Risk Management

Tyco’s Former CFO Claims Innocence

Mark Swartz testifies that the company's board knew full well about at least one loan program.
Stephen TaubFebruary 11, 2004

Former Tyco International Ltd. chief financial officer Mark Swartz denied he ever broke the law in the 11 years he spent at the conglomerate.

When Swartz, who is on trial along with former chairman Dennis Kozlowski for allegedly looting the conglomerate of $600 million, was asked by his lawyer Charles Stillman if he took any action at Tyco that violated any laws, Swartz said, “Absolutely not,” according to published accounts.

Swartz was the first defense witness to testify in the trial, which began in September. Earlier in the day, Kozlowski’s defense team rested its case without calling any witnesses.

One of the key points that prosecutors have been trying to impress upon the jury is that Swartz and Kozlowski never received approval from the board of directors for a number of loan programs designed to enrich themselves and other Tyco employees.

During his testimony, however, Swartz insisted that in 1995, Tyco’s board was fully aware of a relocation program that called for moving a number of key executives and staff, including himself and Kozlowski, from Exeter, New Hampshire, to New York City, according to Reuters. He added that Tyco wanted to take advantage of New York’s investment banking center as Kozlowski increased the size of the company through acquisitions.

Swartz also reportedly testified that Richard Bodman, who was then chairman of Tyco’s compensation committee, summarized the relocation program for the full Tyco board at a meeting in August 1995. Bodman also insisted that top executives were able to borrow up to five times their annual cash compensation at zero interest, added Swartz.

“[Bodman] told the board Dennis could borrow enough to buy Gracie Mansion,” Swartz reportedly testified, referring to the city’s official mayoral residence. When Kozlowski spoke to the board at the same meeting, added Swartz, the former chairman said he might be buying “a lot of mini-mansions.”

In board meeting minutes shown to jurors, it was noted that Bodman “summarized for the board the general terms of a relocation program approved by the compensation committee,” according to the wire service.

Swartz’s testimony is expected to last for several days.