Tyco International Ltd paid US$6.38 million for an apartment on Park Avenue in Manhattan, sold it two years later for US$7 million to Chief Executive Dennis Kozlowski's wife as they divorced, and didn't disclose the transactions.
The Securities and Exchange Commission is investigating whether Tyco violated reporting requirements on compensation, including housing benefits, said a commission official who declined to be identified by name.
"If Tyco didn't disclose these transactions, it would be another embarrassment," said Judith Fischer, managing director of Executive Compensation Advisory Services.
PHOTO: AP
Kozlowski, who built Tyco into a US$100 billion conglomerate through hundreds of acquisitions, was ousted Monday and charged Tuesday with evading New York sales taxes. He denied the charge.
Tyco shares and bonds tumbled yesterday amid credit-rating reductions and concern that a delay in the public offering of a finance unit will strain the company's ability to repay debt.
There were "numerous transactions" under Tyco's employee relocation and corporate-owned apartment programs, and they're being covered by an internal company investigation, said a spokesman, Gary Holmes of the Robinson Lerer & Montgomery public relations firm.
Tyco, based in Bermuda and run from New Hampshire, would disclose any "material event involving the SEC," Holmes said.
In 1997, the SEC sued WR Grace & Co, charging that the company failed to report US$3.6 million in retirement benefits, including a Manhattan apartment, paid to former Chief Executive J. Peter Grace Jr. The company settled the charges without admitting or denying the allegations.
New York property transfer records show that TME Management Corp bought the four-bedroom apartment at 610 Park Avenue, formerly the Mayfair hotel and home to the restaurant Daniel, in October 1998. TME is listed in Tyco's annual filing for fiscal 2001 as a unit. The address on the deed is 1 Tyco Park, Exeter, New Hampshire.
TME sold the apartment on July 10, 2000, to Angeles Kozlowski. That was a day before the Kozlowskis' divorce was entered in the New York County clerk's office.
Mark Swartz, Tyco's chief financial officer, signed the deed over to Angeles Kozlowski, according to the documents.
Koslowski's lawyer, Stephen Kaufman, didn't return calls seeking comment on the matter. Angeles' number in New York is unlisted and she didn't respond to a message left at her apartment building. Partners at the New York law firm Paul, Weiss, Rifkind, Wharton & Garrison, which handled the divorce for Dennis Kozlowski and the sale of the apartment for TME, didn't return calls.
Morrison Cohen Singer Weinstein LLP, which represented Angeles Kozlowski in the divorce, also did not return calls.
No record of the Park Avenue transactions appears in Tyco filings with the SEC.
The 10 percent increase in the price of the 610 Park Avenue apartment was less than that of the three other units in the building sold in 1998 and again in 2000. A two-bedroom apartment sold for US$2.5 million in December 1998, and again in March 2000 for $3.38 million, a 35 percent increase. Another was sold for a 39 percent gain and the third appreciated 67 percent.
The purchase and sales prices are based on the amount of transfer taxes paid, as shown in the deeds.
Kozlowski also used corporate funds to pay about US$18 million for a Fifth Avenue apartment overlooking Central Park in 2000, the Wall Street Journal reported Friday, citing a person close to Tyco's board that it didn't identify.
Regulation S-K stipulates that companies disclose transactions over US$60,000 between companies and directors, any executive officers, any nominee for director, and 5 percent shareholder, and any member of the immediate family of any of those, said Lawrence Cagney, a partner with Debevoise & Plimpton, an international corporate law firm.
Tyco's shares have fallen 83 percent to US$10.10 this year. On Friday, the company delayed the sale of shares in its CIT Group finance unit, while its debt ratings were cut to the lowest investment grade by Standard & Poor's and Moody's Investors Service. The cuts will force the repayment of at least US$530 million of debt.
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