Tyco Seeks Damages From Former CFO

EXETER, N.H. (AP) - Tyco International Ltd. is seeking to force former chief financial officer Mark Swartz to return millions of dollars he allegedly misappropriated from the company.

Tyco filed an arbitration demand with the American Arbitration Association on Monday, the company disclosed in a filing Tuesday with Securities and Exchange Commission.

The SEC filing says Swartz "breached his fiduciary duties" as chief financial officer and director and "misappropriated company funds and other assets."

Swartz was indicted along with former chairman and CEO L. Dennis Kozlowski last month for allegedly stealing $600 million from Tyco. They have pleaded innocent.

Tyco has sued Kozlowski, seeking reimbursement of tens of millions in unapproved loans to employees that later were forgiven.

The company cannot bring a lawsuit against Swartz, but must seek arbitration under the severance agreement Tyco and Swartz reached in early August worth about $45 million.

Gary Holmes, a Tyco spokesman, said Tuesday the arbitration proceeding is confidential and the company cannot release a copy of its demand against Swartz.

A source close to the company said the claim against Swartz is similar to a lawsuit filed against Kozlowski last month, although the amounts of money involved are smaller.

Last month, Tyco sued Kozlowski for at least $730 million, seeking repayment of outstanding loans, unauthorized compensation he paid to other employees, including Swartz, and all income and benefits he received from 1997 through this year.

Charles Stillman, a lawyer for Swartz, told The Wall Street Journal on Monday the money was "totally, 100 percent, rightfully his." Stillman's office said he was in court Tuesday and unavailable for comment. A spokesman for Swartz said he could not immediately comment.

Tyco has been criticized by Manhattan District Attorney Robert Morgenthau for giving Swartz the generous severance package two days after Morgenthau's investigators warned the company of Swartz's growing legal troubles.

Company officials have defended the severance, saying they got Swartz to agree to accept substantially less than he was entitled to under contractual arrangements. They also said he cooperated with the company's internal investigation.

Tyco faces investigation by the SEC and state regulators over possible accounting problems and mismanagement. The SEC has filed complaints against Swartz and Kozlowski.

Based in Bermuda but headquartered in Exeter, N.H., Tyco has 270,000 employees and had $36 billion in revenue last year. The conglomerate owns companies that make everything from coat hangers to security systems to medical devices.

Shares of Tyco rose 12 cents to $12.26 in morning trading Tuesday on the New York Stock Exchange.

America's most aggressive dealmakers.

But in 2000, Kozlowski came charging back. In July the SEC, in effect, gave the company a clean bill of health by ending its inquiry. And since then, Kozlowski has kicked his dealmaking machine back into full throttle, snapping up some 40 companies in 2000 for a total of $9 billion, while profits have soared. Even though Tyco is trading some 12% off its record high, it still has a market cap of about $93 billion--more than General Motors (GM), Ford (F), and Sears (S) combined.

Tyco is a classic conglomerate, making everything from fire alarms and valves to health-care products and electronic components. Kozlowski, 54, a 23-year company veteran who took over as CEO in 1992, is free to focus on dealmaking because he gives his managers enormous autonomy. At the same time, he enforces accountability by setting tough goals. That's how he gets away with just a skeletal head office staff in Exeter, N.H., to oversee 215,000 employees. He prefers managers who are ''smart, poor, and want to be rich,'' he says. That's the way he was, growing up in a working-class neighborhood in Newark, N.J., before attending the local Catholic university, Seton Hall.

From Business Weak

Least we forget how smart he was.

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