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Kozlowski, Tyco face more questions
Tyco gave ex-CEO Kozlowski more than $135M for luxury purchases, report says.
August 7, 2002: 4:29 PM EDT

NEW YORK (CNN/Money) - Tyco International Ltd. gave former CEO Dennis Kozlowski more than $135 million during his tenure so he could buy a mansion, artwork, expensive vacations and other luxury furnishings, a newspaper reported Wednesday.

Kozlowski, 55, who oversaw the expansion of one of the largest U.S. companies, was charged, and pleaded not guilty (in an earlier version of the story CNN/Money erroneously reported Kozlowski pleaded guilty), in June with evading more than $1 million in New York State sales taxes on art purchases. Investigators said Kozlowski used company funds to buy the artwork.

Subsequent investigations revealed that the loans didn't stop with artwork. Kozlowski regularly dipped into Tyco's funds to support his lavish lifestyle and image, the Wall Street Journal reported.

In 1998, Kozlowski bought a 15,000-square-foot, Mediterranean-style, waterfront mansion in Florida with a pool, tennis court and a fountain, using a $19 million, no-interest loan from Tyco. The company later forgave the loan as part of a "special bonus" program, and even kicked in another $13 million to cover Kozlowski's income taxes on the forgiven loan, the Journal reported, citing people familiar with the company. None of this was disclosed to shareholders.

Tyco also forgave another $25 million in loans to Kozlowski in 1999, which he used to pay for antiques, art and other furnishings for his New York apartment, including a $6,000 gold-and-burgundy floral patterned shower curtain. The company even paid for the apartment itself, a Fifth Avenue duplex, which Tyco considered a corporate apartment, according to the report.

Last summer, Tyco paid for half of a $2.1 million trip to the Italian island of Sardinia, the highlight of which was a 40th birthday party for Kozlowski's wife, Karen, that included a performance by singer Jimmy Buffett.

Tyco, which manufactures a diverse line including disposable diapers and undersea fiber-optic cables, is being investigated by the Manhattan district attorney and the Securities and Exchange Commission. The U.S. Attorney in New Hampshire, where the company maintains offices, has made inquiries, according to the report.

The company itself could face charges that it failed to fully disclose how much it lent Kozlowski and other executives. Kozlowski also could face additional charges for failing to pay New York state and city income tax on compensation, including the apartment and forgiven loans.

Separately, New Hampshire's chief securities regulator said he had broadened his investigation of Tyco, Reuters news agency reported.

"For the past several months, this office has been reviewing certain alleged improprieties regarding Tyco International," said Mark Connolly, New Hampshire's director of securities regulation. Without being specific, Connolly said his office had widened its probe of Tyco, which has offices in Exeter, N.H.

Connolly said his office was collaborating with the New York District Attorney's Office and the Securities and Exchange Commission.

Tyco has said it remains a strong company and expects to produce more than $2.5 billion in free cash flow for the year ending Sept. 30. Company spokesman Walter Montgomery told the Journal that "nothing uncovered to date could be considered to be material to the company's financials."

Tyco (TYC: Research, Estimates) stock fell 55 cents to $12.21 Wednesday.  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.