Former Tyco International director Frank Walsh has been arrested and charged with securities fraud after allegedly receiving a secret $20m (Â£12.5m) payment.
Manhattan district attorney Robert Morgenthau announced the charges against Mr Walsh at a news conference in New York.
Mr Walsh, who served as the lead director of Tyco, was charged with violating New York state’s Martin Act for failing to disclose that he received a substantial fee for assisting his firm’s purchase of finance-giant CIT Group.
“The complaint charges that [former chief executive Dennis] Kozlowski and the defendant submitted the proposed transaction to the Tyco boards for its approval without disclosing the Walsh stood to gain from the transaction,” the district attorney said in a press release.
Mr Walsh resigned from Tyco’s board in January.
That same month, Tyco said Mr Walsh received the payment, split between himself and a charity of which he was a trustee, for brokering Tyco’s $9.5bn acquisition of CIT Group in 2001.
Tyco filed a lawsuit against Mr Walsh in June for taking the unauthorised fee.
Mr Walsh had argued the $20m fee was entirely legal as part of his work in helping cement the Tyco/CIT deal and said the scheme was approved by Mr Kozlowski.
Now contrite, Mr Walsh is expected to plead guilty to the charges, repay the $20m fee and pay a $2.5m fine.
In doing so he will simultaneously settle criminal charges and civil charges.
He faces up to four years in prison.
Tyco ex-chief executive Kozlowski stepped down earlier last spring shortly before being indicted on tax avoidance charges.
Mr Walsh’s indictment is the fourth since an investigation into fraudulent activities at the Bermuda-based corporate giant began earlier this year.
Ex-chairman Kozlowski, former finance chief Mark Swartz and former general counsel Mark Belnick have been indicted and face criminal charges for allegedly taking $600m (Â£3.75m) through fraudulent stock sales and other means.
They have denied the charges.