updated 2/18/2004 7:13:34 PM ET 2004-02-19T00:13:34

Mark Swartz, the former chief financial officer of Tyco International, testified Wednesday that $24 million he and the company's former chief executive officer are accused of stealing was part of a bonus they had earned.

Swartz got $8 million and L. Dennis Kozlowski, the former CEO, got $16 million from a $56 million bonus package shared by other employees because of a $400 million profit Tyco earned on the sale of a subsidiary, ADT Automotive Corp., in October 2000.

Prosecutors say the money was part of the $600 million Swartz and Kozlowski stole while they were running the conglomerate during the past decade.

Both men are in the fifth month of trial in Manhattan's state Supreme Court, charged with grand larceny, enterprise corruption, state business law violations and falsifying business records.

Prosecutors contend that Tyco's board members were unaware of the ADT bonuses before they were awarded, and that this was another instance in which the defendants looted the company.

Assistant District Attorney Mark Scholl handed Swartz several documents, including the compensation rules of the Tyco board of directors' compensation committee.

After Swartz agreed it was the committee's job to set criteria for bonuses and other compensation as well as pay amounts, Scholl asked, "Is there anything there (in the rules) about giving bonuses on the sale of a subsidiary of Tyco?"

Swartz conceded there was not.

"Where does it say that you get a separate bonus for the sale of a subsidiary?" Scholl demanded. He asked Swartz whether he could find proof in any document that the Tyco board intended to pay bonuses for the sale of ADT, or that the board acknowledged the bonuses were being paid.

Swartz agreed that language was not in the documents.

Swartz claimed that while bonuses were usually paid at the end of Tyco's fiscal year, he and Kozlowski simply took the bonus money early. He suggested that had they waited, they would have gotten it as part of their year-end compensation.

But Swartz conceded the board and its committees could not know how Tyco would perform and what kind of bonuses the executives would be entitled to until the end of that fiscal year.

Scholl displayed a Dec. 15, 2000, memo prepared on Swartz' instructions that says "selected employees" would receive bonuses for work on the ADT deal. The bonuses would be in cash, forgiveness of relocation loans, or stock, the memo says.

Prosecutors say Swartz and Kozlowski stole $170 million from Tyco by hiding unauthorized pay and secretly forgiving loans. The two allegedly made another $430 million on Tyco shares by lying about the company's finances from 1995 into 2002.

Defense lawyers say that Kozlowski and Swartz earned all the benefits they got from Tyco and that all the appropriate overseers knew about their compensation and loans.

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