- The Washington Times - Wednesday, December 18, 2002

NEW YORK (AP) A former Tyco International director who secretly reaped millions while orchestrating a company acquisition pleaded guilty to securities fraud yesterday and agreed to pay restitution and a fine.
Frank E. Walsh, 61, admitted that he failed to tell his board of directors that the manufacturing conglomerate was paying $20 million in "finder's fees" in exchange for his help in brokering Tyco's 2001 acquisition of CIT Group, a financial services company. Half was paid directly to Walsh, and half was donated in his name to a charity.
As part of a plea deal with the Manhattan district attorney, Walsh agreed to repay Tyco the entire $20 million and pay a fine of $2.5 million.
Two top Tyco officers former Chairman and Chief Executive Officer L. Dennis Kozlowski and former Chief Financial Officer Mark Swartz knew of the payments but did not disclose them to the board, Walsh said in court yesterday. Both have been indicted on charges of stealing more than $600 million from Tyco and are expected to go on trial in June.
State Supreme Court Justice Michael Obus approved the plea deal "as an appropriate resolution of a larger matter." Walsh was charged with felony violation of the Martin Act, the state's general business law.
To settle a related Securities and Exchange Commission lawsuit, Walsh agreed to never again serve as an officer of a publicly traded company.
Walsh was a Tyco director from 1997 until February, the month after the payment became public.
In court yesterday, Walsh told the judge he thought the $9.2 billion CIT acquisition would be good for Tyco, but "I intentionally did not disclose to the rest of the board, except Mr. Kozlowski and Mr. Swartz, that I stood to receive a substantial fee."
The CIT acquisition proved to be anything but a good deal for Tyco shareholders. Manhattan District Attorney Robert Morgenthau said Tyco "lost about $7 billion on the CIT deal."
Tyco reversed the deal in July, raising $4.6 billion to pay off debt in a spinoff that made CIT independent again.
One of Walsh's two attorneys, Joel Cohen, called his client a "man of common decency, a God-fearing man."
"A lifetime of good deeds fall by the wayside," Mr. Cohen said in a statement read to the court.
Mr. Cohen also said he believed Walsh had in fact "fully earned the money he received" from Tyco.
He said he had tried in vain to get prosecutors to proceed against Walsh with civil rather that criminal litigation.
After the hearing, Walsh's other attorney, Andrew Lawler, handed over four checks to pay the restitution and the fines.
Assistant District Attorney John Moscow, the lead prosecutor in the Tyco cases, said that while his office has no cooperation agreement with Walsh, he would expect him to be truthful if called to testify at the trials of Mr. Kozlowski and Mr. Swartz.
Mr. Morgenthau said the Tyco prosecutions are significant because there were "serious breakdowns in the checks and balances that you expect to find in a corporation."
Prosecutors said that when Walsh learned of Tyco's interest in buying CIT, he arranged a meeting in early 2001 between Mr. Kozlowski and CIT's chief executive. After the meeting, Mr. Kozlowski told Walsh he would receive an investment banking fee, or finder's fee, if the acquisition was completed.
Along with a $10 million direct payment to Walsh, Tyco contributed another $10 million in his name to the Community Foundation of New Jersey, a charity that Walsh had recommended. Tyco made the payments in July 2001, but the board did not learn of the payments until six months later.


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