Ex-Tyco Exec Talks About KozlowskiJan 16, 2004 | AP Tyco International Ltd.'s former head of investor relations testified that L. Dennis Kozlowski, the company's ex-chairman and chief executive, frequently told investors that he sold shares only to pay taxes, repay loans for taxes on share vestings or for estate planning.
That testimony by Brad McGee, Tyco's head of investor relations from 1998 to 2000, is in stark contrast to testimony by numerous individuals that said Kozlowski used share sales to repay loans taken out under Tyco's so-called Key Employee Loan Program for millions of dollars of jewelry, artwork and investments.
Several directors have testified that KELP loans were designed to be used only for the payment of taxes on the vesting of restricted shares.
Kozlowski and Mark Swartz, Tyco's former chief financial officer, are on trial in State Supreme Court here in Manhattan, charged with improperly using Tyco funds to enrich themselves and others. Each faces up to 30 years in prison. They have denied wrongdoing.
Charges against Kozlowski and Swartz include providing false or misleading information about the company, which inflated the stock price. Prosecutors also have charged that the defendants improperly used KELP loans to purchase artwork, automobiles and other items.
In addition to McGee's testimony, the jury for the first time heard comments about executive stock sales in Kozlowski's own voice. Prosecutors introduced taped excerpts of two conference calls in which Kozlowski discussed his stock sales.
"The only time I have ever sold any stock is to pay back taxes due to Tyco," Kozlowski said on an Oct. 14, 1999, conference call with investors.
Under questioning from prosecutor Kenneth Chalifoux, McGee testified that Kozlowski expected an explanation whenever insiders — executives or directors — sold shares of their Tyco holdings, saying it put Kozlowski in a "predicament" with the market.
McGee said Kozlowski often said the bulk of his wealth was in Tyco stock and would describe low periods for the stock as a "buying opportunity."