Directors' Firms On Payroll At TycoSep 18, 2002 | USA Today Companies controlled by Tyco International directors got more than $4.3 million in previously undisclosed payments to provide aircraft and pilots to the firm, Tyco said Tuesday.
The payments, criticized by corporate governance experts, were included in a report to securities regulators in which Tyco detailed an alleged pattern of ''improper and unlawful conduct'' by ex-CEO Dennis Kozlowski and two other former top officials.
Ex-director Frank Walsh had a controlling interest in two firms that got more than $3.5 million to lease an aircraft and provide pilot services to Tyco from 1996-2002, Tyco reported to the Securities and Exchange Commission.
A company controlled by current director Stephen Foss received $751,101 to supply a Cessna Citation aircraft and pilot services from May 2001 to May 2002, the company reported.
Tyco sought competitive bids before awarding the contracts, but it did not report the deals to the SEC until Tuesday. Corporate governance experts said such payments typically are disclosed to the SEC as related party transactions.
''That's problematic, because it goes to the issue of the independence'' of board members, Charles Elson, director of the Center for Corporate Governance at the University of Delaware, said about the non-disclosure.
Annual transactions of more than $60,000 between a company and a director generally should be reported, according to SEC rules.
Walsh's deals were arm's-length agreements approved by both sides, after competitive bidding, spokesman Gregory Miller says. Foss' contracts were ''open and aboveboard,'' says spokesman Ben Kincannon, who added that lawyers for Foss and Tyco advised they need not be disclosed.
Tyco spokesman Gary Holmes says the firm opted to report them now in a bid to restore investor confidence. As part of that effort, Tyco's SEC filing also:
Reported that Kozlowski, former CFO Mark Swartz and Mark Belnick, the former chief corporate counsel, improperly ''enriched themselves at the expense of the company'' from at least 1997 to June 2002. A lawyer for Kozlowski, who told a judge his client can't meet a $100 million bail bond due Thursday, did not respond to calls. Kozlowski told The Wall Street Journal Monday that he was unaware of any questionable expenses and always sought board approval for bonuses and loans. Defense attorney Charles Stillman said Swartz, who can't meet a $50 million bond, ''is innocent of all charges.'' Belnick's lawyer did not return messages. Kozlowski and Swartz face being jailed on criminal charges if they cannot post bond, but prosecutors have frozen many of their assets and Tyco is in the process of seizing others.
Disclosed that three Tyco executive officers shared more than $11.7 million in relocation loans. Jerry Boggess, president of Tyco's fire and security services division, has repaid his $5 million. Tyco is seeking $5 million from Neil Garvey, former president of its TyCom subsidiary, and $1.75 million from Stephen McDonough, former plastics division president.
Identified seven of the 51 employees who shared nearly $96 million in Tyco loans forgiven by Kozlowski. Holmes said Tyco is seeking repayment from Kozlowski, not the employees, because they ''were misled by Mr. Kozlowski.''
Repeated charges that Walsh and a charity he controlled improperly received $20 million in Tyco fees secretly approved by Kozlowski. USA TODAY reported Monday that Manhattan prosecutors are investigating that transaction.