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Former Tyco International Ltd. general counsel Mark A. Belnick Thursday was acquitted of all charges that he stole more than $30 million in compensation and loans from the company. The verdict came on the sixth day of jury deliberations, following more than two months of testimony. Belnick, who was chief corporate counsel at Tyco from 1998 to 2002, had been charged by the Manhattan district attorney’s office with grand larceny, securities fraud and falsifying business records. He had faced up to 25 years in prison. The prosecution, led by Assistant Manhattan District Attorney John W. Moscow, had argued that the lawyer received a $17 million bonus and more than $14 million in interest-free loans without board approval because he helped former Tyco chairman and chief executive officer L. Dennis Kozlowski cover up his own thefts from the company. Belnick’s defense team, headed by Reid Weingarten of Washington, D.C.’s Steptoe & Johnson, had countered that the general counsel had earned his bonus through his hard work on a 2000 inquiry by the Securities and Exchange Commission into Tyco’s accounting practices. They also argued that Belnick, a former litigation partner at New York’s Paul, Weiss, Rifkind, Wharton & Garrison, reasonably relied on Kozlowski and former chief financial officer Mark H. Swartz on issues of board approval and disclosure. “We are happy, relieved but not surprised,” Weingarten said Thursday. “We always believed we represented an innocent man and we were confident that when a fair-minded jury heard the evidence, we would be fine.” The other main lawyers for the defense were Mark Hulkower, also of Steptoe, and Robert F. Katzberg of New York’s Kaplan & Katzberg. Describing the scene in the Manhattan Supreme Court Justice Michael Obus’ courtroom Thursday, Katzberg said Belnick was “prayerful” as he waited for the verdict to be read. He said the defendant visibly slumped with relief as he was found not guilty on one charge after the other. But sources close to both the prosecution and defense said neither side was so confident of a favorable outcome they were unwilling to renew plea discussions just before the jury delivered its verdict. Belnick had been offered a deal prior to trial that would have included no jail time but would have required him to disgorge most of his money and property, including his homes in Manhattan and Park City, Utah, in order to also settle pending civil suits against him by the SEC and Tyco itself. Belnick balked at the deal, which would also have cost him his law license. In more recent discussions, the sides had moved closer. Belnick would have received no jail time but also kept his law license and a much larger portion of his money and property. But a source said terms demanded by Tyco’s lawyers at Boies, Schiller & Flexner led Belnick to reject the deal Wednesday. Belnick’s acquittal is a blow to Manhattan District Attorney Robert M. Morgenthau, whose office’s prosecutions against Tyco executives have been among the most high-profile cases of alleged corporate crimes. Moscow, one of the office’s chief fraud experts, tried the case along with Assistant District Attorney Amy Schwartz. “The jury has made its decision and we, of course, accept it,” a spokeswoman for the district attorney said Thursday. The prosecution had no doubt been looking for a conviction of Belnick going into the retrial of Kozlowski and Swartz in January. The two executives’ earlier six-month trial for stealing about $170 million in unauthorized compensation ended in a mistrial in April. As in the earlier trial against Kozlowski and Swartz, a number of former Tyco directors testified against Belnick, stating that they never knew of or approved his compensation. The defense aggressively attacked the credibility of those former directors, pointing out how they themselves took advantage of Tyco’s corporate largesse. Defense lawyers went to some lengths to distinguish Belnick from the earlier Tyco defendants, in particular Kozlowski, whose reputation for ostentatious living came to symbolize executive greed. BELNICK AS WITNESS The centerpiece of their case was Belnick himself, who took the stand for several days of testimony. On direct examination by Weingarten, he presented himself as an honest lawyer and outsider at Tyco who failed to establish a rapport with Kozlowski and encountered active hostility from other Tyco executives and members of the board of directors. On the stand, Belnick explained how he slowly instituted policies and procedures at the company. He also described how he hired and worked with lawyers at Washington, D.C.’s Wilmer, Cutler & Pickering to resolve the SEC investigation. He said Kozlowski had promised him the $17 million bonus on the investigation’s successful conclusion. Throughout his time on the stand, Belnick had acknowledged that his compensation was high but he said Tyco was known for rewarding performance. He said he relied on Kozlowski’s word that the CEO had the ability to set the general counsel’s compensation. Noting that he was a litigator rather than a securities lawyer, he said he willingly deferred to Swartz on issues like whether he needed to disclose his loans or bonuses on the company’s proxy statements. Moscow had attacked Belnick for his reliance on Kozlowski and Swartz, arguing that a lawyer of Belnick’s experience should have questioned their practices. The prosecutor said Belnick was rewarded by Kozlowski for turning a blind eye and preventing others from looking into misconduct at the company. The prosecution had relied upon the testimony of two Wilmer Cutler lawyers, Lewis Liman, now a partner at New York’s Cleary, Gottlieb, Steen & Hamilton, and William McLucas, the head of Wilmer Cutler’s securities enforcement practice and a former chief of the SEC’s enforcement division. In the course of the SEC inquiry, both men had asked Belnick about documents showing that Kozlowski was using a company loan program for personal expenses. McLucas had also complained to Belnick about how Tyco’s corporate culture seemed cavalier about accounting issues. Prosecutors contended Belnick’s failure to act on these issues showed he was trying to shield Kozlowski. But the defense also relied on the testimony of the Wilmer Cutler lawyers. Liman and McLucas both credited Belnick with strong work on the SEC investigation and much of their testimony downplayed the importance of their discoveries about the loan programs. At Paul Weiss, Belnick was a close friend and prot�g� of the late Arthur Liman, the well-known litigator and father of Lewis Liman. The two worked together on several high-profile matters, serving as co-counsels to the U.S. Senate Committee investigating the Iran-Contra affair in the late 1980s. Belnick met then-U.S. Senator Warren Rudman while working for the committee, and the senator recommended Belnick for the Tyco position. Rudman, now of counsel for Paul Weiss in Washington, D.C., testified for Belnick’s defense. Several other Paul Weiss lawyers have shown support for Belnick by attending their former partner’s trial on a regular basis. In one of the trial’s most dramatic moments, Belnick cried on the shoulder of litigation partner Martin London following testimony in which Belnick had described the day on which he had been fired from Tyco and escorted out of his office. Paul Weiss chairman Alfred Youngwood, who has also attended the trial, said Thursday: “Mark was a wonderful partner at Paul Weiss and we’re delighted for him and his family.” Belnick’s is one of the first acquittals in the various criminal trials to have followed the major corporate scandals of recent years. Just last week, John Rigas, the founder of Adelphia Communications, and one of his sons was found guilty in Manhattan federal court of securities fraud and conspiracy for using company funds for personal use. Katzberg said Thursday the defense had been concerned about ill feeling toward corporate executives. “We were always confident when it came to the facts of the case, but, given today’s environment, we were nervous,” he said.

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