Tyco Witness Denies Being Advised of Forgiven Loans

Tyco International Ltd.’s former director of executive compensation testified Tuesday that she was never told of millions of dollars in forgiven loans that former Chief Executive L. Dennis Kozlowski and his finance chief are accused of stealing.

Former compensation executive Donna Sharpless told the jury at the fraud and larceny trial of Kozlowski and former Tyco Chief Financial Officer Mark Swartz that as a result, forgiven loans including $37.5 million in 1999 were left out of the company’s statements to shareholders. She also said she wasn’t told of $48 million in forgiven loans and other compensation the following year.

Swartz, 44, and Kozlowski, 58, are accused of giving themselves and others $150 million in unapproved payments and of defrauding shareholders by inflating the value of Tyco stock. They are being retried in state court in New York after their first case ended in a mistrial in April.

Prosecutors claim Kozlowski and Swartz didn’t get the board’s permission to make such payments and conspired to hide them from directors. The defendants deny those allegations.

Sharpless also backed up testimony Monday by Marian Tse, a lawyer who advised Tyco on compensation. Tse told the jury she never discussed loan forgiveness with Sharpless or with Patricia Prue, Tyco’s former head of human resources.

Prosecutors say Kozlowski and Swartz abused company loan programs by awarding themselves millions of dollars to buy apartments and artwork and to fund personal investments.