Network Firm News
Charges Filed Against Former Tyco General Counsel
Tyco Hires Bill Lytton as New GC
(gave luncheon talk to Network in Stamford, 2001)
Anthony Lin -- New York Law Journal -- 09-13-2002
The Manhattan district attorney's office and U.S. Securities and Exchange Commission filed criminal and civil charges Thursday against former Tyco International Chief Executive Officer L. Dennis Kozlowski, former Chief Financial Officer Mark H. Swartz and former Chief Corporate Counsel Mark A. Belnick, alleging they defrauded the company and its shareholders of more than $600 million in improper compensation, loans and stock sales.
Tyco followed prosecutors by filing its own suit in the Southern District of New York Thursday against Kozlowski, who resigned as chief executive of the diversified conglomerate in June. The company charged he committed fraud and conspired with Swartz and Belnick to breach the three officers' fiduciary duties.
The district attorney has charged Belnick with six counts of falsifying business records, alleging that he lied in internal documents to conceal $14 million in loans to himself. He faces four years in prison.
Belnick, whom Tyco sued separately for fraud in June, is the first general counsel to be charged with a crime in any of the recent corporate scandals. In charging that Belnick participated in a conspiracy with Kozlowski and Swartz, Tyco's suit goes further than either the district attorney or the SEC, both of whom are alleging that the former counsel chiefly sought to conceal his own $14 million loan, rather than assisting the looting of the other two officers. Tyco is also alleging that Belnick conspired with Kozlowski in May to conceal from Tyco's board the fact that Kozlowski was under investigation for attempting to evade sales tax on more than $11 million in art and antiques he had purchased from New York dealers. The Manhattan district attorney indicted Kozlowski for sales tax fraud in June.
In its suit against Belnick, Tyco sought the return of $35 million in unauthorized compensation and loans. The $14 million loan at the heart of charges against Belnick allegedly went to purchase a $10 million home in Park City, Utah, and an apartment on Central Park West in New York.
The June 17 suit against Belnick followed his dismissal from Tyco for allegedly trying to hinder an internal investigation being conducted by attorney David Boies. Boies' firm, Armonk, N.Y.-based Boies, Schiller & Flexner, filed Tyco's suit against Kozlowski Thursday, and the firm's report on its internal investigation is expected shortly.
Belnick, a former partner at Paul, Weiss, Rifkind, Wharton & Garrison, was a prominent white-collar criminal litigator before joining Tyco in 1998. In June, Belnick's lawyer, Stanley Arkin, said Belnick was the victim of a "legal turf war" with Boies and Joshua M. Berman, a Tyco board member and former partner at Kramer Levin Naftalis & Frankel. Belnick replaced Arkin in July with Reid H. Weingarten, a partner at Washington, D.C.'s Steptoe & Johnson.
Weingarten said via e-mail: "Mark Belnick's entire professional life has been dedicated to the law and he has complete faith in the legal system. Because of that and because he has done nothing wrong, we are certain that when this painful process ends he will be cleared of the unsupported allegations that have been made against him."
Weingarten declined further comment.
NEW GENERAL COUNSEL
Tyco also announced Thursday it had hired a new general counsel, William B. Lytton, who was previously general counsel at International Paper Co. His previous experience includes eight years as a federal prosecutor in Chicago and Philadelphia. Edward D. Breen, Tyco's chief executive, said in a written statement that Lytton "will play a vital role in helping us establish and maintain the best practices of corporate governance."
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