18 million New York apartment and whether he received interest-free loans from the company to buy costly artwork, people familiar with the situation told The Wall Street Journal.
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Meanwhile, the Securities and Exchange Commission has opened a preliminary investigation into questions raised by reports that the former CEO, L. Dennis Kozlowski, didn't pay sales tax on the artwork and that the art was purchased with a company loan, according to a person with knowledge of the situation.
The New York inquiries are part of a widening probe of Mr. Kozlowski's dealings by Manhattan District Attorney Robert M. Morgenthau. It follows the indictment on Tuesday of Mr. Kozlowski on charges that he conspired to evade more than $1 million in New York sales taxes on $13.1 million in paintings he purchased, including works by Claude Monet and Pierre -Auguste Renoir. Mr. Kozlowski has pleaded not guilty to the charges.
Why the district attorney, who enforces the laws of New York state, is looking into the additional matters isn't clear. One area prosecutors are exploring is whether Mr. Kozlowski failed to pay income tax on any company funds used for his personal benefit. In addition, if Tyco, a diversified conglomerate based in Bermuda but managed from Exeter, N.H., did pay for the apartment and extend the loans, failure to disclose them could be a violation of federal securities laws. The district attorney doesn't enforce these laws, but often cooperates with federal authorities and could pass along any information he turns up.
The inquiries remain at a preliminary stage, and it's unclear whether they will lead to any charges.
Stephen E. Kaufman, an attorney for Mr. Kozlowski, said Mr. Kozlowski would have no comment.
J. Brad McGee, a Tyco spokesman, said the company was conducting an internal probe into Mr. Kozlowski's dealings and would have no comment until that was completed. Mr. McGee added that the company is "working with the Manhattan District Attorney's office in their investigation of Dennis Kozlowski," which he said indicated it was doing "more than just cooperating."
The latest inquiries could drag Tyco itself further into the legal morass faced by its just-departed CEO. On Tuesday, prosecutors said six of the paintings bought by Mr. Kozlowski were purchased using funds he borrowed from Tyco through an executive-loan program supposed to be used for a different purpose -- helping employees to pay taxes that become due upon the vesting, or taking full ownership, of restricted stock awards. These are the loans that investigators now believe may have been granted free of interest. Under the loan program, Tyco executives are supposed to pay interest at a rate fixed by the company, which in 2001 was 3.7%.
Wall Street Journal Staff Reporters Mark Maremont, Laurie P. Cohen, Jerry Markon, Glenn Simpson, Peter Grant and Michael Schroeder contributed to this report. |
