Tyco's 'Special Bonus' on Trial
For the defense in the trial of the men who once ran Tyco International Ltd., it is the $38.5 million question.
In opening arguments expected next week in a Manhattan courtroom, where jury selection is under way, prosecutors will begin describing how the state of New York believes L. Dennis Kozlowski, Tyco's former chief executive, and his No. 2, Mark H. Swartz, looted the company of $600 million in unauthorized compensation and illicit stock sales.
Both men have pleaded not guilty to the charges, which include more than 30 counts of grand larceny and other alleged crimes that could bring 15 to 30 years in prison. The indictment says the duo used Tyco funds to buy themselves costly houses and pay themselves unauthorized bonuses, as Mr. Kozlowski helped himself to more company money for jewelry, artwork and a $7 million Park Avenue apartment for his ex-wife.
But one incident at the heart of the case is seen by prosecutors as particularly strong ammunition, and could be the most challenging for the defendants to explain away.
In August 1999, prosecutors say Mr. Swartz, then Tyco's chief financial officer, quietly ordered a subordinate to add credits totaling $38.5 million to the employee-loan accounts of three people: himself, Mr. Kozlowski, and Barbara Jacques, a Tyco events planner. The credits amounted to a huge forgiveness of loans, which Mr. Swartz allegedly told the subordinate stemmed from a "special bonus" approved by Tyco's board to reward the three for relocating to New York from New Hampshire.
Prosecutors charge that the loan-forgiveness wasn't approved by Tyco's board, as it should have been. Of the total, Mr. Kozlowski received $25 million; Mr. Swartz, $12.5 million; and Ms. Jacques, $1 million.
For many of the charges in the case, the defense is expected to argue that money received by the two men was authorized by the company. In pretrial hearings, defense lawyers suggested that another of the main pillars of their case will rest on knowledge of such now-disputed transactions by Tyco's outside auditors, PricewaterhouseCoopers LLP. "Embezzlement can't succeed without stealth, without concealment," one of Mr. Kozlowski's attorneys said in a pretrial hearing. During pretrial skirmishing, prosecutors tried unsuccessfully to exclude the auditors from giving evidence, indicating they feel their case may be somewhat vulnerable on this score.
But several people familiar with the matter say there is no evidence the auditors ever knew about the $38.5 million loan-forgiveness transaction, which wasn't disclosed by Tyco in its public filings, and at the time was known to few people other than the three who benefited from it. Unlike other supposedly unauthorized bonuses involved in the case, the 1999 forgiven loans weren't included in W-2 wage-disclosure forms for Messrs. Kozlowski and Swartz that Tyco filed with the Internal Revenue Service, according to civil suits brought by Tyco against the two former executives.
In short, the forgiveness may have occurred with just the kind of stealth the defense says is intrinsic to embezzlement.
The $38.5 million transaction was uncovered last year by lawyers at Boies, Schiller & Flexner LLP who were conducting an internal probe after Mr. Kozlowski's resignation in June 2002. Details of the transaction have since been included in lawsuits and public filings from the company.
Before he left Tyco, Mr. Kozlowski, now 56 years old, had been one of the highest-paid CEOs in the world, having built Tyco from an obscure industrial firm into a globe-girdling conglomerate with $36 billion in annual revenue. Now, he is the first CEO of a major company to face a jury in the post-Enron era of corporate scandals. Mr. Swartz, 43, was widely hailed by Wall Street as a savvy finance chief.
With Tyco under new management, its stock is up 23% this year and has more than doubled since hitting a low of $8.25 in July 2002 on bankruptcy rumors not long after Mr. Kozlowski resigned. Thursday, it was at $20.92, up 19 cents, in 4 p.m. composite trading on the New York Stock Exchange.
Stephen Kaufman, Mr. Kozlowski's attorney, declined requests to discuss the specific charges in the case. Last year, a person speaking on behalf of Mr. Kozlowski said the Tyco chief had "no knowledge" of the $25 million in forgiven loans. This person said Mr. Kozlowski was busy running the conglomerate and assumes that subordinates kept accurate track of his loans, adding that he gave instructions to "clean up" his borrowings at the end of each year by offsetting them against his bonus and other pay.
A person familiar with Mr. Swartz's defense strategy said the $38.5 million was disclosed in the company's books, and the auditors either knew about it or should have. This person added that Mr. Swartz didn't have anything to do with the decision to forgive the loans, and promptly repaid his $12.5 million portion when Tyco lawyers told him last year that the forgiveness had never been approved by the board. As for the failure to include the sum on Mr. Swartz's W-2, this person said that it was an oversight.
Early this year, Mr. Swartz was charged in federal court in New Hampshire with income-tax evasion for failure to report the $12.5 million on his 1999 taxes. He reported income of $9.6 million, not the $22.1 million he should have reported, the indictment charged. The case was dismissed after prosecutors admitted it had been brought in the wrong state, but prosecutors have said they plan to refile the charges at some point.
In the trial, one witness about these events is likely to be Mark Foley, whom people close to the case say is the subordinate allegedly instructed by Mr. Swartz to enter the $38.5 million in loan credits. Mr. Foley is a former Tyco senior vice president of finance. His attorney, Paul Fishman, said Mr. Foley "never did anything illegal or inappropriate and has been fully cooperative with every agency conducting a investigation of Tyco."
But even if Mr. Foley testifies that Mr. Swartz ordered him to see that the loans were forgiven, what evidence ties the scheme to Mr. Kozlowski? That is where Ms. Jacques is likely to play a role in the state's case. A relatively lowly events planner wouldn't normally be included in an executive-compensation plan, much less qualify to receive $1 million.
People close to the case say Ms. Jacques at one point had been a friend of Mr. Kozlowski's. Ms. Jacques, who no longer works at Tyco, didn't return messages left at her Florida home.
Since Ms. Jacques hadn't borrowed much from Tyco, the $1 million "credit" she received amounted to extra pay, although it is unclear if she ever availed herself of the money.
Now 49 years old, Ms. Jacques was a longtime Tyco employee who, among other tasks, planned executive trips and parties. She helped plan a now-infamous $2.1 million Sardinia jaunt that included a birthday celebration for Mr. Kozlowski's wife and was on the guest list for that party.
泰科前高层的特别奖金清白否？
对于泰科(Tyco International Ltd., TYC)的前高层人士来说，他们迫切需要在法庭上就3,850万美元贷款的问题为自己辩护。
关于这一问题的公开辩论下周将在曼哈顿的一个法庭举行，目前正在挑选陪审团成员。预计检方将在法庭上指出，纽约州相信，泰科前首席执行长科兹洛夫斯基(L. Dennis Kozlowski)及原公司的2号人物斯沃茨(Mark H. Swartz)曾通过未经批准获得补偿费及非法出售股票掠夺了公司6亿美元资金。
两人此前均表示不认罪。检控方对他们的指控包括30多项盗窃罪及其他犯罪，这些指控有可能导致他们被判处15-30年的监禁。控告书称两人使用泰科公司的资金为自己购买豪华住宅，未经批准给自己发放奖金。科兹洛夫斯基利用公司的资金购买珠宝、艺术品，为其前妻在公园大道(Park Avenue)购买了价值700万美元的豪宅。
但这一案件中，有一件事被检控方视为最强有力的证据，也是两个被告最难为自己开脱的一件事。
检方称，1999年8月份，当时的泰科公司首席财务长斯沃茨悄悄命令下属在员工贷款帐户上为其本人及科兹洛夫斯基和泰科的一位项目策划人增加贷款，总额3850万美元。这些贷款中的很大部分后来被豁免了。斯沃茨辩称，他当时告诉那个下属，这笔贷款要从公司董事会批准奖励他们三人的“特别奖金”中出。董事会给他们三人奖金，是为补偿他们从新罕布什尔州迁到纽约州。
检控官们称，豁免贷款偿还义务没有获得董事会的批准，这违背了相关规定。这笔贷款中，科兹洛夫斯基得到了2500万美元；斯沃茨获得了1250万美元；雅克获得100万美元。
对这些指控，被告的律师可能会辩称，两人获得这些钱是经过董事会同意的。在开庭前的聆讯中，辩护律师称，另一个有利证据是，泰科的外部审计机构普华永道(PriceWaterhouseCoopers)对目前引起争议的这些交易是知情的。
科兹洛夫斯基的一位律师在开庭前的一次聆讯中说，如果不是偷窃或者隐瞒情况，贪污公司资金是不可能成功的。而检控官们在开庭前也曾试图排除普华永道提供证据的机会，但未成功，这说明检控官们自己也感到，他们的辩控在这一点上存在某种弱点。
但几位熟悉这一案件的人士称，没有证据表明普华永道知晓3,850万美元贷款免予偿还的交易，泰科公司在公告中也没有披露此事，当时这件事除了他们三个受益人之外，很少有人知晓。泰科公司向这两位前高层提出的民事起诉案显示，与案件中涉嫌未经批准而领取的奖金不同，1999年的这次贷款免偿事件没有包括在泰科公司向美国国税局(Internal Revenue Service)提交的科兹洛夫斯基及斯沃茨的w-2工资披露文件中。
这3,850万美元的交易是去年Boies, Schiller & Flexner LLP的律师们在科兹洛夫斯基于2002年6月份辞职后进行内部调查时发现的。这一交易的细节被列入此项起诉案及公司的公开文件中。
现年56岁的科兹洛夫斯基在离开泰科前一直是世界上薪酬最高的首席执行长之一，是他将泰科从一个名不见经传的小公司打造成业务遍及全球、年收入360亿美元的企业集团。现在他也是安然(Enron)事件后首位面临审判的大公司首席执行长。而现年43岁的斯沃茨曾经是一位广受华尔街好评的精明的首席财务长。
泰科公司调整管理层后，其股价今年已经上扬23%，自从去年7月份科兹洛夫斯基辞职后市场出现该公司破产传闻、股价创下8.25美元低点以来，该股已经上涨了一倍以上。周四下午4点钟，纽约证交所交易中，该股价为20.92美元，上涨19美分。
科兹洛夫斯基的律师考夫曼(Stephen Kaufman)拒绝讨论本案中的具体指控。去年有一位人士曾代表科兹洛夫斯基说，这位泰科公司的前首席执行长不知道2500万美元的贷款免偿一事。此人称科兹洛夫斯基忙于公司事务，认为下属人员已将其名下的贷款事项予以准确记录，此人称科兹洛夫斯基告知属下，每年年底用他的奖金及薪酬还清名下贷款。
一位熟悉斯沃茨辩护策略的人士说，这3,850万美元在公司的帐目中已得到反映，而审计机构知晓此事，或应知晓此事。这位人士还说，斯沃茨本人并未参与宽免这笔贷款的决策，而且当泰科的律师去年告诉他公司董事会从来没有批准宽免这笔贷款后，斯沃茨迅速偿还了贷款中他所欠的1,250万美元。至于这笔已偿还贷款为什么没有包括在斯沃茨的W-2工资披露表中，这位知情人士说，这是疏忽所致。
今年初，斯沃茨在新罕布什尔州的一家联邦法庭被控逃避个人所得税，检方称，他1999年少报了1,250万美元的应税收入：他上报的收入只有960万美元，而他实际应该上报的收入为2,210万美元。但在检控方承认不应在新罕布什尔州对斯沃茨提出起诉后，这一指控被驳回，不过检方已表示，他们计划在其他地方再次对斯沃茨提出起诉。
在庭审中，福莱(Mark Foley)有可能成为这些事件的证人，据熟悉案情的人士称，福莱就是此案中被控受斯沃茨指派将3,850万美元贷款打入员工贷款帐户的人。福莱曾任泰科负责财务的高级副总裁，他的律师菲施曼(Paul Fishman)称，福莱从未有过任何非法和不当行为，他一直在全面配合调查机构对泰科的调查工作。
但即使福莱作证说斯沃茨命令他将这笔贷款视为可宽免贷款，又有什么证据可以把科兹洛夫斯基与这一阴谋联系起来呢？雅克女士在本案中所起的作用可能就在于此。通常而言，公司一个低级别的办事人员是不会被包括进高层管理人士补偿计划中的，更不要说从中获得100万美元了。
熟悉案情的人士说，雅克曾是科兹洛夫斯基的朋友，雅克目前已不在泰科工作。她也没有回复记者电话留言中提及的采访要求。
由于雅克并没有从泰科借多少钱，她获得的这100万美元“贷款”应被视为特别酬劳，不过尚不清楚她是否动用过这笔钱。
现年49岁的雅克曾长期供职于泰科，她负责为公司管理人士安排旅行和聚会。她曾协助安排了一次耗资210万美元的萨丁岛之旅，在这次后来备受垢病的旅行中，有一项活动是为科兹洛夫斯基的妻子庆祝生日，雅克本人也是生日聚会的受邀嘉宾。
