To most of Corporate America, Mark Belnick was a sideshow. No $6,000 shower curtain graced the former Tyco International Ltd. general counsel’s bathroom, and he was not even a guest at, much less the host of, a certain $2 million Roman orgy-themed party on the island of Sardinia.
In February 2003 Belnick was accused by the Manhattan district attorney’s office of stealing a little over $30 million in unapproved bonuses and loans from Tyco, a fraction of the $170 million allegedly stolen by his bosses, former Tyco chairman and chief executive officer Dennis Kozlowski and former chief financial officer Mark Swartz.
But within the legal community, Belnick was always the main event. His trial was a major test of how far prosecutors could go in trying to hold in-house lawyers responsible for corporate crimes.
And Belnick was not just any lawyer; he was an attorney who, as an outside counsel, seemed to embody the very best the legal profession had to offer. He was a former protege of the legendary litigator Arthur Liman and an ex-senior partner at the elite New York firm of Paul, Weiss, Rifkind, Wharton & Garrison. Did his indictment show that even the most reputable lawyers were susceptible to corporate corruption? Or did it mean that even the most respected attorneys could become the target of overzealous prosecutors?
On July 15, following two months of testimony in New York trial court and after less than five days of deliberation, a jury found Belnick not guilty of all charges. The GC had faced charges of grand larceny, securities fraud, and falsifying business records. If he had been convicted of the top count of grand larceny alone, he could have faced as much as 25 years in prison.
The verdict was a thorough rejection of the prosecution’s argument that Belnick, who was Tyco’s general counsel between 1998 and 2002, had been paid vast sums without the approval of the conglomerate’s board of directors because he helped Kozlowski and Swartz cover up their own alleged thefts from the company. The trial of Kozlowski and Swartz on similar charges ended in mistrial in April and is scheduled to be reheard early next year. (Both men have pleaded not guilty.)
But even though Belnick was cleared of criminal wrongdoing, it’s not certain that he did nothing wrong. The GC’s actions in several instances — his failure to report the questionable conduct of Kozlowski and Swartz to Tyco’s board of directors, to familiarize himself with the minutes of board meetings and company bylaws, to check if he was eligible for certain bonuses and loans, and whether, once granted, those monies were properly disclosed in SEC filings — raise questions as to whether he fulfilled his duties to Tyco as a lawyer and acted in accordance with the profession’s ethical standards [see Asked but Not Answered].
Belnick’s chief defense lawyer, Reid Weingarten of Washington, D.C.’s Steptoe & Johnson, has no doubt that issues of professional responsibility will again be aired in the upcoming civil cases against his client filed by the Securities and Exchange Commission and Tyco. The lower evidentiary standard of a civil trial may make a defense slam dunk tougher the second time around, but Weingarten can’t resist a little exultation. “It’d be a lot tougher if we hadn’t won the criminal case,” he says.
The acquittal was a resounding triumph for Weingarten, whose strategy focused on presenting Belnick, 57, as an honest lawyer doing the best he could under difficult circumstances. According to Weingarten, Belnick was extremely well paid, earning some $35 million in salary, bonuses, and loans alone in the four years he was at the company, because he did outstanding work and because it was Tyco’s culture to reward performance lavishly. Nonetheless, throughout his time at the conglomerate, Belnick remained a lonely outsider who became a convenient scapegoat for some board members. “He literally shows up, and no one was there,” says Weingarten, recalling Belnick’s testimony about his inauspicious first day at Tyco. “He’s the general counsel of this huge corporation with no support.”