Lawyers for Mark Swartz, Tyco International Ltd.’s former chief financial officer who has been charged with swindling hundreds of millions of dollars from the company, Friday proposed using $5 million he received from a deferred compensation plan to secure his $50 million bail bond.
That represents an alternative to the 500,000 Tyco shares Mr. Swartz initially planned to offer as collateral on the bail. Prosecutors have contended that at least some of the stock stems from the conspiracy period alleged in the indictment, from 1995 to 2002.
Judge Michael Obus of the New York State Supreme Court in Manhattan ruled last week that Mr. Swartz has until Oct. 11 to either prove that the stock he offered isn’t tainted by criminal activity or secure the bail bond with other collateral.
“We wanted to show the judge that we’re trying to get this done,” Mr. Swartz’s lawyer, Charles Stillman, said after the hearing, which Mr. Swartz didn’t attend.
Mr. Swartz and L. Dennis Kozlowski, the former Tyco chief executive, were indicted last month on charges they looted Tyco of $170 million and obtained $ 430 million from fraudulent stock sales. Both have pleaded not guilty.
Mr. Kozlowski’s former wife offered $10 million to secure his $100 million bail bond, and Judge Obus accepted Mr. Kozlowski’s bail request.
The former executives ran into problems posting bail because their personal assets, totaling about $600 million, have been frozen. In the case of Mr. Swartz, the restraining order also covers any money he received from the deferred compensation, complicating his efforts to use that money as an alternative bail collateral.
Mr. Swartz could ask the judge who issued the restraining order to unfreeze the assets, but it isn’t immediately clear if that attempt would be successful.
“If that’s what they post” as collateral, “we’ll still have questions to ask,” said Assistant District Attorney John Moscow, speaking of the $5 million under the deferred compensation plan. Mr. Moscow said prosecutors would prefer that Mr. Swartz raise the bail money through third parties.