Tyco's ex-counsel is indicted over loan

$12 million was awarded after SEC probe stopped

February 04, 2003|By BLOOMBERG NEWS

NEW YORK -- Prosecutors expanded their case against Tyco International Ltd.'s former general counsel, Mark Belnick, yesterday by charging the one-time prosecutor with grand larceny for taking an unauthorized $12 million loan.

Belnick, 56, who helped conduct the U.S. Senate probe into the Iran-Contra scandal, was accused last year of falsifying business records. A former partner in a large Manhattan law firm, he would face a stiffer prison sentence if convicted of the new charge, which was announced by Manhattan District Attorney Robert Morgenthau.

The indictment steps up pressure by Morgenthau's office on Tyco's former chief executive, L. Dennis Kozlowski, and former chief financial officer, Mark Swartz, lawyers said. They were indicted last year on charges of looting the biggest maker of undersea fiber-optic cable of more than $600 million through stock fraud and illegal compensation.

"The D.A. is looking at Belnick as a ticket to bigger fish at Tyco," said former prosecutor Jacob S. Frenkel.

The new indictment charges Belnick with receiving $2 million in cash and 200,000 shares of Tyco stock, Morgenthau said. It also alleges that he helped Kozlowski and Swartz hide a $2.5 million real estate transaction involving Tyco and then-board member, Lord Michael Ashcroft.

As Tyco's corporate counsel, Belnick had a duty to protect shareholders, Morgenthau said. Instead, Belnick participated in a scheme to defraud the company, Morgenthau said.

Belnick, free on $1 million bail, pleaded not guilty to grand larceny and to a second new charge, fraud. Belnick's attorney, Reid Weingarten, said the original falsification charges are "entirely frivolous" and "the latest charges are no better."

"We're cooperating fully with the D.A.'s office and have no comment on today's indictments," said Tyco spokesman Gary Holmes.

Tyco's new chief executive, Ed Breen, has made several reforms at the Bermuda-based company. He created an office of corporate governance and replaced several top executives, including the head of human resources. Members of the board who served under Kozlowski agreed not to stand for re-election at the company's annual meeting in March.

Some evidence that Morgenthau is using against Kozlowski, Swartz and Belnick was provided by an internal Tyco investigation of executive compensation. Tyco sued the three men last year to recover unauthorized compensation, litigation that has been delayed as the former executives are prosecuted.

Morgenthau said he has no plans "at this time" to bring charges against Ashcroft.

Belnick had previously been charged with concealing more than $14 million in allegedly improper Tyco loans by failing to record them in a directors-and-officers questionnaire. He claims other Tyco executives and auditors from PricewaterhouseCoopers LLP knew of the loans. He would face up to 25 years in prison if convicted of the grand larceny charge, a longer sentence than for falsification.

The $12 million that is the center of the indictment was paid to Belnick over several months in 2000 and was a reward for successfully ending an investigation by the Securities and Exchange Commission into Tyco's accounting, Morgenthau said.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.