Contact Us

PW Case Review Form
*    Denotes required field.

   * First Name 

   * Last Name 

   * Email 

Phone 

   * 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.


N.H., Tyco Agree On $5m Pact

Oct 24, 2002 | The Boston Globe

New Hampshire securities regulators yesterday reached a $5 million settlement with Tyco International Ltd. in a deal that will create a statewide investor education program and fund an academic program on corporate governance.

Under the consent agreement with the New Hampshire Bureau of Securities Regulation, Tyco does not admit to the allegations of mismanagement and lack of corporate control that enabled its executives, including chief executive L. Dennis Kozlowski and chief financial officer Mark Swartz, to loot the company of millions of dollars.

But the settlement will require Tyco's new CEO, Edward Breen, to demonstrate his stated commitment to strong oversight and spotless corporate ethics by submitting annual reports on the firm's corporate governance to the New Hampshire bureau for three years.

Mark Connolly, deputy secretary of state and director of securities regulation, said his office's investigation hinged on standards of corporate behavior and director responsibility contained in state laws.

Though Tyco is nominally headquartered in Bermuda, its largest management office is in Exeter, N.H., and several senior officers, including Swartz and Kozlowski, maintained residences in the state.

''Corporations are creatures of the state in which they're located,'' Connolly said. ''Tyco admits that 25 percent of the old board of directors is under some type of investigation or legal action. The corporation bears responsibility for that. Tyco wouldn't be struggling for its corporate life if these transgressions didn't happen.''

In a prepared statement yesterday, Breen said, ''We believe this consent agreement is in the best interests of our shareholders and employees and reflects the company's commitment to a continued presence in New Hampshire.''

The settlement has no impact on other pending legal actions, including investigations by the Securities and Exchange Commission, Manhattan District Attorney Robert Morgenthau, and the US attorney's office in New Hampshire.

The New Hampshire consent decree is a staid document in comparison to lawsuits brought by Tyco and Morgenthau, and a report by Tyco's own law firm. Those papers detailed extravagant payments to top officers and abuses of company loan programs that enabled executives to live lavishly.

''This wasn't about the juicy details,'' Connolly said. ''This was about how these abuses happened, and how to prevent it from happening in the future.''

The consent decree alleges that top executives, including Kozlowski, Swartz, former chief counsel Mark Belnick, and former director Frank Walsh, misused corporate funds and engaged in transactions without proper approval.

In particular, the top executives misused Tyco programs that provide loans to key employees and to those who are required to relocate for company business.

Many of the specific allegations - including one about a $20 million payment that Walsh took for arranging an acquisition - had already been detailed in the complaints and filings issued by Tyco and the government officials. But the New Hampshire agreement focuses heavily on the role of the company's board of directors in allowing those abuses. Connolly last month sent a letter to Tyco, urging that all the directors who served under Kozlowski resign from the board.

''The executives used these loan programs as personal bank accounts,'' said David F. Conley, special counsel to the New Hampshire bureau. ''The board's compensation committee should have but didn't stop this activity. Had they, this gluttonous abuse would have halted early on.''

The agreement came together at a meeting Monday at a Manchester, N.H., law office, where Connolly and staff attorney Barry J. Glennon met with Breen, Tyco's new head of corporate governance, Eric M. Pillmore, and attorney Paul R. Verkuil, an advisor to Tyco with the firm of Boies, Schiller and Flexner.

Connolly drilled Breen and Pillmore on how the new Tyco will handle issues of corporate oversight. He came away impressed.

''He gets it,'' Connolly said of Tyco's new chief. ''It's not lip service. It's for real.''

The education program will be designed to teach investors about the mechanics and risks of investing in corporate securities.

Separately, an academic program on corporate governance will be set up within the University System of New Hampshire.

Details of the programs have yet to be worked out.


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