Tuesday, September 17, 2002
Tyco to release loan details
The Associated Press
CONCORD, N.H. Tyco International Ltd. was expected to make public Tuesday the names of some of the more than 40 employees who received millions of dollars in forgiven loans from the company, two sources familiar with the situation said.
In a lawsuit Tyco filed last week against its former indicted CEO Dennis Kozlowski, the company alleges some of the money was used to induce the employees' cooperation not to disclose what Kozlowski was doing or buy their silence. The lawsuit seeks to have Kozlowski repay the company for the loans he approved. The loans didn't have the consent or approval of the board, the sources said.
The money, from two Tyco relocation loan programs meant for top executives, was given to employees at all levels of management, one source said. That included assistants to some top managers, a second source said.
On Monday night, the company was still deciding whose names would be released as part of the Securities and Exchange Commission Form 8-K filing, the sources said.
One source close to the company said several board members questioned the lower-level employees about the loans. The employees have responded that they didn't know they were doing anything wrong.
Kozlowski told the employees they were special bonuses for doing good work, the source said.
They wouldn't have any reason to know they were doing something wrong, the source said. In retrospect, their sniffers should have been out.
The source said an internal investigation has not turned up collusion deep in the company.
I don't think the whole company was corrupt. I think it was consigned to a narrow group at the top. I think most were just trying to do their jobs, the source said.
The source said the disclosure should not materially impact Tyco's financial statements because the forgiven loans were included as part of the company's bottom line on its previous earnings reports.
Most of what your going to find (Tuesday) is about disclosure, the source said. What you're going to find is that all of these amounts are already reflected in the financial statements, but a lot of them were hidden so you wouldn't have been able to find them.
A company spokesman declined to comment Monday on the filing.
Also Thursday, the board of directors voted not to support re-election of nine of the 11 directors. A source close to the company said in the final vote three board members Wendy Lane, Richard Bodman and Stephen Foss opposed the move, but were overruled by the majority.
The only two member of the board to remain are the new CEO Ed Breen and lead director John Krol.
According to the Tyco lawsuit, Kozlowski awarded unauthorized special bonuses to himself and over 40 other Tyco employees in September 2000 that forgave the employees' relocation loans and paid their additional tax liabilities owed on the forgiveness
The suit says Kozlowski fabricated another bonus program in favor of himself and two dozen select executives in November 2000. The money was used to induce their cooperation or buy their silence, the suit says.
According to Tyco's lawsuit, Kozlowski wanted board approval for a more generous relocation loan program than it was willing to approve. The board approved a modest plan in 1995, but Kozlowski went ahead with doling out more generous sums of money, the suit says.
Kozlowski, 55, and the former chief financial officer, Mark Swartz, 42, were charged Thursday in New York with enterprise corruption and grand larceny for allegedly stealing $170 million from the company and obtaining $430 million through the fraudulent sales of securities. Both pleaded innocent.
Former general counsel Mark Belnick was charged with falsifying business records to conceal $14 million in loans to himself. He also has pleaded innocent. The three men have declined to talk to reporters.
Shares of Tyco closed at $16.54, down 34 cents, on Monday on the New York Stock Exchange. Shares of the conglomerate are down more than 70 percent for the year.
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