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Tyco executive: Nondisclosure of loans followed counsel?s advice

NEW YORK (Dow Jones/AP) ? Tyco International Ltd.?s director of executive compensation testified yesterday that the company?s former financial chief did not ask her to act contrary to legal advice regarding the nondisclosure of relocation loans made to some executives.

Earlier yesterday, a juror in the trial of two former top Tyco executives was dismissed after suffering an injury over the weekend.

John F. DeVanny is the second juror to be excused in the trial of L. Dennis Kozlowski, Tyco?s ex-chairman and chief executive, and Mark Swartz, Tyco?s former chief financial officer.

Kozlowski and Swartz are on trial in State Supreme Court in Manhattan, charged with improperly using funds from the Bermuda-based conglomerate to enrich themselves and others. Each faces up to 30 years in prison.

They have denied wrongdoing. The director of executive compensation, Donna Sharpless, was asked about the loans during cross examination over a number of memos involving the preparation of Tyco?s annual proxy statement to shareholders, including notes from the company?s outside counsel discussing whether certain compensation needed to be disclosed.

A key defence argument is that compensation for Swartz and Kozlowski that prosecutors say was unauthorised actually was recorded in the company?s books. Defence attorneys have argued that the firm?s outside counsel and auditors were aware of much of Kozlowski?s and Swartz?s compensation and, at times, advised that it didn?t need to be disclosed in the company?s proxy statement.

In one memo previously introduced into evidence, an outside attorney for Tyco advised that relocation loans to executives were considered ?under the normal course of business? and didn?t need to be disclosed in the proxy.

?Mark Swartz did not ask you to act contrary to the legal advice you received? ? asked James Mitchell, an attorney for Swartz.

?That?s true,? Sharpless said.

The testimony came after Judge Michael Obus, who is presiding over the case, said DeVanny, juror No. 7, had fallen over the weekend, receiving an injury to his face that required 14 stitches.

?It appears, unless the man makes a miraculous recovery, we will not be able to wait for him,? Obus said.

Obus dismissed the juror without objection from defense attorneys or prosecutors, saying it could have delayed the trial a week to wait for his recovery.

The case has gone on nearly four months and has experienced few delays due to illness ? none by jurors. A juror was excused earlier in the case when it was found her brother works for one of the law firms defending Kozlowski and Swartz. She was dismissed without objection from both sides.