PEMBROKE, Bermuda – Tyco International Ltd. (TYC) on Tuesday said it uncovered tens of millions of dollars in fraudulent bonuses and revealed it picked up the tab for personal expenses including a $6,000 shower curtain and a $2,200 wastebasket for indicted former Chairman L. Dennis Kozlowski's New York City apartment.
Despite the allegations of massive fraud and largesse that extended from Kozlowski's corporate suite and beyond, the company said it would not have to restate its financial results.
Details from the company's internal investigation, authored by a committee headed by attorney David Boies, were contained in a company filing with the U.S. Securities and Exchange Commission. The filing was massive, exceeding 100 pages.
In 2000, Kozlowski had Tyco authorize nearly $96 million in unapproved bonuses for 51 employees to offset relocation loans.
Kozlowski and former Chief Financial Officer Mark Swartz received most of the money, which was purportedly paid out for the successful initial public offering of TyCom, the company's undersea fiber-optic cable network, documents show.
The report also details $13.5 million in unauthorized loans to key Tyco managers -- not including Kozlowski and Swartz. The benefits were never approved by Tyco's board. One of the executives cited is Jerry Boggess, who runs Tyco's key fire and security division.
Boggess borrowed $5 million to buy property in Boca Raton, Florida, but the loan was forgiven. When he recently learned that Kozlowski was not authorized to forgive the money, Boggess asked that the loan be reinstated, Tyco said.
Directors Also Mentioned
The Boies investigation also reviewed transactions that benefited Tyco board members, who have been criticized for being too lax under Kozlowski. Most of them will resign by early next year.
Many of the deals involving executives were not apparent to investors until recently. Tyco director Lord Michael Ashcroft, for example, sold his Boca Raton home to Kozlowski for $2.5 million after Tyco bought Ashcroft's company, ADT, for several billion dollars in 1997.
Ashcroft has told the company that he didn't learn until two years later that a Tyco subsidiary, not Kozlowski, bought his home at market prices, Tyco said. He brought the matter to the attention of former Tyco CFO Swartz, but the transaction was never reported to shareholders.
Former Tyco board member Frank Walsh, who also was a close friend of Kozlowski's, leased aircraft to Tyco for several years and was paid for invoices totaling nearly $2.5 million, Tyco said.
Walsh is a major reason why Tyco started received heightened scrutiny from Wall Street and the rest of the company's board. He received a $20 million payment for brokering Tyco's $9.5 billion acquisition of CIT Group Inc., which was sold this year for half that amount.
When the payment was disclosed early this year, Tyco's stock plummeted.
Though in greater detail, the findings largely mirror what New York prosecutors and the SEC alleged last week in a massive corruption case against Kozlowski and two of his top lieutenants.
Kozlowski, Swartz, and former general counsel Mark Belnick are accused of carrying out a theft and fraud scheme that fleeced Tyco and shareholders out of more than $600 million.
Kozlowski portrayed Tyco as a lean corporate operation, but the Boies investigation accuses him of using the company's funds for a number of unjustified extravagances, including a $1,650 notebook, a $17,100 traveling toilette box, a $445 pin cushion, and $5,960 for sheets.
Shares of Tyco fell 35 cents to close at $16.89 in late afternoon trading Tuesday on the New York Stock Exchange. Shares of the conglomerate, based in Bermuda but run from Exeter, N.H., are down more than 70 percent for the year.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox