Kozlowski - Kozlowski'sandSwartz' TheIllicitReceipt,...

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Kozlowski's and Swartz's Secret Looting of Tyco: The Illicit Receipt, Abuse and Concealment of Tyco Funds Abuse of KELP Loans 13. From 1996 through the first half of 2002, Kozlowski and Swartz granted themselves hundreds of  millions of dollars of low interest and no-interest loans from Tyco. Most of Kozlowski's and Swartz's  improper Tyco loans were taken through abuse of Tyco's Key Employee Corporate Loan Program (the  "KELP").  14. According to Tyco's proxy statements, the KELP, established by Tyco in 1983, and subsequently  amended, was "designed to encourage ownership of Tyco common shares by executives and other key  employees." The purpose of the KELP was to provide low interest loans to enable Tyco executives and  employees to pay taxes due as a result of the vesting of ownership of shares granted under Tyco's  restricted share ownership plan. The plan itself, as filed with the Commission, explicitly described its  narrow purpose: [U]nder the Program, loan proceeds may be used for the payment of federal income taxes due upon the  vesting of Company common stock from time to time under the 1983 Restricted Stock Ownership Plans  for Key Employees, and to refinance other existing outstanding loans for such purpose. 15. Kozlowski and Swartz bestowed upon themselves hundreds of millions of dollars in KELP loans which  they used for purposes not legitimately authorized by the KELP.  16. From 1997 to 2002, Kozlowski took an aggregate of approximately $270 million from Tyco that he  charged as KELP loans — even though he only used approximately $29,000,000 of those funds to cover  taxes due as a result of the vesting of his Tyco stock.
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This note was uploaded on 12/20/2011 for the course MBA 1036 taught by Professor Sn during the Spring '11 term at Great Lakes Christian college.

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Kozlowski - Kozlowski'sandSwartz' TheIllicitReceipt,...

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