Tyco International Ltd.’s auditors knew about millions of dollars of bonuses that former Chief Executive L. Dennis Kozlowski was later accused of stealing, a witness at his fraud trial testified Monday.
Patricia Prue, Tyco’s former head of human resources, told jurors in New York state court that the company’s payroll and legal departments also knew about the payments, or rewards to employees for their work on the public offering of shares in Tyco subsidiary TyCom Inc.
The testimony supports the contention of lawyers defending Kozlowski and former finance chief Mark Swartz that their clients didn’t keep the bonuses secret and the company’s board knew of or could have learned about the payments.
Dozens of Tyco employees got such bonuses and were asked to sign letters pledging not to mention them to co-workers. Prosecutors say the non-disclosure agreements were a way to hide the payments from directors.
Scrushy not at meeting
The defense in Richard Scrushy’s corporate fraud trial sought to poke holes in the claims of a key witness who contends the fired HealthSouth Corp. CEO was behind a scheme to overstate earnings.
Under cross-examination by Scrushy attorney Jim Parkman, former HealthSouth finance chief Bill Owens conceded that Scrushy never attended big meetings of a group called “the family” that carried out the fraud and that he didn’t previously identify Scrushy as being a member at all.
Owens is one of 15 former HealthSouth executives who have pleaded guilty in what prosecutors describe as a $2.7 billion overstatement of earnings from 1996 through 2002.
Ebbers case delayed
A federal judge suspended the fraud trial of former WorldCom Inc. Chief Executive Bernard Ebbers until Wednesday, postponing the crucial cross-examination of the government’s star witness. U.S. District Judge Barbara Jones did not explain her decision, but told jurors not to draw any conclusions from it.
Reid Weingarten, chief defense lawyer for Ebbers, declined to say specifically when asked why Jones called the delay. Ebbers is charged with fraud, conspiracy and making false filings to the Securities and Exchange Commission.
