(Bloomberg) ? A former Tyco International Ltd. executive testified that he was told to record as extraordinary bonuses several payments that then-chief executive L. Dennis Kozlowski and his deputy Mark Swartz are accused of stealing.

The payments were booked as expenses incurred for three transactions and were not counted as part of regular year-end bonuses approved by the company?s board. Prosecutors say Kozlowski and Swartz wanted to hide the bonuses from directors, the only group authorised to set the defendants? compensation.

Mark Foley, a former Tyco senior vice president of finance, told jurors yesterday that Swartz instructed him to book the bonuses as ?incremental,? classifying them as extraordinary payments. Swartz, 44, and Kozlowski, 58, are facing fraud charges in a New York state court for a second time after a mistrial in April.

The two men are accused of granting themselves and others $150 million in unapproved payments and of defrauding shareholders by inflating Tyco stock. They face a total of 31 counts of stock fraud, falsifying business records, grand larceny and conspiracy. The most serious charge carries a 25-year jail term.

Kozlowski and Swartz improperly awarded themselves millions of dollars in bonuses after each of three transactions in 2000 and 2001, including a share offering in subsidiary TyCom Ltd. and the sale of its ADT Automotive unit, prosecutors say.

At the start of the three-week old trial, prosecutors called the proceeds from the TyCom Ltd. offering ?a big pot of money that these defendants could steal from?.

One of the bonuses, a $16 million payment for the ADT transaction, was so large that two cheques had to be prepared, Foley said.

?The payroll system couldn?t handle a $10 million cheque,? Foley said. ?It was just too many digits.?

Kozlowski resigned from Tyco in June 2002 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.

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.