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Tyco Chief Given Wide Latitude on Purchases

October 15, 2003|From Reuters

Tyco International Ltd.'s board of directors allowed former Chairman L. Dennis Kozlowski to spend up to $200 million on acquisitions without its approval, a former director testified Tuesday, underscoring the wide latitude Kozlowski had in running the company.

The disclosure came during the second week of testimony in the corruption trial of Kozlowski and former Tyco finance chief Mark Swartz in lower Manhattan. The former executives are accused of looting $600 million from Tyco through unauthorized pay and illicit stock sales.

John Fort, a former Tyco director who ran the conglomerate before naming Kozlowski his successor in the early 1990s, said the board in 1997 voted to allow Kozlowski to make acquisitions of up to $50 million without its approval. But that figure was raised to $100 million in 1999 and then doubled to $200 million the following year, Fort said under cross-examination by one of Kozlowski's defense lawyers.

Kozlowski and Swartz face 35 counts on charges that range from enterprise corruption and securities fraud to grand larceny and falsifying business records. But their attorneys say the men never did anything illegal and had board approval to back their actions.

Kozlowski earned the nickname "deal-a-day-Dennis" on Wall Street as he built Tyco into one of the world's largest manufacturing conglomerates, spending $60 billion on acquisitions during a decade-long spree.

Fort spent most of Tuesday morning undergoing a grueling cross-examination by James DeVita, a lawyer for Kozlowski.

Nell Minow, editor of the Corporate Library, a corporate governance watchdog, said the fairly free hand Kozlowski got from Tyco's board was not unusual during what she called "the era of the superstar CEO."

"Today, that's not happening," Minow said. "It would maybe be 20% of that number."

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