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103
During fiscal 2002, Jerry R. Boggess, the former President of
Tyco Fire and Security, had an outstanding loan under the Key
Employee Loan Program. The rate of interest charged on such
loan was 2.03%. The maximum amount outstanding under
this loan during fiscal 2002 was $0.4 million and such loan was
repaid in full prior to September 30, 2002.
During the fourth quarter of fiscal 2002, the Board of
Directors and new senior management adopted a policy under
which no new loans are allowed to be granted to any officers of
the Company and existing loans are not allowed to be extended
or modified.
Certain former Tyco directors and executive officers owned
TyCom Ltd. shares or options, which were converted to Tyco
shares and Tyco options upon the amalgamation of a subsidiary
of Tyco with TyCom Ltd. on December 18, 2001 at the
exchange ratio applicable to all holders of TyCom Ltd. shares
and options.
Stephen W. Foss was a director of Tyco until March 6, 2003.
Mr. Foss is the owner of a corporate aircraft which we leased
from him starting in May 2001 after seeking competitive bids of
which Mr. Foss’s bid was considered the most competitive given
anticipated usage. Tyco paid Mr. Foss, and a company of which
he is president, an aggregate of $587,000 in lease payments for
our use of the aircraft and its pilots in fiscal 2002. These leasing
arrangements were terminated as of September 30, 2002.
Joshua M. Berman was a director of Tyco until December 5,
2002. From March 1, 2000 through July 31, 2002, we also
engaged Mr. Berman to render legal and other services. During
this period, we compensated Mr. Berman at an annual rate of
$360,000 and provided Mr. Berman with health benefits, secre-
tarial assistance, a cell phone and electronic security services for
his homes. We also reimbursed Mr. Berman for legal fees and
expenses incurred by him in connection with matters relating
to Tyco pursuant to indemnification provisions applicable to all
directors of Tyco. Mr. Berman is a retired counsel to the law
firm Kramer Levin Naftalis & Frankel LLP, which provided legal
services to us in fiscal 2002.
Tyco and certain of our former directors are defendants in
four pending actions purporting to bring suit derivatively on
behalf of Tyco against certain former officers and certain former
directors of Tyco and against Tyco as a nominal defendant in
connection with alleged improper conduct of former officers of
Tyco relating to the use of our funds, our Key Employee Loan
Program and assets. The ultimate resolution of these actions is
not yet determinable.
We filed civil complaints against L. Dennis Kozlowski, our
former Chairman and Chief Executive Officer, Mark A. Belnick,
our former Executive Vice President and Chief Corporate
Counsel, and Mark H. Swartz, our former Chief Financial Officer,
for breach of fiduciary duty and other wrongful conduct
relating to alleged abuses of our Key Employee Loan Program
and relocation program, unauthorized bonuses, unauthorized
payments, self-dealing transactions or other improper conduct.
In June 2002, we filed a civil complaint against Frank E.
Walsh, Jr. for breach of fiduciary duty, inducing breaches of
fiduciary duty and related wrongful conduct involving a $20
million payment by Tyco, $10 million of which went to Mr.
Walsh with the balance going to a charity of which Mr. Walsh is
trustee. The payment was purportedly made for Mr. Walsh’s
assistance in arranging our acquisition of The CIT Group, Inc.
On December 17, 2002, Mr. Walsh pleaded guilty to a felony
violation of New York law in the Supreme Court of the State of
New York, (New York County) and settled a civil action for vio-
lation of federal securities laws brought by the Securities and
Exchange Commission in United States District Court for the
Southern District of New York. Both the felony charge and the
civil action were brought against Mr. Walsh based on such pay-
ment. The felony charge accused Mr. Walsh of intentionally
concealing information concerning the payment from Tyco’s
directors and shareholders while engaged in the sale of Tyco
securities in the State of New York. The SEC action alleged that
Mr. Walsh knew that the registration statement covering the
sale of Tyco securities as part of the CIT acquisition contained
a material misrepresentation concerning fees payable in connec-
tion with the acquisition. Pursuant to the plea and settlement,
Mr. Walsh paid $20 million in restitution to Tyco on Decem-
ber 17, 2002. Our claims against Mr. Walsh are still pending.
TYCO INTERNATIONAL LTD.