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The Securities and Exchange Commission claims he conspired to loot his own company. Former Sen. Warren Rudman calls him brilliant, decent and a model of integrity. Robert Morgenthau, the Manhattan district attorney, says he falsified company records and hid his ill-gotten gains. His lawyer says he’s the target of “unsupported” allegations and has done nothing wrong. Mark Belnick himself is saying little these days, at least to the press. For weeks, he had been sitting in a $10 million house high above Park City, Utah, waiting to hear whether his 30-year career as an elite corporate lawyer will end with an indictment from a New York grand jury. The answer came on Sept. 11, when his lawyer, white-collar defense expert Reid Weingarten of the D.C. office of Steptoe & Johnson, learned for certain that Morgenthau’s office planned to charge Belnick under New York’s securities laws. Despite strenuous lobbying by Weingarten, Morgenthau announced the indictment the next day, and the SEC simultaneously filed its own suit against Belnick alleging civil fraud. Belnick pleaded not guilty to the criminal charges. Just a few months ago, Belnick was the chief corporate counsel and one of the three most senior executives at Tyco International Ltd., the sprawling industrial conglomerate he had joined in the fall of 1998. He enjoyed a sterling professional reputation, hard-earned during more than two decades of handling high-profile cases at New York’s Paul, Weiss, Rifkind, Wharton & Garrison. And he was making millions of dollars. Tens of millions, actually. A door slammed shut on all of that on June 10. That day, the 55-year-old Belnick was escorted out of Tyco’s Manhattan office and summarily fired. Seven days later, the company, represented by Boies, Schiller & Flexner, sued him in federal court for breach of fiduciary duty and fraud. Among many other things, Boies’ suit accused Belnick of engineering $35 million in compensation for himself without telling Tyco’s board. The suit also alleged that Belnick had hatched a secret compensation arrangement with L. Dennis Kozlowski, Tyco’s then-chairman and chief executive officer. Kozlowski had hastily retired from the company on June 3, two days ahead of his indictment in New York on charges of tax evasion. (On Sept. 12, he was also charged with grand larceny.) Tyco already throbbed on the radar of hawkish prosecutor Morgenthau, and Belnick quickly became the target of a criminal investigation led by a top Morgenthau deputy, John Moscow. Emotionally and psychologically, his lawyer recounts, Belnick went into “free fall.” What happened to Mark Belnick? Many of the facts remain unknown or fiercely contested. At the request of Tyco’s board, Boies Schiller is investigating the conduct of Kozlowski, Belnick and other company insiders. Maybe the firm’s report will retrace each half-step along Belnick’s quick trip to scandal. Maybe the details will be thrashed out in court. Or maybe they’ll remain obscured, swept under a plea bargain with Morgenthau and a settlement with the SEC. In any case, the facts that are known about Belnick add up to a sad epigram for the last Wall Street boom, when the taunting image of stock-market wealth could make even the most successful big-firm lawyers feel small. Belnick’s legal career took off under the guidance and patronage of the late Arthur Liman, the famed Paul Weiss litigator. Liman was tapped by a Senate committee in 1987 to lead an investigation into the Iran-Contra affair that had ensnared the administration of President Ronald Reagan. Liman, in turn, picked Belnick — then a 41-year-old Paul Weiss partner — to serve as his deputy. Belnick, a cum laude graduate of Cornell University who earned his law degree at Columbia University as a Harlan Fiske Stone scholar, excelled during the high-profile government investigation. He won accolades from his law partners and members of Congress when he managed to track down a missing $10 million payment that Lt. Col. Oliver North had solicited from the sultan of Brunei on behalf of Nicaraguan rebels. Belnick located the money, plus $235,000 in interest, in a numbered Swiss bank account. Joking with the press about his investigative coup, Belnick quipped, “I wonder if I’ll get a finder’s fee.” “Mark is brilliant and witty,” Liman told Legal Times in May 1987. “He has been involved in our dealings with the White House, the Department of State, and the Department of Defense. The fact that we have had extraordinary cooperation is due in large part to the fact that they know Mark is completely fair.” Liman and Belnick returned to Paul Weiss in New York after the Iran-Contra hearings concluded, and Belnick picked up where he had left off, handling high-stakes cases, often alongside Liman. In the early 1990s, Belnick played a key role in negotiating a global settlement of some 180 lawsuits filed against his client, junk-bond financier Michael Milken. He also advised Pennzoil during its bruising legal fight with Texaco, and ultimately helped Pennzoil win an $11 billion verdict. And in 1998, on behalf of Smith Barney Inc., he orchestrated a settlement of one of the largest sexual discrimination suits ever filed against a Wall Street firm. Belnick’s performance during the Iran-Contra hearings won him another very public role in 1995. Warren Rudman, who as a senator from New Hampshire had co-chaired the Senate’s Iran-Contra inquiry and had then signed on as a Paul Weiss partner in 1993, had been tapped by the National Association of Securities Dealers to overhaul the then-scandal-tarred organization. Rudman approached Belnick, the brilliant lawyer he knew from the Iran-Contra hearings, and asked him to serve as his chief counsel. Rudman and Belnick succeeded in effecting a major reorganization of the NASD and Nasdaq, where millions of investors would soon flock to bid up dot-com stocks. Once again, Belnick returned to Paul Weiss. In July 1997, his former mentor, Liman, died of cancer at the age of 64. Belnick had been at the firm for nearly 25 years. He had a wife. Three children. Dogs. A house in Westchester. He was making a good living. Twenty-five years. He stuck with Paul Weiss for one more. In 1998, Warren Rudman stepped into Belnick’s career once again. Rudman recalls having a discussion at some point that year with a “longtime acquaintance” — a prominent Granite State citizen and fellow Raytheon Corp. board member Dennis Kozlowski. Kozlowski needed a top-flight general counsel to fill out the executive ranks at his own fast-growing company. Rudman nodded toward Belnick. In September 1998, Belnick took the job at Tyco. The Internet-fueled economy was lifting off all around him. People half his age were getting very rich, fast. And Kozlowski was willing to deal his new lawyer in. “I loved Paul Weiss,” Belnick told The National Law Journal in December 1998. “But the opportunity at Tyco was too good.” Tyco is a company made up of other companies — lots of them. Under Kozlowski’s leadership, which began in 1992, Tyco acquired hundreds of other businesses, ranging from makers of garbage bags to makers of medical supplies. By the fall of 1998, when Belnick punched in as the company’s top legal officer, Tyco was an enormous but still ravenous corporation, with annual revenue of nearly $20 billion. The year before, the company racked up about $7 billion in revenue. Last week, when he announced the indictments of Kozlowski, Belnick and former Tyco CFO Mark Swartz, New York prosecutor Morgenthau observed that Tyco, which is incorporated in Bermuda, now owns 2,346 subsidiaries and generates annual revenues of approximately $36 billion. Mergers and acquisitions were a way of life at Tyco, and a source of pride among company executives. Kozlowski nurtured a reputation as a brash and decisive deal-maker, and in May 2001 was rewarded by a Business Week cover story anointing him “The Most Aggressive CEO.” In that article, Irvin Gutin, a Tyco executive and lawyer who had headed up a squad of “in-house M&A specialists,” boasted of the company’s deal-closing prowess. “Investment bankers will tell you it takes six months to do a deal,” he told the magazine. “We often get them done in two weeks.” According to sources close to Belnick, and sources close to Tyco, Belnick almost immediately alienated key players at the company. Both sides recount that Belnick moved quickly to retain top-tier, high-cost outside counsel and to enlarge the budget of his office. For several years, the New York firm Kramer Levin Naftalis & Frankel had enjoyed most-favored-law-firm status at Tyco, and had advised on many of Tyco’s M&A deals. In November 1998, less than a month after Belnick started work, Tyco sealed one of its biggest acquisitions ever: the $11.3 billion purchase of electronics manufacturer AMP Inc. Kramer Levin was lead counsel on the deal, but the elite New York corporate firm Cravath, Swaine & Moore was also brought in. Shortly thereafter, Belnick retained D.C.’s Wilmer, Cutler & Pickering for securities law expertise. And he tapped lawyers from what is now Clifford Chance to tackle antitrust issues relating to Tyco’s numerous conquests. Belnick’s posse of expensive advisers rankled some board members, according to people with knowledge of the situation. Sources close to Belnick, and to Tyco, say Kozlowski quickly became frustrated with Belnick and indicated privately that he would like to get rid of him. Belnick’s defenders, including his lawyer, Weingarten, say this is because Belnick was pushing for greater disclosure and more punctilious regulatory compliance. “Kozlowski wanted to hire a r�sum�,” when he brought Belnick aboard, Weingarten says. Another source close to the situation says Kozlowski grew to dislike Belnick because he “wasn’t a team player.” And immediately after he was fired, Belnick suggested publicly, through a lawyer, that his approach to his job at Tyco aggravated the company’s longest-serving board member, Joshua Berman. Berman, who is a lawyer, joined the predecessor company to the current Tyco in 1967, and he remains on the board. But in 1985, he also signed on as counsel to Kramer Levin, effectively delivering Tyco as a client for the firm. According to a recent SEC filing from Tyco, Berman remained on the Kramer Levin payroll until January 2000. Kramer Levin managing partner Paul Pearlman declined to discuss publicly Berman’s role at the firm and at Tyco. A Tyco spokesman also declined comment. Berman’s lawyer, Elkan Abramowitz, downplays the subject. “The dispute between [Berman and Belnick] has been exaggerated,” Abramowitz says. Stephen Kaufman, Kozlowski’s New York attorney, did not reply to a call seeking comment. Not one source close to the situation disputes that the relationship between Belnick and Berman was hostile. But the underlying source for their antipathy remains obscure. What does seem pretty clear now, thanks to last week’s flurry of indictments and civil suits, is that while Belnick was general counsel, at least a few insiders at Tyco appear to have harvested millions of dollars worth of perquisites, stocks and plain old cash at the company’s expense. Were those compensation deals technically illegal? Or just extravagant and, as in the case of Kozlowski’s infamous $6,000 shower curtain, sometimes grotesque? Belnick’s defenders claim he was “frozen out” of Tyco’s inner circle, in part because he was pushing to make the company play by the rules. Weingarten says Belnick describes his brief tenure at Tyco as the worst period of his professional life. But then there’s the New York district attorney, the SEC and Tyco’s current management claiming that Belnick benefited personally from Tyco’s clandestine culture of greed. Weingarten — speaking for Belnick, who declines comment — manages to look both revolted and bemused when he talks about the allegations leveled at his client. The notion that Belnick was somehow complicit in an attempt to avoid financial disclosures or, as David Boies’ team has claimed, hell-bent on stymieing an internal investigation at Tyco, is, Weingarten says, ludicrous on its face. His evidence? “He called in Wilmer.” This is not a silly argument. Wilmer and, more particularly, partner William McLucas, the firm’s senior SEC expert, gained notoriety recently as a result of the firm’s investigation of, and damning public report on, the collapse of the Enron Corp. McLucas was until just a few years ago the head of the Enforcement Division at the SEC. He’s not well-known for advising clients on how to bamboozle their shareholders. If you’re interested in avoiding disclosure and gaming the SEC, Weingarten observes, the last thing you’re going to do is retain McLucas and Wilmer Cutler. The trouble for Weingarten, and for Belnick, is that Morganthau’s lead investigator, John Moscow, hasn’t been persuaded to see things their way. Nor has Thomas Newkirk, the SEC official leading the agency’s investigation of Tyco. When they look at Belnick, they see a guy who got very rich, fast. In the suit Tyco filed against Kozlowski on Sept. 12, the company’s lawyers from Boies Schiller spell out the details of Belnick’s compensation. “Through repeated unauthorized grants of stock and benefits,” the complaint alleges, Kozlowski “bought the silence” of Belnick, “whose acquiescence to Kozlowski’s nondisclosures and subsequent self-dealing was crucial to the success of Kozlowski’s scheme.” The complaint claims that Kozlowski secretly dealt Belnick $5.5 million in cash bonuses during 1999 and 2000, and granted him 500,000 shares of restricted Tyco stock in “less than three years.” Belnick’s “immediate resale” of those shares, when they vested, yielded about $7 million in 1999, $11 million in 2000, and $16 million in 2001, according to the Tyco complaint. Those are large numbers, but senior executives at other highflying companies often reap enormous rewards. The trouble with Belnick’s spoils, according to the Boies complaint, is they were never “approved” by the compensation committee of Tyco’s board. Weingarten sharply disputes this and says that the absence of that allegation from the criminal indictment and the SEC complaint “strongly suggests that it’s not true.” And then there’s the matter of the $14 million that Belnick obtained from Tyco for his houses. Belnick’s lifestyle changed quickly after he took the Tyco job. In short order, he moved out of his Westchester suburb and purchased an apartment in the Eldorado, a luxury Manhattan co-op on Central Park West favored by such celebrities as Faye Dunaway and Michael J. Fox and once inhabited by Marilyn Monroe. According to the SEC’s Sept. 12 complaint, Belnick bought and renovated his new digs with $4 million in interest-free loans from Tyco — money granted to him under a company “relocation program.” Belnick later availed himself of the same program to buy a “ski chalet” in tony Park City, Utah, according to the SEC. The Park City house ran to $10 million. Tyco had no office in Park City when Belnick opted to “relocate” there. But that was remedied when, the SEC asserts, Kozlowski and Belnick agreed that the company should pay him $19,200 annually to cover the “dedicated Tyco office” in Belnick’s new home. According to the SEC and Tyco, which has sued to get the cash back, Belnick has not repaid his relocation loans. Weingarten says the loans were legal, disclosed to the Tyco board, and approved by then-Chairman and CEO Kozlowski. He says the money will be repaid, and he stresses that Belnick never sought to conceal the loans from others at Tyco. He insists that Belnick fully intended to — and did — shift much of his professional life to Utah. And Weingarten challenges the SEC’s claim that Belnick violated securities laws by failing to disclose the loans to Tyco’s auditors. “As a legal matter, it is not at all clear that he needed to,” Weingarten says. “Mark believed in good faith based on his conversations with the CFO and counsel that they were loans in the normal course that did not have to be disclosed.” Weingarten also points out that Belnick’s various forms of compensation from Tyco are dwarfed by those of his co-defendants, Kozlowski and ex-CFO Swartz. The New York indictments and the SEC’s complaint certainly bear that out: The SEC claims that Kozlowski and Swartz “bestowed upon themselves” hundreds of millions in low-interest and no-interest loans from the company, many of which were then simpy forgiven. Kozlowski alone obtained about $316 million in such loans, the SEC claims. Indeed, the criminal charges against Kozlowski and Swartz, both of whom pleaded not guilty last week, are much more far-reaching than those against Belnick. Newkirk, who is leading the SEC’s Tyco investigation, dismisses the implication that Belnick’s conduct was less blameworthy. “It’s different in quantity, not quality,” he says. “This is an integrity issue.” Those must be painful words to Belnick, who built a public reputation and a lucrative legal practice around his fairness and integrity as much as on his skill and intellectual rigor. Weingarten’s emotional appeal on Belnick’s behalf — that he was a stand-up guy who actually pushed the company to toe the legal line — leaves Newkirk unmoved. “A chief corporate counsel has a responsibility to take steps to cause the company to comply with the law,” he says. “It’s little excuse to me to say, ‘I tried but no one wants to do anything,’ and then go back to work.”

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