Skip to content, or skip to search.

Skip to content, or skip to search.

The Convert


To Moscow, Belnick was that convenient person: a collection of talents with no moral compass, a legitimizing reputation whose grip on the rules loosened at the prospect of personal gain. If Tyco was a looter’s paradise—and that was the prosecution’s unyielding assumption—then, Moscow seemed to imply, wasn’t the general counsel duty-bound to act as watchdog? Or guide dog? Why take advice on whether to disclose a loan from a finance guy, which Belnick had? “Weren’t you,” as Moscow repeated, “the company lawyer?” Clearly, Moscow wanted more vigor from a general counsel, more outrage, more Moscow. “A perfectly ridiculous idea,” snaps Belnick, “with no basis in law.” And yet, even some devoted former colleagues wondered. “If shenanigans were going on under Mark’s nose, where was the ethical guidance?” one said. “Mark should have known better, his antennae should’ve been raised, he had to look the other way,” said another partner.

For Moscow, crimes, and perhaps criminals, are simple things with uncomplicated motives, and money is the key one. Indeed, at the heart of the prosecution’s case was the supposed affront of all that money—Belnick would receive $37 million from Tyco—and the company is withholding a severance package worth another $20 million. Even Boies, whose firm would receive more than $30 million from Tyco, said, “The question a lot of people will ask is, why would anybody think that they could take that much money?”

Not many defendants testify in their own defense. Belnick insisted. The jury wouldn’t find him entirely convincing—“He was the prosecution’s best witness,” said one. But Belnick told Moscow, “I’ve been waiting for two years to tell the truth about the charges brought against me.” To Belnick, the charges were slanderous. “I consider the law profession a sacred trust,” he says. The prosecution’s case was preposterous. Why, if Kozlowski was looking for a partner in crime, would he recruit a Paul, Weiss lawyer with an impeccable reputation?

Belnick contended that he’d been unpopular within Tyco because, among other things, he was ethical. He advocated a product recall that most people said wasn’t necessary. He brought in the SEC’s former top cop to help sort out a potentially thorny securities issue, which is not recommended if one’s intent is criminal. In Belnick’s mind, he got the huge bonus because he earned it. As far as not disclosing the relocation loans, he acted in good faith. That was company policy. The CFO told him so.

If Belnick admitted a fault, it was that he was sometimes inattentive to matters of personal finance—he signed the same Tyco $500,000 promissory note twice—and perhaps too trusting of others’ advice.

This was the defense’s challenge: to convince the jury Belnick could be both a sophisticated litigator who parsed motives, predicted outcomes—“He knew everything that would happen two years in advance,” says a partner—and also at times a naïf, nonplussed at how his dewy dreams all were coming true. The kind of person who didn’t scrutinize loan documents, trusted others’ advice, the kind of person who could say, “I understood the chairman of the board”—Kozlowski—“to be a truth teller,” and mean it.

The state supreme Court building on Centre Street, majestic from the outside, resembles an aging high school inside. Waxed floors, hard polished seats, and elevators that mysteriously stop between floors. Most of Belnick’s family—his wife and three kids and in-laws—sat behind the defendant every day. His Catholic friends didn’t frequent the court, though McCloskey, transferred to London, sent daily e-mails. But each day, lawyers from Paul, Weiss, most of whom hadn’t been in touch with Belnick for years, crowded the courtroom, quietly working their BlackBerrys. For some, it was a complicated decision. Belnick had shut them out, as if he felt a lingering resentment toward Paul, Weiss. “But now he needed us and it didn’t matter how he treated us,” said one partner. “I’m hoping Mark learns some lessons about friendship.” On some days, there were as many as fifteen partners, legal talent worth close to $10,000 an hour.

Moscow charged that not long after Belnick arrived, he teamed up with Kozlowski to sell out shareholders. It seemed difficult to believe—Kozlowski didn’t really like Belnick—but Moscow thought he’d pinpointed a meeting where the two must have discovered a common interest.

The meeting occurred not long after the SEC launched an investigation of Tyco in December 1999, looking into whether Tyco was fudging its numbers by counting reserves as income. Formal charges could be catastrophic for Tyco, which had used its buoyant stock to purchase other companies.

For Tyco, the burden suddenly fell on the soft shoulders of Belnick. Belnick practiced before the SEC, had a reputation there. One CEO represented by Belnick before the SEC recalls, “The first thing Belnick asked me was, ‘Did you do it? If you lie to me and I find out, you’re dead.’ Because,” this CEO explains, “what happens is that you walk out of the SEC hearing room and then the SEC guy asks Belnick, ‘Is he a bad guy?’ Belnick says either ‘No, he’s a good guy’ or he says ‘No comment.’ The SEC counts on the reputation of a guy like Belnick.”

Belnick welcomed the pressure of dealing with Tyco’s SEC problems. “This is going to sound bizarre, but during the SEC investigation, working night and day, I enjoyed working at Tyco,” Belnick would later say. “I was working to save the company, and I hate to say that’s enjoyable, but that’s what I do.” Kozlowski’s fate was in his hands. He got the relationship he’d long wanted. They spoke every day. Says Belnick, “Dennis was constantly calling me.” Belnick hired outside counsel—William McLucas, the former head of enforcement at the SEC, now at Wilmer, Cutler, Pickering, Hale & Doore, and McLucas’s partner Lewis Liman, son of Belnick’s late mentor. And they started producing documents, thousands of them, for the SEC staff.

One document proved tough to get. When Belnick finally extracted it, he understood why: It showed that Kozlowski had planned to fire him. “I’m tough, but this hurts,” he told Kozlowski, who quickly disavowed the information.

Another document, which covered loans made to Kozlowski by Tyco, proved tricky. Kozlowski, who’d borrowed more than $250 million from Tyco, used the money to pay for everything from dentist bills to a beach-house expense for Karen Mayo, a person identified on the document as Kozlowski’s “mistress.” Inquiring about these expenses, Belnick was told that Kozlowski brought the balance to zero by the end of the year.

Later, it turned out Kozlowski had reduced the balance by using other company loan programs, and also by forgiving some loans. (The Boies firm figured he was on the hook for about $40 million.) But for the purposes of the SEC, interested in whether reserves were used to inflate revenues, “the mistress document,” as it became known, didn’t seem relevant, just embarrassing.

As far as misusing reserves, McLucas found some corner-cutting—and didn’t like the implications—but, as he told Belnick, “nothing material.” In consultation with McLucas and Liman, Belnick decided to white out some of Kozlowski’s expenses, and the word mistress, before turning in the document to the SEC. Whiting it out could draw attention to the document, and in that case, Belnick, McLucas, and Liman agreed to reveal the original. It never came to that.

Belnick’s key decision was to send Tyco’s CFO before the SEC, an unorthodox move. Offering up a high-level executive for a free-for-all cross-examination could, everyone knew, open a can of worms. Later, McLucas would compliment Belnick for the bold call. It took, he said, “the right combination of street smarts, balls, integrity, judgment, and lunacy.”

Certainly, Kozlowski understood the far-reaching implications of Belnick’s decisions. Before the CFO appeared in front of the SEC, Kozlowski took the company plane—he used it like a taxi—to Washington, checked into the Four Seasons, where Belnick was staying, and phoned him. Belnick hadn’t been expecting him. “He wanted to see me, and would I please come to his room?” Belnick told the court. In Kozlowski’s suite, Belnick reported on the SEC investigation.

“Do you think the SEC is going to go bad?” asked Kozlowski.

“No,” said Belnick.

Kozlowski praised Belnick for doing a terrific job—among other things, he’d gotten shareholder lawsuits against the company dismissed—and told him the company was awarding him 100,000 shares of stock worth, at the time, about $5 million.

“I was thrilled,” Belnick says. “All I had wanted to do when I got to Tyco was to meet the challenges.” He was glad to have the bad feelings of his “rookie year,” as he put it, behind him.

“Well, that’s not all,” Kozlowski said. He said the company had decided that if the the SEC inquiry went well, Belnick would get an additional $2 million cash bonus and 200,000 more shares, worth about $10 million.

Belnick didn’t know it, but the board of directors hadn’t voted on this second bonus, and never got around to it, and it was here that Moscow smelled a rat. In Moscow’s mind, that amount of money, not to mention the lack of board approval, should have made Belnick suspicious. Was Kozlowski worried that Belnick or McLucas, the former top cop at the SEC, might pull too hard on the Karen Mayo thread? Belnick wasn’t entirely comfortable with Kozlowski’s generous offer.

Current Issue
Subscribe to New York

Give a Gift