Tyco Seeking $$ From Ex-CFO
Company Files Arbitration Case Against Mark Swartz, One Of 3 Ex-Execs Facing ChargesOct 8, 2002 | CNN/Money
Tyco International Ltd. is trying to force former CFO Mark Swartz, who was indicted on fraud charges last month, to return millions of dollars he supposedly misappropriated from the diversified manufacturer.
Tyco filed an arbitration demand with the American Arbitration, the company disclosed in a filing Tuesday with Securities and Exchange Commission. The SEC filing says Swartz "breached his fiduciary duties" as CFO and as a director and "misappropriated company funds and other assets." The demand for arbitration seeks to recover all damages it suffered from Swartz.
Swartz, who became the company's CFO in 1995, left the company Aug. 1 and in September was indicted along with former CEO Dennis Kozlowski for orchestrating deals that looted the company of at least $600 million. They have pleaded innocent.
Tyco has sued Kozlowski, seeking reimbursement of tens of millions in unapproved loans to employees that later were forgiven. The company cannot bring a lawsuit against Swartz, but must seek arbitration under a severance agreement Tyco and Swartz reached in early August, worth about $45 million.
Gary Holmes, a Tyco spokesman, said Tuesday the arbitration proceeding is confidential and the company cannot release a copy of its demand against Swartz.
Last month, Tyco sued Kozlowski for at least $730 million, seeking repayment of outstanding loans, unauthorized compensation he paid to other employees, including Swartz, and all income and benefits he received from 1997 through this year.
Charles Stillman, a lawyer for Swartz, told the Wall Street Journal on Monday the money was "totally, 100 percent, rightfully his." Stillman's office said he was in court Tuesday and unavailable for comment, the Associated Press reported. The news agency said a spokesman for Swartz declined to comment.
Tyco has been criticized by Manhattan District Attorney Robert Morgenthau for giving Swartz the generous severance package two days after Morgenthau's investigators warned the company of Swartz's growing legal troubles.
Company officials have defended the severance, saying they got Swartz to agree to accept substantially less than he was entitled to under contractual arrangements. They also said he cooperated with the company's internal investigation.
Tyco faces investigation by the SEC and state regulators over possible accounting problems and mismanagement. The SEC has filed complaints against Swartz and Kozlowski.
Based in Bermuda but headquartered in Exeter, N.H., Tyco has 270,000 employees and had $36 billion in revenue last year. The conglomerate owns companies that make everything from coat hangers to security systems to medical devices.