updated 6/22/2004 1:37:38 PM ET 2004-06-22T17:37:38

Mark A. Belnick, Tyco International Ltd.’s former top lawyer, testified Tuesday that ex-Chief Executive L. Dennis Kozlowski told him when he was hired in 1998 that Kozlowski was the only person who could set his salary.

As his much-anticipated testimony began Tuesday, Belnick, the Bermuda-based conglomerate’s chief counsel from 1998 to 2002, said Kozlowski sketched out his initial compensation on the back of a napkin at a lunch meeting in Manhattan.

Belnick testified that he asked Kozlowski if his initial hiring package needed approval from Tyco’s compensation committee.

“He said, ’No, I have the authority to negotiate your compensation and determine what your compensation would be,” said Belnick, who appeared poised and confident on the stand.

Belnick, 57 years old, is on trial in New York State Supreme Court in Manhattan, charged with grand larceny, securities fraud and falsifying business records in connection with $32 million in bonuses and loans he received while working at Tyco. He faces up to 25 years in prison on the most serious charge of grand larceny. He has denied wrongdoing.

Prosecutors claim that Belnick was improperly granted a bonus of cash and stock worth up to $17 million by Kozlowski for his work in resolving an informal inquiry by the Securities and Exchange Commission in 2000. Also, prosecutors have charged that Belnick failed to properly disclose on his annual directors-and-officers questionnaire $14.9 million of relocation loans, which were used to purchase a New York apartment and a Utah home.

Belnick said he was never asked by any directors — before his hiring or during his tenure at the company — about his compensation.

“No director asked anything to do with my compensation, but they most assuredly knew I wasn’t working there for free.”

Belnick said Kozlowski was the one who first broached the idea of loaning him money to buy an apartment in Manhattan as part of his hiring package.

In it, Kozlowski offered him a base salary of $700,000, a yearly cash bonus equal to one-third of Kozlowski’s cash bonus and a chance to move from his suburban Westchester home to New York. Kozlowski understood that Belnick and his wife were interested in making the move.

“He said, ’The company will help you do it,”’ Belnick said. “We’ll give you an interest-free loan to move to Manhattan.”

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