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Ex-Tyco Director Expected To Plead Guilty To Felony Count

Dec 17, 2002 | Wall Street Journal

A former director of Tyco International Ltd. is expected to plead guilty to one felony count associated with his receipt of a $20 million payment from the company, according to a person familiar with the matter.

Frank E. Walsh Jr., who resigned from Tyco's board early this year, is expected to return the $20 million and pay a fine as part of a simultaneous settlement deal with Manhattan District Attorney Robert Morgenthau, this person said.

The arrangement is expected to be unveiled at a press conference in New York this morning by Manhattan District Attorney Robert Morgenthau.

Mr. Walsh resigned after being confronted by fellow directors at a board meeting, after the directors discovered Mr. Walsh had been paid $20 million by Tyco, supposedly for his role in helping broker the company's $9.5 billion acquisition of CIT Group (CIT, news). Mr. Walsh received $10 million of the payment, while another $10 million went to a charitable fund of which he was a trustee.

Tyco sued Mr. Walsh in June to recover the money, claiming that he breached his fiduciary duties to the company by accepting the payment, which wasn't authorized by the board. Mr. Walsh has defended the payment as proper, saying it reflected his contribution to the CIT deal.

Mr. Walsh also has said the payment was approved by then-Chief Executive L. Dennis Kozlowski, who has since been indicted on charges of looting Tyco. Mr. Kozlowski has pleaded not guilty.

Mr. Morgenthau's office has been investigating the Walsh payment for at least several months. Mr. Walsh would be the fourth ex-Tyco official to be indicted, including former Chief Financial Officer Mark Swartz and former general counsel Mark Belnick.

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