News > Companies
Tyco wants its money back
Kozlowski bought $15,000 umbrella stand, $2,200 waste basket with Tyco funds, company says.
September 17, 2002: 4:23 PM EDT

NEW YORK (CNN/Money) - Ex-Tyco International Ltd. CEO Dennis Kozlowski bought a $15,000 umbrella stand, a $2,200 wastebasket, and other pricey items with some of the $62 million in unauthorized loans Tyco says he took from the firm.

Tyco detailed the interest-free loans Tuesday, along with $100 million in additional unauthorized loans it said Kozlowski steered to other executives, in a filing with the Securities and Exchange Commission.

The filing said Kozlowski, former finance chief Mark Swartz and former General Counsel Mark Belnick borrowed millions from the firm without authorization. The three men were indicted last week on securities fraud charges for allegedly bilking the company of about $600 million.

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Lawyers for Kozlowski and Belnick were not immediately available for comment Tuesday. Swartz' lawyer, Charles Stillman, said in a statement Tuesday that "as I indicated at my client's arraignment last week, he is innocent of all charges against him. Mark Swartz never received a penny from Tyco that was not fully authorized. Today's report does not change that fact."

Meanwhile, the company is seeking repayment of many of the loans.

Tyco provided the agency with a list of Kozlowski's allegedly unauthorized purchases, including $15,000 for the umbrella stand, $6,300 for a sewing basket, $17,000 for a "traveling toilette box," a $2,200 wastebasket, $2,900 for coat hangers, $5,900 for two sets of sheets, a $1,650 appointment notebook, and a $445 pincushion.

Separately, Kozlowski authorized nearly $100 million in loans to 51 other executives and employees, which were later forgiven.

Shares of Hamilton, Bermuda-based Tyco (TYC: up $0.35 to $16.89, Research, Estimates) were down slightly in midday trading Tuesday.

Kozlowski resigned from Tyco on June 4, a day after the Manhattan district attorney charged him with evading $1 million in sales tax on artwork and other luxury items he allegedly purchased with company funds.

Subsequent investigations by the company and prosecutors have turned up a complex and extensive web of loans and transactions controlled by the three top officers that siphoned tens of millions of dollars from Tyco without the board's knowledge, according to the filing.

Tyco said that Kozlowski borrowed about $62 million in unauthorized interest-free loans from the company, of which he paid back about $22 million. Kozlowski also authorized for himself forgiveness of $19.4 million, according to the filing. Another $21 million was reclassified to other loan accounts he maintained with the company.

While the Manhattan district attorney charged Kozlowski, Tyco said the DA will not be filling charges against it, Reuters reported Tuesday.

The complex deals centered on corporate relocation programs Kozlowski set up in 1995 to move some employees to New York City from Tyco's Exeter, N.H., offices. The board approved the program, but only after broadening it beyond the half dozen employees Kozlowski had in mind, according to the filing.

However, Tyco alleges that Kozlowski took it upon himself to offer five or six executives and one assistant a more generous relocation package not offered to other employees and without the board's knowledge.

The filing alleges that Kozlowski borrowed about $30 million to buy property and build a home in Boca Raton, Fla., in 1997, and about $7 million to buy a Park Avenue apartment in New York City in 2000. Kozlowski also borrowed millions for other real estate transactions and luxury purchases.

"The improper and unlawful conduct of Tyco's former CEO, CFO and Chief Corporate Counsel in enriching themselves at the expense of the company with no colorable benefit to the company has damaged Tyco," the company said in its SEC filing Tuesday.

Separately, Tyco said Swartz, the former CFO, improperly borrowed more than $33 million to buy property in Florida and New Hampshire. Swartz paid back about $11 million interest-free. Kozlowski forgave $10 million and $12.5 million was reclassified to other loan accounts.

Belnick borrowed about $4.2 million to buy a home in Park City, Utah, the company said.

Additionally, Tyco's filing details loans Kozlowski allegedly approved for other executives including:

Jerry Boggess -- current president of Tyco's Fire and Security Services business, who borrowed $5 million to buy property in Boca Raton, Fla., in 1997. The loan was forgiven, but Boggess repaid it after learning it was unauthorized, Tyco said.

Stephen McDonough -- former president of Tyco Engineered Products and Services and ex-president of the plastics division, who borrowed $1.8 million to relocate from New Jersey to Massachusetts. The loan is payable within 90 days, Tyco said.

Neil Garvey -- former president and CEO of TyCom Ltd., a Tyco subsidiary, who borrowed $5 million to relocate to New Hampshire. Tyco is seeking repayment of the loan.  Top of page

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