MANHATTAN (CN) – A former Tyco executive convicted of $400 million fraud on shareholders says in court that the company owes him $60 million to line his golden parachute.
Mark Swartz resigned from the position of chief financial officer at Tyco International in 2002, just before he was indicted for larceny alongside then-CEO Dennis Kozlowski.
The duo were later convicted of defrauding shareholders of more than $400 million through unauthorized bonuses and loans, which, according to the suit, included purchasing fine art, a down payment on a hotel and a “corporate relocation program.” Both men are serving up to 25 years in prison.
Swartz claims that during his tenure as CFO from 1995 until Sept. 11, 2002, the company’s “reported gross revenues increased approximately eightfold, from $4.5 billion to $35.5 billion.” But investigation or not, Swartz says he left the company in good standing, and with a binding contract for a generous departure package.
Tyco, however, has failed to hold up it end of the bargain, according to a lawsuit filed in New York County Supreme Court.
Swartz says he was not terminated for cause, but replaced, and that CEO Edward Breen, who took over after Kozlowski resigned in June 2002, “instructed Mr. Swartz to assist in vetting CFO candidates and to continue performing his full range of CFO duties, which Mr. Swartz did up until the day he left the company in September.”
At the time Swartz signed the contract regarding his departure, on August 1, 2002, and the board gave its unanimous approval, Tyco knew “both of the fact that Mr. Swartz would be charged and of the subject matter of the charges,” the suit claims. “No party was misled.”
“Approximately $45 million cash was paid by the company to Mr. Swartz in the meeting’s immediate aftermath,” according to the complaint, but Swartz says Tyco still owes him $60 million for benefits.
“Tyco agreed to pay Mr. Swartz: (a) the amounts due to him under the company’s deferred compensation Plan; (b) the current value of Mr. Swartz’s Executive Life Insurance program; (c) the balance of his 401(k) plan; and (d) the amounts due him under his supplemental executive retirement program,” the lawsuit states.
In 2010, after he completed his court-ordered restitution to Tyco of the money he was convicted of misappropriating, Swartz says he sent the company a demand for what he was owed under the 2002 contract.
But, “by letter dated September 8, 2010, Tyco refused to honor each and all of Mr. Swartz’s demands,” the complaint states. “The company has failed since that date to tender any demanded amount to Mr. Swartz or otherwise to cure its breaches of the subject agreements.”
Swartz seeks restitution and to enforce commitments for breach of contract and unjust enrichment. He is represented by Michael J. Grudberg with Stillman & Friedman P.C.