Tyco Sues Former CFO for $400 MillionApr 2, 2003 | AP Tyco International Ltd. has filed a $400 million lawsuit against former chief financial officer Mark Swartz, claiming he looted the conglomerate for his personal gain.
Swartz already faces criminal charges of theft and fraud filed by government prosecutors, who say he and former CEO L. Dennis Kozlowski stole $600 million from Tyco. Both men have pleaded innocent.
The suit accuses Swartz of using Tyco funds to buy a $16.5 million Manhattan apartment, tickets to Miami Heat basketball and Florida Panthers hockey games, cable television service, country club memberships and concert tickets for Billy Joel and Elton John.
It also accuses Swartz of accepting more than $134 million in pay from 1997 to 2002 for "services that were never rendered" and awarding himself tens of millions of dollars in unauthorized bonuses.
Tyco filed the lawsuit late Tuesday in Manhattan federal court.
Swartz's attorney, Charles Stillman, said in a statement the Tyco suit was "no more than a public relations stunt."
Tyco, a conglomerate based in Bermuda but headquartered in Portsmouth, N.H., makes everything from coat hangers to security systems and medical devices.
Tyco claims it tried to take Swartz to arbitration in October to resolve the complaints but says Swartz blocked the move. The company said Swartz agreed to the arbitration process when he left the Tyco board last August.
Stillman said the appropriate time for arbitration was at the end of the criminal proceedings against Tyco. Swartz and other former executives have yet to go to trial.
"There is no fair reason for Tyco to commence this court action now," Stillman said.
Tyco is seeking a $400 million judgment. It also wants the court to order Swartz to account for all the money he received from Tyco both legal compensation and any unauthorized funds.
The civil suit also says Swartz made millions of dollars by abusing Tyco loan programs to speculate in real estate and investments and by paying former Tyco director Frank Walsh a $20 million fee without telling company directors.
In a separate suit filed in December, Tyco accused Kozlowski and Swartz of making more than $40 million off dozens of short-swing stock trades beginning in August 2000.
Government rules say the company is allowed to seize any profits made by corporate insiders who buy and then sell their firm's stock within a six-month period.
Tyco has also sued Kozlowski and former legal counsel Mark Belnick to recover $55 million in compensation the company says should have been approved by the board.
Additionally, Swartz was indicted in New Hampshire in February on federal tax evasion charges. He pleaded innocent to that indictment and faces trial there later this month.
Swartz was freed on $5 million bail on the tax charges. He was freed on $50 million bail on the original New York charges.
The new lawsuit was filed by Tyco International Ltd. and its U.S. subsidiary, Tyco International (US) Inc., which is incorporated in Nevada.