Kozlowski takes blame for omissions

Ex-Tyco chief testifies in second fraud trial

April 29, 2005|By BLOOMBERG NEWS

Former Tyco International Ltd. Chief Executive Officer L. Dennis Kozlowski, charged with leading a $700 million fraud, testified yesterday that he was "ultimately responsible" for company regulatory filings that omitted millions of dollars in compensation.

Assistant Manhattan District Attorney Ann Donnelly showed jurors Tyco filings that didn't note more than $100 million in payments to Kozlowski and other executives. Kozlowski said he signed some of the documents, including those filed with the Securities and Exchange Commission. He added that he didn't prepare many of them.

"Where did the buck stop?" Donnelly asked during cross-examination in New York state court in Manhattan.

"The buck stops with me with everything at Tyco," Kozlowski replied. He later testified that a personal assistant handled his finances and decided when to borrow money from Tyco on his behalf.

Yesterday's testimony supported the prosecution's contention that Kozlowski, 58, purposely withheld information from investors. He and ex-finance chief Mark Swartz, 44, are accused of awarding themselves and other executives $150 million in cash, Tyco shares and loan forgiveness without board authorization.

The two men are charged with securities fraud for hiding the company's condition from investors while selling $575 million in shares and options at inflated prices.

In a tactical shift from his first trial, which ended in a mistrial, Kozlowski took the stand Wednesday as the first witness for the defense. He repeatedly told the jury of six men and six women that he never intended to commit any crimes at Tyco.

At the beginning of her cross-examination yesterday, Donnelly asked Kozlowski about the financial latitude he had as chief executive officer.

"Tyco's money was not your money to spend on yourself as you please, was it?" Donnelly asked.

"That's right," Kozlowski said.

Donnelly displayed Tyco's 1999 financial statement to the jury, focusing on the description of the Key Employee Loan Program. Kozlowski used loans under the program to buy artwork and to pay expenses unrelated to the plan's purpose, which was to help employees pay taxes due when their Tyco shares vest.

Kozlowski conceded that he used the loans for purposes other than paying taxes.

Donnelly also showed the jury minutes from a 1999 Tyco compensation committee meeting that ratified Kozlowski's pay.

"There is no section in these minutes that gives you $25 million in loan forgiveness, is there?" Donnelly asked, referring to compensation that prosecutors said he purposely omitted from company filings and tax returns.

"No," Kozlowski said.

Donnelly then showed jurors Tyco's 1999 statement to shareholders, which Kozlowski signed.

"There is no mention of your receiving $25 million in loan forgiveness in this proxy statement, is there?" Donnelly asked.

"That's correct," he said.

Kozlowski has testified that former Tyco director Phil Hampton approved the $25 million loan forgiveness as part of the bonus due him in 1999. On direct examination, Kozlowski conceded that the $25 million was not included on the income statement he submitted with his taxes for 1999.

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.