Tyco Trial Focuses on Timing of Bonus

Mark Belnick, Tyco International Ltd.’s former top lawyer, was approved for a bonus for guiding the company unscathed through a federal investigation even before the inquiry was completed, a former Tyco board member testified Monday.

Prosecutors contend that the timing of the bonus, which was at least $12 million and as much as $17 million in cash and stock, indicates that it was not for legal work but was actually a payoff for helping to hide former Chief Executive L. Dennis Kozlowski’s alleged thefts.

Under questioning by a prosecutor, Frank E. Walsh Jr. said the bonus resolution was approved May 8, 2000, but the Securities and Exchange Commission inquiry ended in July 2000. Walsh is a former board member whose own illegal actions contributed to Kozlowski’s ouster.

Shown minutes of the meeting at which the bonus resolution was passed, Walsh, then a member of Tyco’s executive compensation committee, was asked to say whether the money for Belnick had been approved before the SEC report was issued.

“If these minutes were approved as I’m reading them, it would appear that it had,” said Walsh, 62, of Jupiter, Fla. He added that he had never spoken to Belnick about the bonus resulting from the SEC probe.

In 2002, Kozlowski and former Chief Financial Officer Mark Swartz were indicted on larceny and other charges. Their joint trial ended in a mistrial two months ago.

Belnick is charged with first-degree grand larceny, securities fraud and falsifying business records. He faces up to 25 years in prison if convicted of the top count, grand larceny. Prosecutors say Belnick was allowed to misuse nearly $15 million in loans that he was not qualified to receive under Tyco rules.

Much of Walsh’s testimony concerned his illegal receipt of a $20-million “investment banking fee” for suggesting and facilitating a merger between Tyco and CIT Group, a commercial lender.

The rest of the Tyco board found out about the payment in January 2002 and demanded that Walsh give the money back. Walsh refused and quit the board. He was indicted and pleaded guilty to securities fraud in 2003. In a plea deal that kept him out of jail, Walsh paid $20 million to Tyco and $2.25 million in fines in connection with the illegal fee.