A former Tyco International director testified Tuesday that L. Dennis Kozlowski, the company's former chief executive, was specifically barred from setting compensation for the company's former general counsel, Mark A. Belnick.
John F. Fort, who also had preceded Kozlowski as Tyco's chief executive, said that only the compensation committee of the company's board of directors was allowed to determine salary and bonuses for Tyco's executives.
Fort was cross-examined by Belnick's lawyer, Reid H. Weingarten, who said during his opening statements that $17 million Belnick is accused of stealing was a bonus awarded by Kozlowski. And he said Belnick believed Kozlowski was authorized to give it to him.
Prosecutors say that it was Belnick's job, as Tyco's top in-house lawyer, to know the company's rules and that he knew his compensation could not be set by Kozlowski. They say the bonus was a payoff for protecting Kozlowski during a federal probe of Tyco and the chief executive's alleged wrongdoing.
On Monday, Fort testified that Belnick never told the Tyco board that Kozlowski was misusing a loan program for personal expenses, that Manhattan prosecutors were investigating him for tax evasion or that he had approved an improper $20 million fee for Frank E. Walsh Jr., another director, for facilitating a merger.
Belnick is also accused of taking out more than $14.5 million in unauthorized interest-free relocation loans without board approval. Prosecutors say he used that money to buy a Manhattan apartment and a house in the resort town of Park City, Utah.
Belnick, 57, is on trial in Manhattan's state Supreme Court on charges of first-degree grand larceny, securities fraud and falsifying business records. He faces up to 25 years in prison if convicted of grand larceny, the top count.
Kozlowski, 57, and Tyco's former chief financial officer, Mark H. Swartz, 43, went on trial in October on larceny and related charges. But state Supreme Court Justice Michael J. Obus declared a mistrial last month. A retrial is expected later this year or early next year.
Fort, Tyco chief executive from 1982 until 1992, returned as interim chief executive from June 2002 until the end of July 2002, after Kozlowski was fired following his indictment by the Manhattan district attorney's office. Fort fired Belnick in that period.
Based in Bermuda but with U.S. headquarters in West Windsor, N.J., Tyco makes everything from telecommunications equipment to home alarm systems. In the year ended Sept. 30, the corporation had sales of $36.8 billion.