April 29, 2005
Dennis Kozlowski's Testimony
Posted by Gordon Smith

Prosecutors in the Dennis Kozlowski case contend that Kozlowski and former CFO Mark Swartz stole over $150 million from Tyco. Part of that amount was $25 million that Kozlowski allegedly took as a loan and never repaid. In a surprising appearance as a witness in his own defense, Kozlowski testified that in 1999 he used a portion of his $60 million bonus as repayment of the $25 million loan, and merely "forgot" to include the $25 million as compensation on his 1999 taxes. But according to the W$J:

Mr. Kozlowski's description of that $25 million as part of his regular bonus contradicts earlier testimony, as well as a 2002 regulatory filing. In that filing, Tyco said Mr. Kozlowski had admitted, through his attorneys, that he "sought no approvals" for the payment, and also admitted that any such credits to his loan account had been entered "improperly." A person close to the situation said prosecutors may seek to call one of the attorneys at Boies Schiller & Flexner LLP who conducted the internal probe at Tyco to testify about that supposed admission.

Perhaps the most absurd aspect of Kozlowski's testimony is the claim that the loan forgiveness transaction was approved by Philip Hampton, a former Tyco director who is now dead. In yesterday's cross-examination, Kozlowski was asked for more details about his meeting with Hampton, but he had a pretty vague recollection. Hmm.

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