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Tyco Funded Ex-CEO's Lavish Lifestyle

Former Tyco International Ltd. chief executive Dennis Kozlowski indulged his lavish tastes — including a $6,000 shower curtain — with millions in company money and much of it was not reported to shareholders, a published report said.

In all, it appears that more than $135 million in Tyco funds went to benefit Kozlowski, largely in forgiven loans and company payments for real estate, charitable donations and personal expenses, The Wall Street Journal reported Wednesday.

Kozlowski resigned in June, a day before being indicted on charges that he evaded New York sales taxes on pricey works of art. Kozlowski has pleaded innocent.

Tyco spokesman Walter Montgomery said Tyco's board "was not aware of expenditures that would have required disclosure at the time they were made. When the directors became aware, they took immediate action."

Tyco and the Securities and Exchange Commission have launched broad investigations of financial transactions at the company. A source has told The Associated Press the company is looking at transactions involving all of its senior executives.

Kozlowski, 55, is the only one who faces criminal charges.

More than $11 million of Tyco's cash paid for antiques, art and other furnishings in Kozlowski's New York apartment, including a $6,000 gold-and-burgundy, floral-patterned shower curtain, the Journal said. The decorating bill came on top of the $18 million Tyco paid for the Fifth Avenue duplex, which Tyco considered a corporate apartment.

Last summer, Tyco picked up half the tab for a $2.1 million trip to the Italian island of Sardinia, the paper said. The central event was a 40th birthday party for Kozlowski's wife, Karen, with a performance by singer Jimmy Buffett.

The Journal said Kozlowski also paid for a new home in Boca Raton, Fla., in 1998 with a $19 million, no-interest loan from Tyco.

Two years ago, Tyco quietly forgave the loan as part of a "special bonus" program, people familiar with the company said.

To cover Kozlowski's income taxes on the forgiven loan, the sources said, the company kicked in an extra $13 million. The Journal said none of the deals was disclosed to Tyco shareholders.

Montgomery said Tyco's board didn't learn about the program until the internal investigation, which began in June. He also said none of the disclosures were material to Tyco's finances.

A person speaking on Kozlowski's behalf, who was not identified by the Journal, disputed any suggestion that Kozlowski misspent Tyco funds for personal benefit or that he knew of any forgiven loans. The person said Kozlowski entrusted his financial interactions with Tyco, including loans, to company employees, and assumes they were accounted for accurately.

The person said Tyco is holding all of Kozlowski's personal financial records and that he is unable to recall details of many transactions without them.

Kozlowski's lawyer, Stephen Kaufman, did not immediately return a call for comment Wednesday.

Tyco hired former Motorola Inc. president Edward D. Breen to replace Kozlowski as chief executive last month.

Shortly afterward, chief financial officer Mark Swartz announced his resignation from that post as well as the company's board.

Breen added an outsider to the company's board and has hired two experts to focus on improving Tyco's corporate governance.

Expert observers have said at least three current board members have potential conflicts of interest serious enough to raise questions about the objectivity of an internal investigation into Tyco's finances.

Tyco, a huge conglomerate with 277,000 employees, is based in Bermuda but run from Exeter. It has been hammered by accounting questions and the investigations stemming from Kozlowski's indictment.

Its stock price has dropped about 80 percent since January. Share were trading at $12.20 each, down 56 cents, in morning trading Wednesday on the New York Stock Exchange.

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