Former Tyco International Ltd. chief finance officer Mark Swartz was apparently unrattled by grilling from prosecutors on Wednesday. He is expected to be the sole defense witness in the case against him and former Tyco chairman Dennis Kozlowski for allegedly looting Tyco of $600 million.
Prosecutors say the defendants stole $170 million by hiding unauthorized pay and secretly forgiving loans, and made another $430 million on Tyco shares by lying about the company’s financial condition from 1995 to 2002. Both Swartz and Kozlowski deny any wrongdoing.
Some reports have stated that prosecutors have been irked by the appearance of Swartz, but not Kozlowski, on the witness stand. In effect, Swartz has been able to effectively present his boss’s side of the story while denying the prosecution the opportunity to cross-examine Kozlowski.
The cross-examination of Swartz would certainly have been vigorous in any even. Assistant District Attorney Marc Scholl accused Swartz of slashing expenses by cutting jobs and closing factories, reported Reuters, while the Bermuda-based conglomerate acquired hundreds of companies and while the former CFO gave himself salary increases and bought lavish homes using company loans.
“There were thousands [of employees] who did not make it into the Tyco family, right?” Scholl asked. “Do you know what that figure is?”
Swartz said he did not know. According to Reuters, during the last six years that Kozlowski and Swartz ran Tyco, they initiated plans to cut more than 70,000 jobs.
Swartz had testified Tuesday that company directors gave Kozlowski a vote of confidence after learning he had approved an improper $20 million fee. He said the board blamed fellow director Frank E. Walsh Jr., who had demanded the fee for “investment banking” work he did to facilitate the 2001 merger of Tyco and CIT Group, a large commercial lender-financier, according to the Associated Press.
Prosecutors at the trial of Kozlowski and Swartz have said that the $20 million payment, without approval from Tyco’s board, was illegal. Walsh was arrested, indicted, and allowed to plead guilty last year; he repaid the money and served no prison time.
Disclosure of the Walsh payment and a subsequent investigation of the fee and of Tyco executive compensation led to Kozlowski’s resignation and to his and Swartz’ indictment. Their trial is in its fifth month in Manhattan’s State Supreme Court. Kozlowski and Swartz are charged with grand larceny, enterprise corruption, state business law violations, and falsifying business records. If convicted, each could face up to 25 years in prison on the enterprise corruption charge alone.