NEW YORK - The Manhattan district attorney and the Securities and Exchange Commission brought new and wide-ranging criminal and civil charges yesterday against Tyco International's former chief executive and two other former executives.
Tyco also filed a lawsuit against the former chief executive, L. Dennis Kozlowski, alleging "fraud and self-dealing" and seeking the return of income and benefits since 1997 and forfeiture of severance pay. Although the suit said the total had yet to be determined, people briefed in advance of its filing said the amount would be at least $250 million.
Manhattan District Attorney Robert M. Morgenthau announced the indictment of Kozlowski; Tyco's former chief financial officer, Mark H. Swartz; and the company's former general counsel, Mark A. Belnick. They were charged with enterprise corruption, accused of stealing more than $170 million from Tyco and obtaining more than $430 million through fraud in the sale of securities. Belnick was also charged with falsifying records of company loans to himself worth more than $14 million.
The indictment accused Kozlowski and Swartz of using "money they stole from Tyco to buy expensive property and homes in Manhattan, Boca Raton, Fla., Nantucket, Mass., and Rye, N.H." It said stolen funds also were used to pay for yachts, works of art, jewelry and interests in sports teams.
The SEC accused the men of securities fraud and seeks millions of dollars in penalties. Regulators said the three executives had "failed to disclose multimillion-dollar low-interest and interest-free loans they took from the company and, in some cases, never repaid." The complaint says the three men also failed to disclose sales of millions of dollars worth of Tyco shares.
Kozlowski, Swartz and Belnick "treated Tyco as their private bank, taking out hundreds of millions of dollars in secret low-interest and interest-free loans from the company without ever telling investors," the SEC's director of enforcement, Stephen M. Cutler, said.
The three former executives were to be arraigned in Manhattan yesterday. Trading in Tyco's shares, which are down 70 percent this year, at $17.80, was halted yesterday.
Executives close to Tyco said that all the new charges against the three men were not material to the company because it took charges against the expenses in previous quarters.
The new charges against Kozlowski would be in addition to a 14-count indictment he already faces. That accuses him of evading more than $1 million in New York sales taxes on six paintings that he bought last fall for his New York apartment but claimed they were going to New Hampshire.
Kozlowski is said to have had empty crates shipped to Tyco's headquarters in Exeter, N.H. He also has been charged with tampering with evidence by removing a fraudulent cargo document from a file that was turned over to the Manhattan district attorney.