Tyco employee Beth Pacitti
Posted on 12/04/2003 7:25:44 AM PST by fight_truth_decay
NEW YORK (Dow Jones)--Prosecutors moved a step closer to questioning an interior designer who did extensive work for L. Dennis Kozlowski, Tyco International Ltd.'s (TYC) former chairman and chief executive.
The government had been seeking the whereabouts of Wendy Valliere, owner of Seldom Scene Interiors, to testify in the trial of Kozlowski and Mark Swartz, Tyco's former chief financial officer, in State Supreme Court in Manhattan.
Late Wednesday, her attorney, James Batson, agreed to reveal the phone number and location where he has been contacting her to prosecutors in response to an order by Supreme Court Judge Michael Obus.
Kozlowski and Swartz have been charged with improperly using Tyco funds to enrich themselves and others. Each faces up to 30 years in prison. They have denied wrongdoing.
Manhattan Assistant District Attorney John Moscow said in court Wednesday that prosecutors had been unable to locate Valliere, going as far as sending police officers to her home and office.
"This trial has been going on for a while, we have been trying for a while to get Ms. Valliere," said Moscow, who serves as deputy chief of the DA's investigation division. "We are now down to the last couple of months of the trial and when you start talking about playing ducks and drakes with the court and hiding in various states, it becomes more difficult to locate Ms. Valliere to properly serve her." Batson argued earlier in the day that Valliere's phone number and address are privileged information between himself and his client. The hearing was held outside the presence of the jury in the case.
Batson said that Valliere initially agreed to meet with prosecutors when it was her understanding they solely wanted to interview her, but that meeting was canceled by prosecutors. Subsequently, it became apparent that prosecutors wanted her to testify, at which point Valliere was no longer willing to meet with them, Batson said.
Moscow said in court that Valliere was "hiding with the aid of counsel" and had been doing so for months. Batson countered that while he had represented Valliere in previous matters, he only began representing her in this matter beginning sometime at the end of October or early November. Batson also said that Valliere wasn't hiding with the aid of counsel.
Meanwhile, Kathy McRae, Tyco's former director of executive treasury, said in her third day of testimony that she told Tyco's outside auditors that loans given to Kozlowski under the Bermuda conglomerate's so-called Key Employee Loan Program, or KELP, were approved by its board of directors in 1997, 1998 and 1999.
KELP was designed to offer loans to certain employees to cover their income-tax liability when restricted shares in the company vested.
Prosecutors have charged that Kozlowski and Swartz used loans to finance purchases well beyond the scope of the program, which was expanded at some point to allow employees to borrow an amount tied to a portion of their restricted holdings.
McRae testified Tuesday that Kozlowski used KELP loans to buy jewelry, to pay off his investment in a company that owns the New Jersey Nets and to buy a $90,000 Porsche for Karen Mayo, who later became his wife. He also used a $13.5 million KELP loan in September 1999 to acquire the Endeavor, his personal sailboat, she said.
Defense attorneys have argued that Swartz and Kozlowski paid off those loans every year, with prosecutors countering that those loans were repaid with bonuses illegally obtained from the company.
At the same time, defense attorneys introduced documents Wednesday that showed Swartz received $300,000 from Tyco four days before he transferred a similar amount to Exeter Road Restaurant LLC for an investment in Bonta, a New Hampshire restaurant.McRae testified Tuesday that Kozlowski and Swartz each invested $300,000 - or $600,000 combined - in Bonta, only to have that investment reimbursed by Tyco.
McRae also testified Tuesday that Kozlowski told her to use Tyco funds for a $400,000 investment in SoHo SoHo, a Manhattan restaurant.
Court adjourned early Wednesday as Swartz is ill. Prosecutors hope to resume testimony early Thursday.
-By Chad Bray, Dow Jones Newswires; 201-938-5293; chad.bray@dowjones.com
Background: Kozlowski’s free-spending ways have made him the poster boy for the extravagant corporate excesses of the late 1990s.
His well-documented lifestyle includes the purchase of high-end homes on Nantucket, New York’s Park Avenue and in Boca Raton, Fla., furnished with paintings by Monet and Renoir, a $6,000 shower curtain and a $15,000 umbrella stand provided by island designer Wendy Valliere, who according to court documents billed him more than $7.5 million for her services.
His pride and joy is the former America’s Cup J-boat Endeavor, a 130-foot sailing vessel often seen in the summer tied up at a private dock on North Wharf. Prosecutors are expected to introduce into evidence a videotape of the party he threw for his second wife Karen’s 40th birthday in Sardinia, a $2.1 million bash on which he allegedly spent $1 million of Tyco’s money. A number of Nantucket residents attended that party which featured entertainment by Jimmy Buffett (cost of US$250,000 ($436,000)) and island band ECliff and the Swingdogs, actors dressed as Roman gladiators and a life-size vodka-dispensing ice sculpture of Michelangelo’s David, and a life-sized chocolate cake of a woman....the Hotel Cala di Volpe in Sardinia golf course was turned into the themed extravaganza with chariots and gladiators greeting guests in the reception area, as well as male models dressed in togas and Speedo bathing suits. Following his indictment, Kozlowski’s assets were frozen. He was allowed to hold on to the Endeavor and pay its crew and maintenance expenses, on the condition the vessel be chartered as frequently as possible.
He and his former finance chief Mark Swartz are accused of looting the company of US$600 million ($1 billion). Both face up to 30 years in prison if convicted.
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