Tyco Prosecution Witness Says Panel May Have Approved Bonuses

by Glen Shapiro, LawAndTax-News.com, New York

10 November 2003

In her fifth day of testimony in the trial of former Tyco chairman and chief executive, Dennis Kozlowski, and former chief financial officer, Mark Swartz, the firm's former human resources director, Patricia Prue admitted that Bermuda-based Tyco's compensation committee may have unwittingly signed off bonuses that the two men awarded themselves.

Under examination last week, Ms Prue revealed that the committee had, in August 2001, unknowingly approved an amended retention agreement for Mr Kozlowski.

The original agreement stipulated that he should be paid three times his salary and an amount equal to his largest cash bonus if he was let go by Tyco. However, amendments were made (and subsequently approved by the hospitalized former chairman of the compensation committee, Philip Hampton) which boosted this to a sum equivalent to three times his salary, plus his largest annual cash bonus, shares, and other considerations over an eight year period.

Mr Hampton died in 2001.

According to an Associated Press report, under questioning on Thursday from Kozlowski attorney, James Devita, the former HR director acknowledged that the classification of "other considerations" in the retention agreement may have included loan forgiveness and other disputed payments awarded to the executive.

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