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Prosecutor concedes that auditor PWC knew about Tyco's executives transactions

NEW YORK (AP) — A prosecutor acknowledged Friday that PriceWaterhouseCoopers, the world's largest accounting firm, knew about many of the transactions that have led to the indictments of Tyco International's top executives.

Lawyers for the executives, who maintain that the money they received from Tyco were board-approved loans, said they could not understand how their clients committed fraud if the corporation's “outside” auditors knew about it.

The executives — former chief executive Dennis Kozlowski, 51, and former chief financial officer Mark Swartz, 45 — have been indicted on grand larceny charges for allegedly stealing more than $600 million from Tyco.

The former chief lawyer for the company, Mark Belnick, 56, also has been charged with larceny in the case. He was first accused of improperly obtaining $14 million in loans from Tyco. In a superseding indictment last week, prosecutors alleged that he received a $12 million “special bonus” for blocking a federal probe.

Assistant District Attorney John Moscow, trying to get a May 27 trial date by eliminating months of pretrial depositions of accountants, told the court that he would “stipulate” — agree — that the auditing firm knew about the transactions. “We're not going to be opposing this at trial,” he said.

Defense lawyers asked for a January 2004 trial date, saying they had 700 boxes of documents and 3.5 million e-mails to sift through to prepare for trial.

State Supreme Court Justice Michael Obus, after hearing arguments on when the trial should begin, scheduled jury selection to begin Sept. 29 for the joint trials of Kozlwoski and Swartz. He did not set a trial date for Belnick.

Moscow said he was not conceding that PriceWaterhouse knew about all of the questionable transactions, or knew that certain transactions were in fact illegal. He did not say whether anyone at the accounting firm might be criminally liable.

The defense lawyers seemed surprised at Moscow's concession. Stephen Kaufman, Kozlowski's attorney, told the court, “Isn't it extraordinary that we're told today that the watchkeepers of the organization had full knowledge” of the things the former Tyco CEO is charged with.

Swartz' lawyer, Charles Stillman, told Obus, “It is very startling that the district attorney is acknowledging that PriceWaterhouse knew of actions for which the DA wants to send my client to prison.”

Moscow said outside court that auditors were told that the transactions had been approved by Tyco's board of directors when in fact they were not.

Told of the prosecutor's courtroom remarks, accounting firm spokesman Steven Silber said, “PriceWaterhouseCoopers has been and continues to cooperate with the Manhattan district attorney's Tyco investigation.”

“It doesn't appear that anything said in court is new or is anything that hasn't been previously reported,” Silber said. “We do not disagree with ADA Moscow's assertion that PWC was aware of some of the loans, but we had no knowledge that any of the loans or bonuses at issue were unauthorized or unknown to the company and its board of directors.”

Moscow also rejected Stillman's description of the money as “loans” to the defendants. “These were not loans,” he said after the proceeding. “These were thefts.”

Obus scheduled court dates for Swartz and Kozlowski for March 14 and for Belnick on May 16.

The three defendants have pleaded innocent. Kozlowski is free on $100 million bail, and Swartz is out on $50 million bail. Belnick, after arraignment on the new charges this week, was left free on the same $1 million bail he already had.

Based in Bermuda but with U.S. headquarters in Exeter, N.H., Tyco makes products ranging from telecommunications equipment to home alarm systems.

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