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Tyco's Former General Counsel Says Auditor Knew Of Loans

Oct 22, 2002 | The Boston Globe The former general counsel for Tyco International Ltd., indicted for falsifying documents to conceal $14 million in loans, said in court papers yesterday that the conglomerate's outside auditors knew about the payments.

The documents, filed in a Manhattan court, also said that ex-general counsel Mark Belnick told the auditors he owed more to Tyco than they had calculated.

Lawyers for Belnick filed a motion asking the judge to dismiss the charges against him, saying Tyco's auditor, PricewaterhouseCoopers, was aware of the loans through regular disclosures.

''Mr. Belnick consistently confirmed his relocation loans for Tyco's outside independent auditors, as well as other individuals inside and outside the company,'' according to a 66-page document.

Belnick was indicted last month along with former Tyco chairman L. Dennis Kozlowski and former finance chief Mark Swartz.

Both have pleaded not guilty in New York to charges of enterprise corruption and grand larceny. They face up to 25 years in prison on each charge if convicted.

''Mr. Belnick regularly completed disclosure forms for PricewaterhouseCoopers confirming the balance of his outstanding New York (and subsequently Utah) relocation loans (and on two occasions advised the auditors that he actually owed more on the relocation loans than they calculated),'' according to the filing.

Also yesterday, a top New Hampshire official said the state may settle its securities violations case against Tyco, but no settlement is imminent.

''I don't know whether there will be one or not,'' said Secretary of State William Gardner, whose department enforces state securities laws.

Mark Connolly, director of securities regulation, did not immediately return a call yesterday.

The state has been investigating whether Tyco violated state laws by not disclosing some compensation paid to former top executives, including Kozlowski and Swartz.

Based in Bermuda, the diversified conglomerate has its US headquarters in Exeter, N.H.

Tyco has acknowledged that proxy statements sent to shareholders in the past failed to include some payments to top executives.

A news report last week indicated that action by New Hampshire regulators was imminent unless Tyco settled with the state.

Quoting unidentified sources, The Wall Street Journal said yesterday the settlement was imminent, and was likely to include a $5 million payment by Tyco, which has $36 billion in annual revenues.

Gardner could not confirm the figure.

''Someone may be discussing that,'' he said.

Last month, Connolly called for the prompt resignations of Tyco directors who served during Kozlowski's tenure.

Tyco's board has voted not to support the reelection of the nine such directors, but the company said last month that unspecified business considerations prevented their immediate resignation.

Connolly criticized the response as ''unpersuasive, unconstructive, and unnecessarily protective of a board that has already been compromised.''

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