Tyco Responsible for Utility Bills at Ex-CEO's $10.6 Mln Home
By Kathleen M. Howley
Boca Raton, Florida, June 15 (Bloomberg) -- Tyco International Ltd. is listed as paying utility bills for the $10.6 million Boca Raton home of former Chief Executive Officer Dennis Kozlowski, an arrangement not disclosed to shareholders.
Water and sewer bills for the 15,000 square-foot residence have been sent to Tyco's Boca Raton offices, city records show. The latest $569.57 bill was paid May 7, about one month before Kozlowski was ousted and charged with evading more than $1 million of New York sales taxes.
Tyco's designation as the ``customer'' on utility records for the executive's personal residence is the latest example of undisclosed financial connections between the conglomerate, Kozlowski and others closely related to company.
``It certainly doesn't smell very good,'' said Judith Fischer, managing director of Executive Compensation Advisory Services in Alexandria, Virginia. ``It's going to end up tainting a lot of reputations.''
The Securities and Exchange Commission and the Manhattan district attorney are conducting separate investigations into whether Tyco violated the law in what it did and didn't tell shareholders about executive compensation and payments to others close to the company.
Tyco has begun its own inquiry and brought in attorney David Boies, who represented the Justice Department in its antitrust case against Microsoft Corp., to lead it.
Several Transactions
Gary Holmes, a spokesman for the Bermuda-based conglomerate, declined to answer questions about Kozlowski's Boca Raton home. ``There were a number of transactions under the company's employee- relocation and company-owned real estate programs,'' he said. ``We can't discuss the specifics of the investigation until it is complete.''
SEC spokeswoman Christi Harlan declined to comment.
Stephen Kaufman, Kozlowski's lawyer, confirmed that the executive owns the Boca Raton house, as well as one on Nantucket Island, off the coast of Massachusetts. Both houses are listed in property records as being owned by trusts, a common practice among wealthy individuals for estate-planning purposes or to protect personal privacy. Kaufman wouldn't provide further details.
Kozlowski, who was paid more than $300 million during the decade he headed Tyco, was indicted June 4 on charges he failed to pay New York sales taxes on $13.2 million of artwork, including paintings by Monet and Renoir. Manhattan District Attorney Robert Morgenthau said the former CEO borrowed money from Tyco to purchase the art. Kozlowski pleaded not guilty and was released on $3 million bond.
The 55-year-old executive's troubles and concerns about Tyco's ability to repay debt have contributed to a 77 percent decline in the company's shares this year. Tyco shares fell 40 cents yesterday to $13.40.
`Ridiculously Cheap'
``Management is of concern to me,'' said Glenn Downen, who helps manage $1 billion at Davidson Investment Advisors in Great Falls, Montana. ``I can see some real trouble there.'' He added that ``even with the problems going on with management,'' the company's stock is trading ``at ridiculously cheap prices -- I believe the cash flow is real.''
Kozlowski and his wife, Karen Lee Mayo, disclosed their ownership of the Boca Raton house in an application filed Feb. 22 with Palm Beach County seeking special ``homestead'' tax breaks. They said on the application that the property, located in a gated residential development called the Sanctuary, has been their primary residence since Jan. 1.
The property includes a ``luxury single-family residence'' built in 1998 that has an elevator, a roof made of clay Bermuda tiles and a boat dock on the Intracoastal Waterway, according to Palm Beach County tax assessment records.
``The Sanctuary has some great houses,'' said Richard Allison of Palm Beach County residential brokerage firm J. Richard Allison & Associates Inc. ``They have houses selling for $3 million, $4 million and up.''
ADT Acquisition
Palm Beach County records show the property on which the house is located was accumulated by Mayo Realty Trust Inc. starting in 1997, the same year Tyco acquired ADT Ltd., a maker of security systems with operations in Boca Raton. Deeds on file with the county clerk's office list Tyco's New Hampshire headquarters as the Mayo trust's address.
In 1999, Mayo Realty combined four lots, including the house, into one deed, county records show. The property was sold on Dec. 26, 2001, to K&D Trust for $10.6 million.
Richard Murdoch, a Boca Raton attorney listed as trustee for both the K&D Trust and the Mayo Realty Trust, declined to comment.
Boca Raton records list Tyco as being responsible for the paying for water and sewer services to the property since Nov. 20, 1998. Payments since last October have totaled $2,218.60.
``The Real Owner'
``We have plenty of people in Palm Beach County who have their properties in real estate trusts,'' said Dorothy Ewing, director of the Exemption Services Department of the Palm Beach County Property Appraiser's office. ``What we need to see on a homestead application is who has controlling interest in that trust -- who the real owner is -- and that is not something you will always see on a deed.''
Homestead exemptions give Florida homeowners a $25,000 annual tax exclusion, meaning the state will deduct $25,000 from the value of a home before levying taxes. The state also will limit yearly increases in the appraised value of a property to 3 percent, Ewing said.
Another benefit to Florida's homestead laws is that under the state's constitution, a resident's primary home is protected from creditors no matter how much it is worth. Florida is one of six states that allow an unlimited amount of equity to be protected in a primary residence. The other states are Texas, Arkansas, Iowa, Kansas and South Dakota. |
