Lawyer for Tyco Says She Wasn’t Told of Loan Plan

A lawyer who advised Tyco International Ltd. on what it should tell investors about company loan programs said Tuesday that she was not informed of plans to forgive mortgage loans for key executives, including then-Chief Executive L. Dennis Kozlowski.

Marian Tse testified that she would have urged disclosure of the loans in annual proxy reports had she been told of those plans by Tyco’s human resources director, Patricia Prue.

“Ms. Prue never told me about specific real estate loans,” Tse told jurors in New York state Supreme Court in Manhattan at the fraud trial of Kozlowski and former Chief Financial Officer Mark Swartz.

Tse’s testimony contradicted what Prue told jurors earlier this month. Prue said Tse advised her that the loans wouldn’t have to be reported. Prue said she told Swartz about Tse’s advice.

The decision by the Manhattan district attorney’s office to call Tse to the stand is considered unusual because she discredited the testimony of Prue, a major government witness.

Prue’s testimony about Tse did bolster a key defense argument: The bonus payments that prosecutors contend were illegal either were approved by Tyco’s board of directors and auditor PricewaterhouseCoopers or, in this case, did not have to be publicly disclosed.

Kozlowski and Swartz are accused of stealing $170 million by raiding company loan programs. Prosecutors say the two deceived Tyco’s board of directors and investors as they approved bonuses for themselves and other executives.

Tse told jurors that she had conversations with Prue and another Tyco executive, Donna Sharpless, between 1999 and 2001 about whether to disclose the relocation program for executives on proxy reports. Tse said she told Sharpless and Prue that the loan program did not have to be disclosed on the proxy if it was generally available to all employees.