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.
The industrial conglomerate is under investigation after its chief executive was indicted on sales tax evasion charges. Tyco said late Monday that counsel 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 chief executive Dennis 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 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 Tuesday 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 Kozlowski resigned and was charged with illegally avoiding more than $1 million in sales taxes on paintings, including works by Renoir and Monet.
Also Monday, Fitch Ratings downgraded its credit rating of Tyco to junk status after Standard and Poor's and Moody's Investors Service last Friday downgraded Tyco credit to a notch above junk.
In a conference call Monday, S&P analysts said Tyco's rating could go lower if the criminal investigation focusing on Kozlowski and Tyco is not resolved soon.
Arkin called Belnick's firing unfair and irrational, noting that he has been assisting New York prosecutors in their investigation of Kozlowski.
According to a filing with the Securities and Exchange Commission, Belnick signed a retention agreement calling for him to receive $10.6 million if he stayed with company until October, 2003.
A source familiar with the investigation into Kozlowski and Tyco said Friday that New York prosecutors are investigating whether Tyco bought Kozlowski's New York and Florida homes and improperly paid other expenses.
The source, who spoke on condition of anonymity, said that others within Tyco were being investigated along with Kozlowski.
Interim Tyco chief executive John Fort and chief financial officer Mark Swartz have promised to disclose details of Tyco's internal probe this week.
Before Kozlowski resigned, Tyco was already under fire for Enron-inspired questions about how it accounted for the huge number of acquisitions he made in the 1990s. The deals turned Tyco into a 277,000-employee behemoth producing everything from undersea fiber-optic cable to coat hangers.
But the company's stock is down about 80 percent this year, and analysts say its survival depends on a plan to sell or spin off its lending unit, CIT, to help pay down $27 billion in debt.
Tyco said the deal, originally planned to be completed by the end of June, could be delayed a week.