From Deseret News archives:
Witness says Tyco CEO took unauthorized pay
Frank E. Walsh Jr., the former compensation chief who took the stand Wednesday, is considered a key witness in the corruption trial of Kozlowski and co-defendant Mark Swartz, Tyco's former chief financial officer.
Through Walsh's testimony, the prosecution sought to show that the two acted without company approval in taking millions from Tyco.
Walsh testified that the board never gave Kozlowski or Swartz control over their own compensation. Nor, Walsh said, was he aware that the board of directors ever allowed compensation beyond what was authorized by his committee.
Kozlowski and Swartz are on trial on larceny and enterprise corruption charges in state Supreme Court in Manhattan. They face up to 30 years in prison if convicted.
Prosecutors contend the two stole $170 million from Tyco by hiding unauthorized pay and forgiven loans in major Tyco transactions and made another $430 million on their Tyco shares by lying about the conglomerate's financial condition from 1995 into 2002.
On Wednesday, the prosecution sought to make the point in specific terms. Prosecutor Mark Scholl asked Walsh, "Did you ask the compensation committee to authorize for Dennis Kozlowski $25 million in loan forgiveness?"
Walsh replied that he had not.
Defense lawyers have argued that Kozlowski and Swartz were entitled to the compensation they took, and it had all been properly approved.
Walsh's own unauthorized multimillion payment helped lead to the investigation of senior executives' activities. He pleaded guilty to a felony in 2002, but the jury did not hear of the plea on Wednesday.
At the urging of the defense, Judge Michael Obus ruled that the prosecution could not ask Walsh about the plea. To do so, the judge said, would impeach the credibility of the prosecution's own witness.
Walsh joined the company's board of directors in 1992, at Kozlowski's urging, and served for 10 years. The two met through Kozlowski's alma mater, Seton Hall University, where Walsh was on the board of trustees.
It was Walsh's questionable $20 million "finder's fee" for brokering a deal in which Tyco acquired CIT Group, a commercial lender, that contributed to the unraveling of the executives' financial activities. Kozlowski had approved the payment, but the board was not aware of it.
The Tyco board subsequently hired a law firm to get the $20 million from Walsh and investigate the senior executives' activities at Tyco.
Tyco, which has about 270,000 employees and $36 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business. It is based in Bermuda.
