Tyco Seeks Damages From Former CFOOct 8, 2002 | AP Tyco International Ltd. is seeking to force former chief financial officer Mark Swartz to return millions of dollars he allegedly misappropriated from the company.
Tyco filed an arbitration demand with the American Arbitration Association on Monday, the company disclosed in a filing Tuesday with Securities and Exchange Commission.
The SEC filing says Swartz "breached his fiduciary duties" as chief financial officer and director and "misappropriated company funds and other assets."
Swartz was indicted along with former chairman and CEO L. Dennis Kozlowski last month for allegedly stealing $600 million from Tyco. 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 the 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.
A source close to the company said the claim against Swartz is similar to a lawsuit filed against Kozlowski last month, although the amounts of money involved are smaller.
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. A spokesman for Swartz said he could not immediately 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.