SEC Sues Former Tyco CEO Kozlowski, Two Others for Fraud
FOR IMMEDIATE RELEASE
2002-135Washington, D.C., September 12, 2002 -- The Securities and Exchange Commission today filed civil fraud charges against three former top executives of Tyco International Ltd., including former CEO L. Dennis Kozlowski, alleging that they failed to disclose multi-million dollar low interest and interest-free loans they took from the company, and in some cases, never repaid. The SEC complaint, which also charges former Tyco CFO Mark H. Swartz and chief legal officer Mark A. Belnick, alleges that the three former executives also sold shares of Tyco stock valued at millions of dollars while their self-dealing remained undisclosed. According to the SEC complaint, Kozlowski and Swartz granted themselves hundreds of millions of dollars in secret low interest and interest-free loans from the company that they used for personal expenses. They later caused Tyco to forgive tens of millions of dollars they owed the company, again without disclosure to investors as required by the federal securities laws. Belnick, according to the complaint, failed to disclose that he received more than $14 million in interest-free loans from the company to acquire two residences in New York City and Park City, Utah. "Messrs. Kozlowski, Swartz and Belnick treated Tyco as their private bank, taking out hundreds of millions of dollars of loans and compensation without ever telling investors," said Stephen M. Cutler, the SEC's Director of Enforcement. "Defendants put their own interests above those of Tyco's shareholders. Those shareholders deserved better than to be betrayed by the management of the company they owned." Thomas C. Newkirk, Associate SEC Enforcement Director, stated: "Filing this case today simultaneously with the related criminal charges brought by the Manhattan District Attorney is the result of the effective working relationship we have with the Manhattan District Attorney and the New York City Police Department. We will continue with this investigation." The SEC complaint, filed in the Southern District of New York, seeks a final judgment ordering the defendants to disgorge all their ill-gotten gains. From Kozlowski and Swartz, these include: - all compensation they received subsequent to their fraudulent acts and omissions, including salary, bonuses, stock options and grants and any advances that have not been repaid;
- all loans not properly repaid by them to Tyco with interest imputed on all interest-free loans;
- all losses avoided from their sales of Tyco securities subsequent to their fraudulent acts and omissions;
- prejudgment interest on the amounts disgorged; and
- civil money penalties.
From Belnick, the Commission seeks: - all loans not properly repaid by him to Tyco with interest imputed on such interest-free loans;
- all losses avoided from his sales of Tyco securities subsequent to his fraudulent acts and omissions;
- all rent payments that he received from Tyco for the home office he maintained in the Utah residence;
- prejudgment interest on the amounts disgorged; and
- civil money penalties.
The complaint also seeks court orders to bar all three from ever again serving as officers or directors of a publicly traded company and enjoin them from further violating the antifraud, proxy and reporting provisions of the federal securities laws. For more information, including details of the defendants' undisclosed loans and other secret transactions, read SEC Litigation Release 17722. SEC Contact:
Thomas C. Newkirk
(646) 428-1510
(202) 942-4550 |
