Tyco Lawyer Changed SEC Statement
A former Tyco International Ltd. lawyer testified Monday that she had been told to change the description of a director’s role in brokering a takeover, a role that earned the director a $20-million bonus.
Fatima Sadegji-Nejad, the lawyer, is the latest former Tyco executive to take the stand in the embezzlement trial of L. Dennis Kozlowski and Mark Swartz, the company’s onetime chief executive and chief financial officer, respectively.
Kozlowski and Swartz have been accused of looting the conglomerate of $600 million through unauthorized pay and fraudulent stock sales, enriching themselves and their friends at the expense of shareholders.
One of the most highly publicized problems with Tyco was a payment former director Frank Walsh Jr. received for helping put together Tyco’s acquisition of finance company CIT Group Inc. in 2001.
Walsh, who pleaded guilty to intentionally concealing the payments, accepted $10 million for himself plus $10 million for a charity of his choice.
Tyco’s stocked plunged the day after the news of the payments hit, erasing $17 billion in market capitalization.
Taking the stand in New York state court, Sadegji-Nejad told jurors that she had been informed of the payment in late 2001. Shortly thereafter, she began crafting an explanation of the payment for a filing with securities regulators.
“It was the first time I was becoming aware of it,” she said. “I called Mark Swartz to let him know there was this disclosure. He asked me to check and find out whether all of it would have to be disclosed.”
Sadegji-Nejad testified that outside lawyers had told her the full amount -- the $10 million for Walsh and the $10 million for charity -- would have to be included in filings with the Securities and Exchange Commission.
In drafting the statement, Sadegji-Nejad said, she described Walsh as having been paid the fee as a “broker” in the acquisition.
But she was later told by senior executives, including Swartz, to change the statement to say Walsh had been “instrumental” in bringing about the acquisition. The reference to broker was removed.
When asked about the change, Sadegji-Nejad, a prosecution witness, testified she had been told that describing Walsh as a broker would contradict what Tyco had disclosed in earlier filings with the SEC. In those, Tyco had said that only investment banks acted as advisors on the deal.
A document put into evidence by the prosecution showed a handwritten notation by Swartz on a memo relating to changes in the statement about Walsh’s fee. It read: “For accounting purposes this is required!”
