The New York Times reported this week that two senior executives of Tyco Int’l Ltd. disposed of more than $100 million in Tyco stock during the company’s last fiscal year. Dennis Kozlowski, Tyco chairman, and Mark Swartz, CFO, returned the stock to the company in late 2000 and 2001, according to forms filed with the Securities and Exchange Commission (SEC) in November 2001.
Kozlowski and Swartz used an uncommon tactic to reduce their Tyco positions, returning their shares directly to the company instead of selling them on the open market. As a result, they did not have to disclose the sale within 10 days after the month of the sale, as they would have to do with ordinary sales of stock.
In a statement the company stated that Kozlowski returned his shares to Tyco—worth about $70 million—to pay taxes, repay loans to Tyco, or for tax planning purposes. “I’m paid in Tyco stock,” Kozlowski said in an interview in December 2001. “We, the board, everybody, feel the best way to keep management’s interest aligned with shareholders is to keep 100 percent of our net worth in Tyco’s stock.”
So far the company’s stock has fallen 43 percent this year, cutting its market value by more than $50 billion. On Jan. 29, the company’s shares decreased approximately 20 percent after it disclosed in a report filed with the SEC that it had paid an outside director, Frank Walsh, Jr., $10 million last year and an additional $10 million to a charity he controls.
The payment came in exchange for work Walsh did in 2001 when Tyco bought the CIT Group, a financial company, for $9.2 billion. In a statement, Kozlowski called the payment “appropriate in light of Mr. Walsh’s efforts.”
