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Tyco Workers Testify at Fraud Trial

Prosecutors contrast the salaries of lower-level employees with the high pay of the company's former executives.

October 09, 2003|From Bloomberg News

Three Tyco International Ltd. employees were the first witnesses Wednesday in the trial of former executives L. Dennis Kozlowski and Mark Swartz, who are accused of looting the company of $600 million through theft and stock fraud.

The employees, Patricia Travis, Tracy Katigbak and Rosalyn Johnson, were asked to describe their duties as custodians of Tyco corporate records. They also were asked to read excerpts from some of those records.

Prosecutors also questioned the women about their salaries and bonuses at Tyco, in an effort to contrast the compensation of lower-level employees with the high pay of Kozlowski and Swartz. From 1998 to 2002, Kozlowski earned more than $300 million.

Travis, who said she makes almost $63,000 a year plus an annual bonus, was asked whether she would qualify as a "key employee" at Tyco eligible to borrow from loan programs the defendants are accused of stealing from. "No, I'm not," she said.

Travis said Tyco previously had offered to lend her money to buy a computer, which she declined.

Kozlowski, 56, is the first chief executive of a major U.S. company to stand trial for fraud since the December 2001 collapse of Enron Corp. triggered a series of prosecutions of corporate officers. He and Swartz, 43, face as many as 30 years in prison if convicted of charges that include stock fraud, enterprise corruption, grand larceny and falsifying business records. Swartz was Tyco's chief financial officer.

Travis, an administrator in Tyco's legal department, maintains minutes of board meetings. Katigbak is an office manager for Tyco in New York. Johnson is an administrator at Tyco's headquarters in Bermuda.

In court Wednesday, Travis read excerpts of board minutes from meetings in the 1990s, including one in 1995 at which Swartz was elected chief financial officer and another session at which Kozlowski proposed that the interest rate charged by Tyco's Key Employee Loan Program be reduced.

At a third meeting, the board was told about a plan to pay employees relocating from company headquarters in New Hampshire to New York City.

Kozlowski's predecessor as chief executive at Tyco, John Fort, is expected to take the witness stand today. Fort took over the company on an interim basis when Kozlowski resigned in 2002 shortly before being indicted.

Jurors on Wednesday also got their first look at a document prosecutors described in opening statements as the key to the unraveling of Kozlowski and Swartz. The document, a questionnaire that sought financial information from directors and senior executives, was submitted by former board member Frank E. Walsh Jr., who disclosed a secret $20-million payment he got for brokering Tyco's acquisition of CIT Group Inc.

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