Witness: Kozlowski didn?t keep information secret:
(Bloomberg) -- Tyco International Ltd.'s former head of human resources testified that ex-Chief Executive L. Dennis Kozlowski, on trial for fraud, never asked her to keep bonus or other information secret from the company's directors.
The testimony from Patricia Prue, who worked as a liaison to the board's compensation committee, undercuts prosecutors' contention that Kozlowski, 58, and former finance chief Mark Swartz, 44, awarded themselves millions of dollars of bonuses without the board's knowledge. The men are facing the charges in New York state court for a second time after a mistrial in April.
"Did Mr. Kozlowski ever tell you not to share information with the chairs of the compensation committee?" Kozlowski's lawyer, Austin Campriello asked.
"No," said Prue, a prosecution witness who testified for two days about compensation documents that didn't list the bonuses. "He never told me to say anything or act a certain way with them." Prue said she worked with three committee chairmen while at Tyco.
Prosecutors hope to prove that Kozlowski and Swartz illegally arranged bonuses and other payments of $150 million to themselves and others.
In testimony yesterday and today, prosecutor Owen Heimer went through a series of documents with Prue, including compensation committee minutes, information packages on Tyco executive compensation and annual statements to shareholders.
None of the documents mentioned the bonuses collected by Kozlowski, Swartz and Prue. The bonuses were recorded in memos that were never presented to Tyco's directors.
Prue testified yesterday that Kozlowski and Swartz gave themselves and others almost $125 million in bonuses, much of which was paid as mortgage loan forgiveness for relocating executives.
Prue said that during an internal investigation in mid-2002 after Kozlowski had been indicted for tax evasion, a lawyer asked her for a relocation program plan covering some of the bonuses.
Prue said that Swartz had told her in 2000 that he would prepare the plan. When she asked him for a copy for the probe, he couldn't produce it.
"He said that he didn't have it," Prue testified. "That he effed-up and he didn't have it."
Kozlowski and Swartz are facing 31 counts of grand larceny, conspiracy and securities fraud. Defence lawyers claim their clients had no intention of stealing the money and that the board knew or could have learned of the payments. The most serious charge carries a 25-year jail term.
In June 2002, Kozlowski resigned from Tyco the day before he was accused of evading sales taxes on $13.2 million in art purchases. He is to be tried separately on those charges. Swartz left in September 2002.
Prosecutors told jurors in their opening statement last month that the men sold as much as $575 million of Tyco stock and options while committing the fraud. Both deny wrongdoing.
Kozlowski presided over more than $64 billion of acquisitions in the last five years of his decade as chief executive, building the Bermuda-based company into the world's biggest maker of electronic connectors, industrial valves, plastic hangers and security systems.
Tyco shares have more than doubled since Kozlowski was first indicted. The stock dropped 21 cents to $33.55 at 4:18 p.m. in New York Stock Exchange composite trading today.