The second time around, Tyco executives convicted of looting hundreds of millions

Saturday, June 18th 2005, 11:26 am

By: News On 6

NEW YORK (AP) _ From the $18 million Manhattan apartment with its $6,000 shower curtain to a $2 million birthday party in the Mediterranean, the case against former Tyco CEO L. Dennis Kozlowski and a subordinate came to epitomize the corporate greed of the late 1990s.

On Friday, jurors convicted Kozlowski and Tyco's former finance chief, Mark H. Swartz, of looting their company of nearly $600 million to finance lifestyles of kingly opulence.

Told by defense lawyers they were hearing a case ``in search of a crime,'' jurors convicted the two men of grand larceny, falsifying business records, securities fraud and conspiracy. The two face up to 30 years in prison.

Kozlowski, 58, and Swartz, 44, became the latest corporate convicts in a widespread government crackdown on white collar crime around the country. They join Martha Stewart, WorldCom's Bernard Ebbers and a host of others. Three former Enron executives go on trial in January.

After a four-month trial in Manhattan's State Supreme Court, the jury deliberated 11 days before returning 22 guilty verdicts out of 23 counts for each man. Each was acquitted of a single count of falsifying records about company loans for homes in Boca Raton, Fla.

The trial was the second for both. Their first ended in a mistrial last year after one juror was identified in news reports as a holdout for acquittal and was improperly contacted.

District Attorney Robert Morgenthau, holding his first post-trial news conference in nearly 15 years, called the verdict ``an endorsement of the principle of equal justice under the law.''

``Crimes committed in corporate offices will be treated according to the same standards as other crimes,'' he said.

Kozlowski and Swartz left the courthouse through a back door, climbed into waiting cars and fled without speaking to reporters. Their lawyers promised prompt appeals.

Charles Stillman, Swartz's lawyer, said, ``I just don't think the jury understood Mark as a human being. There is no way Mark would steal a penny from anybody.''

Jurors were loaded into a bus and driven away by court officers without speaking to defense lawyers, prosecutors or reporters.

Prosecutors had urged Justice Michael Obus to jail the pair pending sentencing, but the judge said he would let them stay free on $10 million bail each. Obus set a tentative sentencing date of Aug. 2 but said he would hear post-trial motions before sentencing the defendants.

Kozlowski, who once made more than $100 million in a single year, and Swartz, whose compensation trailed close behind, were accused of enriching themselves by nearly $600 million by taking unauthorized pay and bonuses, abusing loan programs and selling their company stock at inflated prices after lying about Tyco's finances.

Often, prosecutors said, the defendants hid their alleged thefts by failing to disclose the bonuses and loan forgivenesses in company prospectuses and federal filings, and bought the silence of underlings with outsized compensation.

Both used Tyco's money to fund extravagant lifestyles that included fancy art, jewelry and real estate, prosecutors said. They said a $2 million party Kozlowski threw for his wife Karen's 40th birthday on the Mediterranean island of Sardinia was a perfect example of his style of high living. Tyco paid about half of the party's cost.

The prosecution's emphasis in the first trial on lavish spending was pared down in the second. Less time was spent on the $18 million Manhattan apartment that Kozlowski said he bought for Tyco, then furnished with another $15 million worth of amenities, including a $6,000 shower curtain.

Kozlowski, who was with Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, testified in their own defense in the second trial. Kozlowski had not testified in the first. Both denied they ever stole anything from Tyco or received anything from the company to which they were not entitled.

Lawyers for the two said the executives believed they were acting lawfully when they accepted compensation and loan forgivenesses or spent Tyco's money. There was no criminal intent by either man, they said, and therefore no crimes.

Austin Campriello, one of Kozlowski's lawyers, told the jury that ``this is a case in search of a crime.''

Kozlowski, asked by defense attorney Kaufman why a $25 million bonus that he received from the company never appeared on his 1999 tax return, said he could not explain why.

``I just was not thinking when I signed my tax return that I had a $25 million loan forgiveness,'' Kozlowski said. ``Year in and year out at Tyco, my tax returns for the most part had been correct. I didn't pick up on it.''

The jury apparently did not believe him.

Prosecutors called Kozlowski's explanation for this omission and for other actions by him and Swartz ``ludicrous'' and ``despicable.''

Tyco, which has about 250,000 employees and $40 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business. Nominally based in Bermuda, its operations headquarters are in West Windsor, N.J.