Tyco Execs Repaid for Restaurant Investments

Tyco International Ltd. reimbursed former Chief Executive L. Dennis Kozlowski and former Chief Financial Officer Mark Swartz for their investment in a New Hampshire restaurant, a former Tyco employee testified Tuesday.

Kathleen McRae told New York jurors that Tyco paid $600,000 in 2001 to the two executive for their investment in Bonta, an Exeter, N.H., restaurant. The two men had invested $300,000 each of their own money, McRae said.

Tyco also invested $400,000 in a New York restaurant, SoHo SoHo, because Kozlowski said a waiter there had given the company a “great deal of publicity,” McRae told jurors. She didn’t elaborate. Both restaurants are now out of business.

McRae spent a second day testifying in the fraud trial of Kozlowski and Swartz, who are accused of looting the company of $600 million. McRae told jurors Monday that she ran a three-person department that managed the personal business of the two men. She was the second person in a week to testify about performing personal work while on the company’s payroll.

McRae also gave jurors a detailed list of personal items she said the two men bought with Tyco money, an issue that has been revisited several times in the trial. Kozlowski and Swartz are accused of raiding company loan programs to steal $170 million from Tyco, spending lavishly on houses, jewelry, artwork and yachts.

Both men deny wrongdoing and contend that all spending was approved by Tyco’s board of directors or its outside auditors, PricewaterhouseCoopers. They also say that they repaid the company loan programs they are accused of stealing from. Prosecutors say some of those payments were in the form of unauthorized bonuses the two men granted themselves and others.

McRae testified that Kozlowski bought several expensive automobiles with Tyco funds, including a $64,000 Audi and an $85,000 Porsche, which was purchased in October 1998 for his girlfriend, Karen Mayo, whom he later married.

Kozlowski and Swartz also used Tyco money to invest jointly in several projects, including real estate, a cookie company based in Nantucket, Mass., and a Florida-based grocery company, McRae told jurors.