Tyco Exec Grilled on Approval of Bonuses

Tyco International Ltd.’s ex-finance chief testified Monday that no company documents exist showing board approval of bonuses that he and former Tyco Chief Executive L. Dennis Kozlowski are accused of stealing.

Former finance chief Mark Swartz and Kozlowski received $16 million and $32 million, respectively, in loan forgiveness and tax payments, known as gross-ups, in 2000 that weren’t approved by the Tyco board’s compensation panel. The men have said the awards were for the successful public offering of shares in Tyco unit TyCom Ltd.

“There are no minutes saying, ‘We hereby award $16 million in loan forgiveness and gross-ups.’ Is that correct?” asked Owen Heimer, a New York prosecutor. “That is correct,” Swartz said.

Kozlowski, 58, and Swartz, 44, are charged with looting Tyco of $150 million and defrauding shareholders by selling $575 million worth of stock while hiding Tyco’s financial condition.

Swartz, under cross-examination in a New York state court, said he calculated the bonuses himself based on the $1.7-billion gain from the TyCom offering. He said there was no mention of the payments in documents his department gave the board.

“There is nothing on this page that informs the board of directors that you and Mr. Kozlowski had obtained a total of $48 million in loan forgiveness and gross-ups. Is that correct?” Heimer asked, pointing to a fiscal 2000 executive pay summary prepared for the board. “That’s correct,” Swartz said.