Ex-Tyco Executive Describes Plan to Hide Bonus PaymentsDec 11, 2003 | Bloomberg News
A former Tyco International executive told jurors yesterday how he booked bonus payments on orders from the former chief executive, L. Dennis Kozlowski, and the former chief financial officer, Mark H. Swartz.
Prosecutors contend the bonuses were stolen from the company.
Mark Foley, Tyco's former senior vice president for finance, said he recorded a series of bonus payments to Mr. Kozlowski, Mr. Swartz and other top executives in larger corporate transactions, like the spinoff of subsidiary TyCom in 2000.
Mr. Foley said he had several conversations with Mr. Swartz about the TyCom bonuses, which were paid in the form of mortgage loan forgiveness.
"I was told it was related to the successful I.P.O. of the TyCom business," Mr. Foley said, describing the explanation for forgiving $95.9 million in loans to the executives.
Mr. Foley's testimony gave jurors a first-hand account of how bonus payments were buried in corporate transactions like the TyCom spinoff and the sale of Tyco's ADT Automotive unit in 2000.
Prosecutors accuse Mr. Kozlowski and Mr. Swartz of stealing $170 million and deceiving Tyco's directors and investors by secretly arranging to hide bonuses and forgive loans.
Mr. Foley said Mr. Swartz told him in 1999 that $38.5 million in loans to Mr. Kozlowski, Mr. Swartz and the former Tyco events planner, Barbara Jacques, had been forgiven. Mr. Swartz said the bonuses were related to Tyco's relocation of its corporate headquarters to New York City in 1997.
"He told me that Mr. Kozlowski had told him that certain loans were being forgiven by the board," said Mr. Foley, who left Tyco earlier this year.
Three directors have already testified that they never approved the bonus payments in dispute.
Under questioning by the assistant district attorney, Marc Scholl, Mr. Foley said only Mr. Swartz and the former human resources director, Patricia Prue, told him the bonuses had board approval.
Mr. Foley was among the executives to receive bonuses. He told jurors he received $600,000 in the ADT sale and a special $1 million bonus in 2000 for helping fend off a Securities and Exchange Commission inquiry. Mr. Foley, who earned more than $16 million at Tyco from 1999 to 2002, also said a $1.2 million loan to him was forgiven in the TyCom spinoff.
Mr. Foley said Mr. Swartz called to tell him about the S.E.C. bonus, which was described as a "thank you" for dealing with the inquiry into Tyco's accounting practices.
The S.E.C. closed the investigation without taking any action.