(Bloomberg) ? Tyco International Ltd.?s former lead auditor told Manhattan jurors he informed a board committee about bonuses paid to former chief executive L. Dennis Kozlowski, which prosecutors say were stolen from the company.

Richard Scalzo, formerly the PricewaterhouseCoopers LLP partner overseeing Tyco?s audit, testified for a second day in the fraud trial of Kozlowski and former chief financial officer Mark Swartz.

Scalzo said he couldn?t recall anyone on the audit committee reacting with surprise or objecting to the bonuses.

?I don?t recall any questions from them,? Scalzo said.

The government contends the bonuses were wrapped into big corporate transactions, such as the 2000 spin-off of subsidiary TyCom Ltd. and the sale of Tyco?s ADT Automotive unit, to hide them from scrutiny by board members and investors.

The bonuses are a key element of the allegations that Kozlowski and Swartz looted the company out of $600 million.

The two men are accused of stealing $170 million by corrupting company loan programmes and taking unauthorised bonuses.

Defence attorneys say the payments were disclosed to Scalzo and the board and therefore were appropriate.

Six former board members testified previously at the trial. Five of them said they knew nothing about the bonuses and never approved them.

One former director, W. Peter Slusser, said the board gave retroactive approval to bonuses paid to Kozlowski, Swartz and several other executives for Tyco?s 2001 equity investment in Flag Telecom Group Ltd.

Several of those ex-directors served on the audit committee at the time Scalzo said he informed the panel of the bonus payments.

Prosecutors say the audit committee?s knowledge of bonus payments does not make them legal, because the panel had no power to approve them.

Only the board?s compensation committee had that authority, prosecutors contend.

On direct examination today, Scalzo said he didn?t give the audit committee any specific information about who got the bonuses.

Scalzo, who?s testifying for the prosecution, told jurors Wednesday that he ?concurred? with the decision of Tyco management to record the bonuses within the larger corporate transactions.

Scalzo was barred from auditing public companies in a settlement with the US Securities and Exchange Commission, which accused him of ?recklessly? issuing fraudulent audits after ignoring evidence that executives were looting Tyco.

Jurors did not hear any testimony about that settlement after prosecutors were prohibited from bringing it up by State Supreme Court Justice Michael Obus. Scalzo is still a partner at Pricewaterhouse.

Prosecutors called Scalzo as a witness to counter the defence argument that the outside auditors had closely inspected Tyco?s books and records.

Scalzo told jurors the audits have ?inherent limitations.? He said such programmes as employee loans were a low priority and that accountants typically reviewed them only to confirm that borrowers were still employed by Tyco.