Tyco Sues Former Officials

Tyco International Ltd. sued former director Frank E. Walsh Jr. and ex-general counsel Mark Belnick, alleging they received millions of dollars in compensation the board didn’t approve.

In separate complaints filed in U.S. District Court in Manhattan, Tyco said Walsh arranged and hid a $20-million “finder’s fee” related to the purchase of CIT Group Inc. last year. The company alleged that Belnick, who was fired last week, got $35 million in unauthorized compensation.

The lawsuits are the first actions related to an internal probe into the misuse of funds by ousted Chief Executive Dennis Kozlowski. Tyco, the largest maker of undersea fiber-optic cable and electrical connectors, has lost more than $80 billion in market value this year because of questions about its accounting accuracy and business strategy.

Belnick’s attorney, Stanley Arkin, called the suit “an effort at a legal mugging.” A spokesman for Walsh said the suit against the former director was an “overreaction.”

The suits link Walsh and Belnick with Kozlowski, who was indicted for sales-tax evasion.

“Belnick’s fortunes were, quite literally, linked to Kozlowski’s in a way that neither the board, the compensation committee, the company’s personnel department, nor the public ever knew,” the suit against Belnick alleges.

Tyco cited a memo from Belnick’s personnel file in which Kozlowski promises that Belnick’s yearly bonus won’t be less than one-third of Kozlowski’s.

Tyco also said that Belnick received a $14-million no-interest loan used to buy homes.

Arkin said the allegations are baseless. “[Belnick’s] an honest guy with a terrific reputation,” he said. “The focus should be on the board and what that board did wrong.”

Tyco alleged that Walsh hid the payment from the board and later refused to return it. In a statement released by a spokesman, Walsh said he brokered the CIT acquisition and his fee at Kozlowski’s direction.

Shares of Bermuda-based Tyco closed up 69 cents at $14.09 on the New York Stock Exchange.