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Ex-CFO of Tyco says loans legitimate

Swartz testifies criteria changed

NEW YORK -- The former chief financial officer of Tyco International Ltd. insisted yesterday that a loan program for key company executives was changed to allow more liberal distribution of money, but he acknowledged the switch could not be documented.

Mark Swartz, testifying for the fifth day at his corruption and grand larceny trial, also said he was responsible for making a change contained on a proxy statement about the loans.

Prosecutors alleged that Swartz and codefendant L. Dennis Kozlowski, former CEO, used the Key Employee Loan Program, or KELP, to generate millions of dollars to finance their luxurious lifestyles.

But according to Swartz, an April 1997 meeting with Kozlowski and members of the KELP committee altered the rules for the loans. At this meeting, Swartz said, company officials agreed to let Kozlowski borrow KELP funds to finance the gutting and rebuilding of a home he owned.

But when asked by prosecutor Marc Scholl if there were any record of the policy change, Swartz replied, "There is no documentation that I have seen." Swartz also said that he had changed a company proxy statement to reflect that KELP loans were now used "primarily" to pay off tax bills, rather than exclusively.

Scholl also asked Swartz about a 1995 relocation loan program set up for Tyco employees who were expected to move if the company moved its headquarters from Exeter, N.H., to New York City. Tyco opened a New York office but never moved its headquarters to the city.

Prosecutors say Swartz and Kozlowski added several perquisites to the relocation plan after the board of directors' compensation committee approved a broad outline of the plan.

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