NEW YORK (AP) — An ex-director at Tyco International Ltd. testified that the company’s board never approved loan forgiveness and some special cash bonuses to its former top two executives.
William Peter Slusser, a Tyco director from 1997 until last year, said Monday that the board and its compensation committee weren’t asked to consider nor did they approve millions of extra compensation granted to Tyco’s former chief executive and chief financial officer during his tenure. Other directors have previously given similar testimony.
Ex-CEO L. Dennis Kozlowski and ex-CFO Mark Swartz are on trial in State Supreme Court in Manhattan, charged with improperly using funds of Bermuda-based conglomerate Tyco to enrich themselves and others. Each faces up to 30 years in prison. They have denied wrongdoing.
On cross-examination, Slusser admitted that his notes didn’t include everything that was discussed at meetings of the board or the compensation committee, but often contained more detail than the minutes of meetings of those two groups. Defense attorneys have suggested that the board’s minutes are incomplete and may omit some decisions on compensation for Kozlowski and Swartz.
However, Judge Michael Obus, who is presiding over the trial, admonished Charles Stillman, an attorney for Swartz, over the length of his questioning of what was in Slusser’s notes. Obus described Stillman’s line of questioning as “very tangential.”
Prosecutors have been criticized for the somewhat meandering nature of their questioning in the trial, which is in its fourth month.
Separately, Obus ruled Monday that hedge fund manager Leon Cooperman will be able to take the stand Tuesday.
Swartz attorney James Mitchell argued that testimony from Cooperman and similar investor witnesses might not be relevant under the state’s Martin Act; instead losses they suffered as a result of omissions from the company’s publicly disclosed documents are regulated by federal law.
Cooperman is expected to testify that Kozlowski told him in a January 2002 telephone conversation that the board had approved a $20 million payment for investment banking services rendered by then-director Frank Walsh, but he didn’t agree with making the payment. Cooperman, manager of Omega Advisers, invested $50 million in the company after that conversation, only to learn in June that the board was suing Walsh in an attempt to get him to return the money, prosecutors said.
Several Tyco directors have testified that they didn’t approve the payment to Walsh, who said last week that it was Kozlowski’s idea. Tyco paid $10 million to Walsh and $10 million to a charity of his choice for his work in the company’s acquisition of CIT Group Inc.
Meanwhile, Slusser said the board granted Kozlowski and Swartz restricted shares or options related to the initial public offering of Tycom, its optical-fiber unit, and a vesting of restricted shares associated with the company’s investment in an undersea telecommunications line firm.
Prosecutors have charged that Kozlowski and Swartz granted themselves and others millions of dollars of loan forgiveness and tax gross-ups, or payments to cover taxes on that forgiveness, including nearly $33 million to Kozlowski and $16.6 million to Swartz ostensibly as a bonus for the Tycom IPO.
Slusser also said that he believed the executives were allowed under Tyco’s existing policies to borrow money to purchase homes when they relocated to New York, and later Florida. However, those loans had to be for a “reasonable” amount.
Prosecutors have charged that Kozlowski used Tyco funds via the company’s so-called Key Employee Loan Program to lavishly outfit a multimillion-dollar apartment in New York, as well as purchase the apartment through a Tyco relocation loan.
Defense attorneys have argued that Kozlowski spent little time there and the apartment was actually a Tyco asset.
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Chad Bray is a correspondent for Dow Jones Newswires.
