Later On

A blog written for those whose interests more or less match mine.

The looting of Tyco—and it was indeed looted, pure and simple

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It’s on the same template as the way the Mafia reportedly takes over your restaurant, as a “partner” who steals everything not nailed down, takes out loans secured by the business, and leave it a broken, destroyed shell. Pam Martens and Russ Martens report in Wall Street on Parade in an article on how golden parachutes have gotten pathological:

On September 11, 2002, the Securities and Exchange Commission brought charges against the three top executives of Tyco International. The complaint began with this: “This is a looting case.”

The SEC charged that Tyco’s CEO, Dennis Kozlowski and Mark Schwartz, its CFO, “took hundreds of millions of dollars in secret, unauthorized and improper low interest or interest-free loans and compensation from Tyco.” The transactions were concealed from shareholders and, according to the SEC, “Kozlowski and Swartz later pocketed tens of millions of dollars by causing Tyco to forgive repayment of many of their improper loans” and “engaged in numerous highly profitable related party transactions with Tyco and awarded themselves lavish perquisites — without disclosing either the transactions or perquisites to Tyco shareholders.”

USA Today reported that the Manhattan apartment that Tyco had been providing to Kozlowski “includes a $6,000 shower curtain, coat hangers valued at $2,900, two sets of sheets for $5,960 and a $445 pincushion.”

The SEC also charged that the General Counsel of Tyco, Mark Belnick, a former partner of the corporate law firm Paul, Weiss, Rifkind, Wharton & Garrison, “defrauded Tyco shareholders of millions of dollars through egregious self-dealing transactions.” According to the SEC, “from 1998 into early 2002, Belnick received approximately $14,000,000 in interest-free loans from Tyco to buy and renovate a $4,000,000 apartment on Central Park West and to buy and renovate a $10,000,000 ski chalet in Park City, Utah.” The SEC noted that “by failing to disclose his self-dealing to investors, Belnick violated the antifraud provisions of the federal securities laws.”

Kozlowski and Schwartz were eventually tried by the Manhattan District Attorney’s office and sent to prison. (Both are out now.) Belnick was acquitted by a jury on fraud and larceny charges brought by the D.A. The jury believed that Belnick had internal company approvals for the loans. The SEC eventually settled its civil case against Belnick with a civil penalty in the amount of $100,000 and the prohibition that he not serve as an officer or director of a public company for a period of five years. He was allowed to retain his law license.

One of the most striking revelations in the Belnick case was the retention agreement Belnick had with Tyco. It guaranteed Belnick a payment of at least $10.6 million should he commit a felony and be fired before October 2003.

Another obscene Golden Parachute that came to light involved a Dow Jones Industrial Average blue chip company: General Electric.  . .

Continue reading.

Written by Leisureguy

25 November 2015 at 11:51 am

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