Contact Us

PW Case Review Form
*    Denotes required field.

   * First Name 

   * Last Name 

   * Email 


   * Please describe your case:

What injury have you suffered?

For verification purposes, please answer the below question:

No Yes, I agree to the Parker Waichman LLP disclaimers. Click here to review.

Yes, I would like to receive the Parker Waichman LLP monthly newsletter, InjuryAlert.

please do not fill out the field below.

Ex-Tyco Director Pleads Guilty to Felony

Dec 18, 2002 | AP

A former director of Tyco International has paid $22.5 million in restitution and fines after pleading guilty to securities fraud by arranging a Tyco acquisition and failing to tell fellow board members about his payment from the deal.

Frank E. Walsh Jr., 61, avoided jail time Tuesday in a plea deal with the Manhattan district attorney. Walsh agreed to pay a $2.5 million fine and to repay Tyco the entire $20 million it had given him and a charity.

To settle a related Securities and Exchange Commission lawsuit, the former Tyco board member also agreed to never again serve as an officer of a publicly traded company.

His case is just one of the allegations involving undisclosed payments and loans to Tyco executives and insiders.

According to prosecutors, Walsh learned of Tyco's interest in buying the CIT Group, a financial services company. He arranged a meeting in early 2001 between then-Tyco chairman and CEO L. Dennis Kozlowski and CIT's chief executive. After the meeting, Kozlowski told Walsh he would receive a fee if the acquisition was completed.

Along with a $10 million direct payment to Walsh, Tyco contributed another $10 million to the Community Foundation of New Jersey, a charity that Walsh had recommended. Tyco paid those funds in July 2001, but the board did not learn of the payments until six months later.

Assistant District Attorney John Moscow, the lead prosecutor in the Tyco cases, said the charity will be allowed to keep the money. The $10 million it received will be repaid from Walsh's personal funds.

Walsh admitted that he failed to tell his own board of directors that the company was paying $20 million in "finder's fees" in exchange for his help in brokering Tyco's acquisition of CIT Group.

Kozlowski and former Tyco chief financial officer Mark Swartz, knew of the payments but did not disclose them to the board, Walsh said in court Tuesday. Both have been indicted on charges of stealing more than $600 million from Tyco, and are expected to go on trial in June.

The men have pleaded innocent, and their lawyers have said any money they received was approved.

State Supreme Court Justice Michael Obus approved the plea deal "as an appropriate resolution of a larger matter." Walsh had been charged with felony violation of the Martin Act, the state's general business law.

Walsh told the judge he thought the $9.5 billion CIT acquisition would be good for Tyco, but "I intentionally did not disclose to the rest of the board, except Mr. Kozlowski and Mr. Swartz, that I stood to receive a substantial fee."

The CIT acquisition proved to be anything but a good deal for Tyco shareholders. Manhattan District Attorney Robert Morgenthau said Tyco lost about $7 billion on the CIT deal.

One of Walsh's two lawyers, Joel Cohen, called his client a "man of common decency, a God-fearing man."

"A lifetime of good deeds fall by the wayside," Cohen said in a statement read to the court.

Following the hearing, Walsh's other lawyer, Andrew Lawler, submitted four checks to pay the restitution and fines.

Morgenthau said the Tyco prosecutions are significant because there were "serious breakdowns in the checks and balances that you expect to find in a corporation."

The company also has filed a civil suit against Kozlowski, seeking $730 million in restitution. He allegedly bought luxurious homes with company money, and threw a $2.1 million birthday for his wife, Karen, on the Italian island of Sardinia, according to SEC documents.

Tyco makes products ranging from coat hangers to security systems and medical devices, with $36 billion in revenue last year.

Related articles
Parker Waichman Accolades And Reviews Best Lawyers Find Us On Avvo