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The negotiation of $14 million in relocation loans by former Tyco International Ltd. general counsel Mark Belnick was “open and notorious” and arose “in the ordinary course” of business, Belnick’s lawyer said Thursday in a bid to dismiss criminal charges against his client in Manhattan Supreme Court. Manhattan District Attorney Robert M. Morgenthau charged Belnick in September with six counts of falsifying business records to conceal the $14 million, with the charges resting on Belnick’s failure to disclose the loan in the internal questionnaires Tyco used to prepare its disclosure statements to the Securities and Exchange Commission. The only general counsel to be indicted in any of the recent corporate scandals, Belnick faces four years in prison if convicted. As Belnick sat stoically in the courtroom Thursday, his lawyer, Reid Weingarten of Washington, D.C.’s Steptoe & Johnson, argued that relocation loans of the type Belnick received were considered routine among Tyco employees, with 50 or more participating in the company’s program. Weingarten also said the questionnaires excepted the disclosure of debt to the company acquired in the ordinary course of business. Whatever the court or the public at large might think of Tyco’s relocation loan program, Weingarten said, Belnick’s use of it occurred in the ordinary course of business, and therefore should not have warranted criminal charges. “None of this stuff is remotely close to a felony,” said Weingarten. But Assistant District Attorney John Moscow argued that the company’s ordinary course of business was not the same as what Tyco’s top executives considered it to be. “These officers are not the company,” he said. “The company is owned by the shareholders. The shareholders have a right to know how much executives are being loaned.” Moscow further argued that Weingarten’s argument could be “bootstrapped” to justify virtually any kind of fraud by a company’s top executives. The district attorney has also filed charges against Tyco’s former Chief Executive Officer L. Dennis Kozlowski and former Chief Financial Officer Mark H. Swartz, alleging that the two conspired to loot the company of more than $600 million through improper compensation, loans and stock sales. Weingarten criticized Moscow’s position as having no basis in law. “That’s In re John Moscow,” he said, “It doesn’t stand up to scrutiny.” Justice Michael Obus, who will rule on Belnick’s motion Feb. 7, asked Weingarten how Belnick’s use of the loan to purchase a home in Park City, Utah, where Tyco maintained no offices, could be covered by the company’s relocation program. Weingarten replied that Kozlowski and Swartz approved loans to other executives moving to other locations where Tyco had no offices. “They told him, ‘You are eligible for the relocation program,’” Weingarten said, further pointing out that many of the other executives who participated in the relocation loan program had their loans forgiven, but not Belnick. “Of all the people who got loans, the one person sitting in the dock is the person who never had his loans forgiven,” said Weingarten, noting that Belnick continues to make payments on the loan. Weingarten also raised the fact that Tyco’s management was structured so that Swartz, as chief financial officer, was responsible for the company’s securities filings, not Belnick, as would be the case in most companies. But Moscow said Belnick, who was once a senior partner at Paul, Weiss, Rifkind, Wharton & Garrison, might have used his own legal judgment on the need to disclose the loan or sought the opinion of Tyco’s outside securities lawyers at Wilmer, Cutler & Pickering. “For a general counsel to say he relied on the chief financial officer for interpretation of the law is interesting,” said Moscow, “but it’s not a defense.”

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