from The New York Times
Ex-Chief and Aide Guilty of Looting Millions at Tyco
By Andrew Ross Sorkin
Published: June 18, 2005
L. Dennis Kozlowski, the former chief executive of Tyco International, and his top lieutenant were convicted yesterday on fraud, conspiracy and grand larceny charges, bringing an end to a three-year-long case that came to symbolize an era of corporate greed and scandal.
The verdict, which came after 11 days of deliberations by a New York jury of six men and six women, is the latest in a string of convictions of corporate executives in recent years.
As the verdict was read aloud, Mr. Kozlowski, dressed in a dark suit and a blue tie, stared straight ahead, trying to hold back his emotions as his face flushed. His wife, sitting with one of his daughters, wiped tears from her eyes. His co-defendant, Mark H. Swartz, Tyco's former chief financial officer, tensed up and looked at his wife; she mouthed, "I love you."
Lawyers for the two vowed to appeal.
The verdict is also vindication for the Manhattan district attorney's office, and its chief, Robert M. Morgenthau, after they were criticized for how they handled the first trial of the two executives.
The four-month-long trial was the second time Mr. Kozlowski and Mr. Swartz were tried on charges of stealing $150 million from Tyco - a conglomerate whose products range from security systems to health care - and reaping $430 million more by covertly selling company shares while '"artificially inflating" the value of the stock.
The first case against them was declared a mistrial in April 2004, when a juror holding out for an acquittal made what appeared to be an "O.K." signal to the defense and subsequently received a threatening letter from a stranger, upending the trial.
Yesterday, Mr. Kozlowski and Mr. Swartz were convicted on all but one of the 23 counts of grand larceny, conspiracy, falsifying business records and securities fraud against each of them.
Even as some have suggested that regulatory scrutiny and prosecutorial zeal have been too harsh on corporate America, the convictions are among a steady march of government victories at trial: Martha Stewart; Bernard J. Ebbers, the former WorldCom chief; and John J. Rigas, who founded the cable company Adelphia Communications.
A federal jury is currently deliberating in the trial of Richard M. Scrushy, the former chief executive of HealthSouth. Kenneth L. Lay and Jeffrey K. Skilling of Enron will go on trial next year.
"There's been a bit of excess C.E.O. bravado recently," said Jeffrey A. Sonnenfeld, an associate dean at the Yale School of Management, noting reactions after the Supreme Court overturned the conviction of the accounting firm Arthur Andersen and the acquittal of Theodore C. Sihpol III, a former broker, in a mutual fund trading case.
Yesterday's verdicts, he said, "will help C.E.O.'s take public positions of moral integrity as the judicial system stands behind them"
Mr. Kozlowski and Mr. Swartz face sentences of a minimum of 8¾ years to a maximum of 25 years. And unlike executives convicted of federal white-collar crimes, the two would serve their time in a New York State prison like Attica, not a minimum-security federal prison.
The retrial of Mr. Kozlowski, 58, and Mr. Swartz, 44, was markedly different from the first trial. Prosecutors, who had been criticized by jurors from the first trial for presenting an often meandering and disorganized case, refocused their arguments and trimmed their witness list.
Prosecutors also limited much of the most salacious testimony about Mr. Kozlowski's consumption that had made the first trial fodder for the tabloids and entertainment television news programs, but had backfired badly with the jury.
Instead of days of testimony about Mr. Kozlowski's now infamous $6,000 shower curtain or a $2 million birthday party for his wife that was partly paid for by the company, prosecutors spent most of the trial drilling into the accounting issues surrounding the $150 million that Mr. Kozlowski and Mr. Swartz were accused of stealing.
The case turned on whether the jury believed that several large payments both men received had been authorized by the board of Tyco as part of a preset bonus formula or had been secretly siphoned by the men and dishonestly classified as bonuses. Several members of Tyco's board and the company's lawyer, David Boies, testified that the payments were never authorized.
"This wasn't about trying two men or corporate America; it was about the evidence," said Devin Richardson, one juror. "We were looking for verification of what the board said versus what Kozlowski and Swartz said."
Mr. Richardson said that the defense presented no documentation to back up the claims of the executives.
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