New controversies erupting at Tyco

Tuesday, June 11, 2002 | 9:41 a.m.

SUN WIRE SERVICES

CONCORD, N.H. -- A lawyer for Tyco International Ltd.'s ousted general counsel says his client was fired by board members out for personal gain despite having worked hard to help the company through turbulent times.

But Tyco, the industrial conglomerate under investigation after its chief executive was indicted on sales tax evasion charges, said late Monday that Mark A. Belnick was replaced as the company investigates him for undisclosed reasons. Irving Gutin took the job as Tyco's general counsel, a post he previously held.

"The company is determined to have a fair and complete investigation of any allegations of improper conduct by any of its personnel," Tyco said in a statement. "Mr. Belnick is among the persons being investigated."

The statement added, "The company lost confidence in Mr. Belnick's willingness and ability to conduct a fair and complete investigation, in part because of his unwillingness to cooperate in the investigation of himself and because of his attempt to control the course of that investigation."

Belnick's lawyer, Stanley Arkin, said his client was fired despite working "tirelessly to create a better and more effective corporate governance for Tyco."

Arkin added that "entrenched factions of the Tyco board are exploiting this opportunity to seek to expand their personal control of the company and protect their undeserved entitlements and prerogatives."

In an interview, Arkin did not elaborate, except to say that the situation that led to Belnick's firing involved his relationship with Tyco board member Josh Berman and lawyer David Boies.

Boies -- who represented the U.S. Department of Justice in its antitrust case against Microsoft Corp. -- was hired by Tyco to help conduct an internal investigation of company finances announced after Kozlowski was indicted.

"This weekend, my client had a confrontation with Mr. Boies," Arkin said. "And sort of in a midnight raid, these guys went out and turned the board against him."

Tyco dismissed the allegations.

"The assertion by Mr. Belnick's lawyer that the board of directors acted to protect anyone's 'turf' is ludicrous and is an attempt to distract attention from his client's serious problems," Tyco said.

The board acted after Boies accused Mr. Belnick of receiving $20 million in undisclosed compensation from the company between 1999 and 2001, The Wall Street Journal reported Tuesday, citing unidentified people familiar with the matter.

Arkin confirmed today that Belnick received about $20 million during that period, most of it through Tyco stock transactions. But he said that the compensation was publicly disclosed.

Tyco shares fell nearly 5 percent, or 54 cents a share, to $10.86 in morning trading on the New York Stock Exchange, after being pummeled by investors last week when chief executive Dennis Kozlowski resigned and was charged with illegally avoiding more than $1 million in sales taxes on paintings, including works by Renoir and Monet.

Investors today also were digesting news that the Securities and Exchange Commission has revived an investigation of how Tyco accounted for acquisitions. A Tyco official told Bloomberg News the company was not aware of the investigation.