Tyco International Ltd. (TYC) is preparing an arbitration claim against its former chief financial officer, Mark H. Swartz, seeking repayment of tens of millions of dollars in severance and other compensation it paid him, people familiar with the matter told The Wall Street Journal.
The arbitration claim is expected to be filed this week, perhaps as soon as today.
Tyco announced Mr. Swartz’s departure in early August. Last month, he and former Tyco Chief Executive L. Dennis Kozlowski were charged by New York prosecutors with stealing $170 million from Tyco in unauthorized compensation and reaping an additional $430 million in illicit gains through stock sales. Messrs. Swartz and Kozlowski have pleaded not guilty.
The expected arbitration filing comes after Tyco was criticized by Manhattan District Attorney Robert Morgenthau for paying Mr. Swartz about $45 million in conjunction with a severance arrangement it reached to secure his resignation. In a recent interview, Mr. Morgenthau said his investigators had warned Tyco officials of Mr. Swartz’s growing legal peril two days before the company’s board approved his severance agreement.
Under the severance agreement between Tyco and Mr. Swartz reached in August, Tyco can’t sue Mr. Swartz but must file any claim against him with an arbitrator. The arbitration proceedings won’t be public, but legal experts expect Tyco at minimum will seek repayment of the $45 million, and may well go after the money Mr. Swartz allegedly helped others steal from the company.
A Tyco spokesman declined to comment on the specific timing of any arbitration filing, but pointed out that Tyco has previously said it planned to make monetary claims against Mr. Swartz through arbitration. Charles Stillman, an attorney for Mr. Swartz, said the money Tyco paid his client was “totally, 100% rightfully his. To the extent the company has any claims, they may or may not be asserted in arbitration.”
Under the departure agreement, Mr. Swartz received, among other things, $9.1 million in a lump-sum severance deal, plus $24.5 million from an executive life-insurance plan and $10.4 million from a deferred-compensation plan.