updated 3/28/2005 2:32:16 PM ET 2005-03-28T19:32:16

A former Tyco International Ltd. director testified Monday that three special bonuses granted to former top executives L. Dennis Kozlowski and Mark H. Swartz in 1999 and in 2000 weren’t approved by the company’s compensation committee or its full board of directors.

Under questioning from prosecutors, Peter Slusser, a director at the Bermuda conglomerate from 1997 to 2003, said he never discussed with other directors the possibility of granting millions of dollars in loan forgiveness to Kozlowski, Tyco’s former chief executive, and Swartz, its former chief financial officer, in 1999 or in 2000. Nor did they discuss granting a special bonus to the two executives in late 2000 related to the sale of ADT Automotive unit, Slusser said.

Prosecutors have alleged Kozlowski and Swartz granted millions of dollars of loan forgiveness to themselves as bonuses without proper authorization.

“Did the compensation committee authorize any such loan forgiveness?” asked Assistant District Attorney Owen Heimer.

“No, sir,” Slusser said.

Kozlowski, 58 years old, and Swartz, 44, are on trial in New York State Supreme Court, facing charges of grand larceny, securities fraud and other crimes in connection with giant bonuses and other compensation they received while working as Tyco’s top executives. They each face up to 25 years in prison on the most serious charge of grand larceny. They have denied wrongdoing.

Their first trial ended in a mistrial in April after a juror reported receiving a phone call and letter about the case during deliberations. The juror’s name had been disclosed by several news organizations after she appeared to give an “OK” signal to the defense.

On Monday, Slusser testified that he first learned on a conference call in January 2002 that Kozlowski had paid a $20 million investment banking fee to director Frank Walsh and a charity of Walsh’s choosing. The fee was paid in connection with the acquisition of CIT Group Inc. by Tyco in 2001.

Slusser said he believed at the time that the fee was “way out of line” — namely that Walsh should have disclosed he was in line to receive such a fee and the fee should have been considerably smaller.

“Board members have to be like Caesar’s wife — above reproach,” Slusser said.

Slusser said he didn’t believe the board ever signed off on the fee. At a meeting in January 2002, the board asked Walsh to return the fee. He refused, saying “Adios” as he left the meeting, Slusser said.

Walsh, who pleaded guilty to securities fraud in the matter, eventually repaid the fee.

Tyco has its headquarters in Bermuda but now operates out of West Windsor, N.J.

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