(Bloomberg) A lawyer for Tyco International Ltd. testified at the fraud trial of the company?s former chief executive and finance chief that she was never told about millions of dollars in forgiven loans for the two executives.

The statement by attorney Marian Tse contradicted testimony by government witness Patricia Prue, Tyco?s former head of human resources. Prue said she asked Tse in November 2000 whether such loan forgiveness had to be reported to shareholders and was told that it did not.

Prue passed Tse?s response on to the finance chief, Mark Swartz, and the loans were omitted from that year?s proxy statement, Prue testified. Swartz, 44, and the ex-chief executive, L. Dennis Kozlowski, 58, are accused of giving themselves and others $150 million in unapproved payments and of defrauding shareholders by inflating the value of Tyco stock.

They are being retried in state court in New York because their first case ended in a mistrial in April, 2004.

Tse, who advised Tyco on executive compensation, said she didn?t discuss loan forgiveness with Tyco officials during the period when Kozlowski and Swartz are accused of illegally forgiving millions in company loans they owed. ?Did anyone ever tell you that Mr. Kozlowski had received loan forgiveness of any kind?? Assistant District Attorney Owen Heimer asked Tse, who is also a government witness. ?No, they did not,? she said.

Defense lawyers objected to the introduction of Tse?s testimony about her conversations with Prue, whose testimony both helped and hurt the prosecution. Justice Michael Obus permitted the testimony at the first trial and the retrial of the two men.

In September 2000, Kozlowski and Swartz awarded themselves $48 million worth of bonuses in the form of relocation loan forgiveness and payments to cover consequent tax liabilities, prosecutors said.

The two awarded millions more in forgiveness and tax-reimbursement payments to dozens of Tyco employees. Prosecutors claim the two failed to obtain the necessary permission from the board to make such payments and conspired to hide the bonuses from shareholders and directors. The defendants claim the payments were authorised and that they made no attempt to hide their actions. Prue said her November conversation with Tse concerned these payments.

Tse, a partner at the Goodwin Procter law firm in Boston, said that she did have a conversation with a Tyco official in November 2000 about disclosure matters.

She said she spoke to Donna Sharpless, who also worked in human resources, not with Prue. A fax from Tse containing a page of securities regulations on disclosure matters went to both Sharpless and Prue.

Prue testified that the fax, in which Tse underlined the phrase ?relocation plans,? came in response to her query.

Sharpless, who is scheduled to testify tomorrow, told jurors at the first trial that she didn?t know about some of the bonus payments the defendants received.

In September 2001, Tse said, she did discuss relocation plans with Prue. ?Did the subject of loan forgiveness come up in any form?? Heimer asked. ?No,? she said. Prosecutors from the Manhattan district attorney?s office say the two executives abused the relocation program by awarding themselves loans to purchase apartments and artwork and fund personal investments.

Kozlowski and Swartz, they say, awarded themselves unauthorized bonuses to pay off millions in relocation loan debt and never revealed the payments to shareholders.

On cross-examination, Tse said she couldn?t recall the precise contents of the conversation she said she had with Sharpless in November 2000.

?I don?t recall the specifics of that conversation related to relocation plans,? she told Austin Campriello, a lawyer for Kozlowski.

Tse testified that she believed a bonus tied to a relocation plan needed to be disclosed as compensation and that she wouldn?t have advised Tyco not to report any loan forgiveness to Kozlowski and Swartz.

?I would disclose it as a bonus payment on the summary compensation table? of the proxy, she testified.

She also told jurors that earlier statements she made to the grand jury investigating Kozlowski and Swartz were inaccurate. She had told the grand jury that she had no memory of any discussion of relocation loans before September 2001.

Swartz?s lawyer Charles Stillman showed the jury Tse?s billing log from January 1999, which listed a telephone call with Sharpless ?regarding proxy disclosure of relocation loans?.

?Apparently, my memory was not as accurate as I would like it to be,? Tse said.

Kozlowski, presiding over more than $64 billion of acquisitions in the last five years of his decade as chief executive, built Tyco into the world?s biggest maker of electronic connectors, industrial valves, plastic hangers and security systems.

He and Swartz face 31 charges of grand larceny, conspiracy, falsifying business records and securities fraud. The most serious, grand larceny, carries a maximum 25-year sentence.

Kozlowski resigned from Tyco in 2002 the day before he was indicted for evading sales taxes on $13.2 million in art purchases. He is to be tried separately on those charges. Swartz left in September 2002.

Tyco shares have more than doubled since Kozlowski was indicted.