"Tyco is a replay of Adelphia in the sense that there was an extraordinary level of self-dealing and diversion of assets to corporate insiders,'' John Coffee, a Columbia University law professor, told Bloomberg.
Alas, on Wednesday, the bankrupt cable company announced it will not pay Rigas his $4.2 million cash severance package over three years, according to Bloomberg, citing people familiar with the matter.
This, of course, raises some questions about other current and former top executives who receive generous perks from employers. Earlier in the week, it was reported that Welch negotiated some considerable perks for himself that were never disclosed to the public, even though GE is a publicly owned company.
Court papers filed by Welch's wife, Jane, describe his use of a Manhattan apartment owned by GE, according to last Friday's New York Times. She also claims GE supplies Welch with floor-level seats to the New York Knicks, courtside seats at the U.S. Open tennis tournament, and satellite TV at his four homes.
The court papers also indicate General Electric picks up the tab for Welch's New York apartment -- including wine and food. The privileges also include certain dining bills at the highly-rated -- and highly expensive -- restaurant Jean Georges. The ritzy restaurant is located in the Manhattan apartment building where Welch lives.
According to the Times article, the subsidized benefits also include a car and driver for the Welches, as well as the communications and computer equipment at the Manhattan apartment and at the couple's homes in Connecticut, Massachusetts and Florida. GE also pays for security personnel when the Welches travel abroad.
Are such lavish perks an improper use of company money? Only the SEC and shareholders can answer that question.
The indictment against Kozlowski and Swartz is much more straightfoward. It charges them with plotting in 1995 to steal money from Tyco and defraud investors.
According to the indictment, about $170 million was stolen from the company, more than $60 million of which was paid to Kozlowski and Swartz in the form of loans (that were later forgiven) and unauthorized bonus payments, according to Bloomberg's account.
The indictment also accused Swartz and Kozlowski of fraudulently reaping more than $430 million from the sale of Tyco stock.
Belnick was accused of falsifying records to hide more than $14 million in company loans to himself.
Tyco also sued Kozlowski in Manhattan federal court, seeking hundreds of millions of dollars in damages. The complaint reportedly accuses him of orchestrating a scheme "to abuse the trust that had been placed in him by Tyco's board of directors."
The Securities and Exchange Commission filed separate civil fraud charges against the three individuals, alleging that they failed to disclose multi-million dollar low interest and interest-free loans they took from the company, and in some cases, never repaid. The SEC complaint alleges that the three former executives also sold shares of Tyco stock valued at millions of dollars while their self-dealing remained undisclosed.
"Kozlowski, Swartz and Belnick treated Tyco as their private bank, taking out hundreds of millions of dollars of loans and compensation without ever telling investors," said Stephen M. Cutler, the SEC's Director of Enforcement, in a statement.
Incredibly, Kozlowski met his $100 million bail while Swartz met his $50 million bail. Both had to post 10 percent of their bail in cash or secured by property by next Thursday, when they must appear in court again. Belnick was released on $1 million bail.
Swartz and Kozlowski face huge potential fines and up to 30 years in prison. Belnick faces up to four years in prison, according to reports.
(Editor's note: To see how well some top-paid CFOs manage costs — and how they match up with you and your company — take a look at the CFO PeerMetrix interactive scorecards.)
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