Former Tyco International Ltd. finance chief Mark Swartz denied at his corruption trial on Tuesday that he looted the conglomerate of $600 million with former company Chairman Dennis Kozlowski.
Swartz, 43, was the first defense witness to testify in a trial that began in late September. He and Kozlowski both deny accusations of enterprise corruption, grand larceny, falsifying records and illicit stock sales.
Swartz rebutted a key contention by prosecution witnesses that he and Kozlowski created various loan programs, without the approval of the company’s board of directors, to enrich themselves and other Tyco employees.
In 1995, for example, he said Tyco’s board approved a relocation program that one director summarized as being so lucrative that Kozlowski could borrow enough money to buy Gracie Mansion, the official mayoral residence for New York.
When asked by his lawyer Charles Stillman if he ever broke the law at Tyco, Swartz said, “Absolutely not.”
Earlier in the day, Kozlowski’s defense team rested its case without calling any witnesses. Defense lawyers are leaning heavily on Swartz’s testimony to counter a mountain of evidence presented by Manhattan prosecutors.
Swartz recounted how Tyco’s board in 1995 was fully aware of a relocation program that called for moving some key executives and staff, including himself and Kozlowski, from Exeter, New Hampshire, to New York.
An eye for deals
He said 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, including an allowance for top executives to borrow up to five times their annual cash compensation at zero interest.
Bodman “told the board Dennis could borrow enough to buy Gracie Mansion,” Swartz recounted.
Kozlowski, speaking to the board at the same meeting, said he might be buying “a lot of mini-mansions,” Swartz testified.
Swartz said Tyco’s board did not keep minutes of board meetings held in the United States.
Swartz said Tyco executives shuttled among four headquarters, in New York, New Hampshire, Boca Raton, Florida, and the official corporate domicile in Bermuda, creating the need for various relocation programs.
He said the board would approve general relocation benefits but left it to senior executives to work out the details.
During his testimony, Swartz explained how he would keep an eye out for deals that could benefit Tyco and himself. In one such deal, he tried to buy hotel condominium units in New York near Tyco’s office to rent to visiting company employees -- a deal that would have generated profits for Swartz.
But after Swartz paid a $1.2 million deposit, Kozlowski told him the deal could be a conflict of interest. Swartz forfeited his deposit and Tyco paid him back, later recording a $1.2 million expense, Swartz said.
Asked by Stillman if ever tried to conceal the transaction, Swartz replied: “Never.”
