A lawyer for Tyco International Ltd. advised the company it didn't have to disclose $95.9 million in mortgage loans it forgave for 50 top executives, including L. Dennis Kozlowski, a former Tyco official testified.

Patricia Prue, who was Tyco's human resources director, told jurors she consulted an outside lawyer, Marian Tse, about the loans in 2000.

Prue testified that former Chief Financial Officer Mark Swartz had told her the loans wouldn't need to be reported on the company's annual proxy statement to investors. Tse agreed with Swartz's conclusion, Prue said.

"I told Mark that Marian had agreed with his analysis on disclosure," Prue testified today on cross-examination by Swartz's attorney, Charles Stillman.

Swartz and Kozlowski, Tyco's former chief executive, are on trial in Manhattan state Supreme Court, accused of stealing $170 million by raiding company loan programmes.

Prosecutors say they deceived Tyco's board of directors as they approved bonuses for themselves and other executives. The two men are also accused of making $430 million through unlawful sales of Tyco stock whose price they inflated by misleading investors. The government says they bought expensive homes, cars and boats with Tyco's money.

Prue is in her fourth day on the witness stand and her first full day of cross-examination by defence attorneys. She's testified longer than any witness so far in the 5 1/2-week long trial.

Prue testified briefly about her consultation with Tse on direct examination last week.

Defence attorneys returned to the issue today in an effort to show that bonus payments were either approved by Tyco's board and PricewaterhouseCoopers LLC, its outside auditor, or, in this case, did not have to be publicly disclosed.

Prue testified that Tse told her the mortgage loans didn't have to be disclosed on the proxy statement because the loan program the company offered to executives and other employees who moved to new Tyco corporate offices in Boca Raton, Florida, in 1998 was open to anyone who relocated.

Prue testified last week that Kozlowski had told her the loan forgiveness was a "reward" for employees who moved and had worked hard to make the company successful. The loans were forgiven as part of the $1.76 billion spin-off of TyCom Ltd., a designer of undersea fiber optic cable networks.

Prue said Kozlowski told her the loan forgiveness had been approved by Phil Hampton, Tyco's former lead director. Hampton died in 2001.

Stillman finished his cross-examination of Prue with questions that appeared intended to distance his client from Kozlowski.

Stillman has noted throughout the trial that Swartz cooperated with the internal investigation launched by the company in 2002, a probe led by lawyer David Boies.

In his questioning of Prue, Stillman alluded to the fact that Tyco's board approved a severance package for Swartz worth more than $50 million in August 2002, shortly before he resigned. The board approved the pay package after being fully informed of the bonus payments that are at the center of the criminal case against Swartz and Kozlowski, Stillman said.

"There's no question this was a great deal of money, is that right?" he asked.

"That's correct," Prue said.

An attorney for Kozlowski, James DeVita, began cross- examining Prue this afternoon, questioning her about efforts by Tyco's compensation committee to give Kozlowski and Swartz millions of Tyco and TyCom stock options.

The two men turned down the options in October, 1999 and accepted reduced awards in April, 2000 Prue said.

Kozlowski also refused a $100,000 pay raise in April, 2000 while the company was being investigated by the US Securities and Exchange Commission, she said.

Prue told jurors Kozlowski declined the full option awards because he "wanted to show he had faith in Tyco that it would continue to grow and perform".

Kozlowski asked that tougher criteria be put in place to make the option awards harder to earn, she said.