Tyco Says $56.4 Mln in Loans to Executives Forgiven (Update1)
By Rachel Layne
Exeter, New Hampshire, Sept. 17 (Bloomberg) -- Tyco International Ltd. said former Chief Executive Dennis Kozlowski forgave $56.4 million in loans to employees and used company money to fund a lifestyle that included a $1 million birthday party for his wife in Sardinia and gifts such as a $6,300 sewing basket.
Tyco said in a report to the U.S. Securities and Exchange Commission that 51 employees, including Kozlowski, ex-Chief Financial Officer Mark Swartz and seven ``key managers'' had loans forgiven. Only Kozlowski, Swartz and former General Counsel Mark Belnick were named because their participation in the loans, Tyco spokesman Gary Holmes said. Others who got bonuses in the form of loan forgiveness thought the board approved them, Tyco said.
The allegations are part of a report on the company's months- long investigation into the misuse of funds and follow a lawsuit filed against Kozlowski claiming he stole hundreds of millions of dollars through unapproved compensation.
Others Tyco listed as having loans forgiven include: Jerry Boggess, who heads the fire and security unit, former General Counsel Irving Gutin, Treasurer Michael Robinson, Human Resources head Patricia Prue, and Chief Strategy Officer Brad McGee.
The company also alleges that Kozlowski used Tyco money for a $700,000 investment in the film ``Endurance'' and to buy $72,042 worth of jewelry, $96,943 worth of flowers and $52,334 for wine.
The filing also listed dozens of other perks for Kozlowski improperly paid for by the company, including a $6,000 shower curtain, $2,900 for coat hangers, $11 million in furniture, a $15,000 dog umbrella stand and a $2,200 garbage can.
Rebuilding Credibility
The investigation, led by lawyer David Boies, was one effort by new CEO Edward Breen to rebuild Tyco's credibility. Shares of the conglomerate have dropped 70 percent this year as investors questioned Tyco's liquidity and operating margins, as well as whether it hid slowing growth through acquisitions.
Disclosure of the loans and some unauthorized bonuses are part of the first phase an internal investigation into the misuse of funds authorized by Kozlowski and Swartz and other executives.
An internal audit conducted by a forensic-accounting firm Breen hired wasn't included in the report.
Tyco shares fell 49 cents to $16.05 in New York Stock Exchange trading at 10:34 a.m.
`Criminal Enterprise'
Kozlowski was quoted in the Wall Street Journal today as saying the payments were approved by Phil Hampton, the late chairman of Tyco's compensation committee, who held the role of keeping the board informed. Hampton died in May 2001.
On Thursday, Kozlowski and Swartz were charged by New York authorities with running a ``criminal enterprise'' that looted the company in a scheme that made them more than $600 million through stock fraud and outright theft. They plead innocent.
Also indicted was former General Counsel Mark Belnick for allegedly falsifying records to hide more than $14 million in loans to himself. A judge issued a temporary order freezing more than $600 million in assets held by Kozlowski and Swartz.
Manhattan Assistant District Attorney John W. Moscow said he hasn't had a chance to review the details of Tyco's filing. |
