Ex-Tyco Executives Convicted
Saturday, June 18, 2005
NEW YORK, June 17 -- A Manhattan jury on Friday convicted former Tyco International Ltd. chief executive L. Dennis Kozlowski and former chief financial officer Mark H. Swartz on multiple counts of looting the company, handing prosecutors a big win in their crackdown on corporate crime and concluding a legal drama that stretched across two trials and three years.
After 11 days of deliberations, the jury of six men and six women found Kozlowski and Swartz guilty of criminal counts of grand larceny, conspiracy, securities fraud, and eight of nine counts of falsifying business records. Kozlowski, 58, and Swartz, 44, displayed little emotion as the jury foreman announced their fate. Kozlowski's wife, Karen, wiped back tears.
Over three years, the Tyco case came to symbolize an era of corporate greed, with vivid details of the $6,000 shower curtain that hung in Kozlowski's $31 million Fifth Avenue apartment and the $2.2 million party for Kozlowski's wife on the island of Sardinia in 2001.
On Friday, Kozlowski slipped out of court through a rear door, declining to comment as he pushed through a crush of cameras.
Through their lawyers, both men said they would appeal. "This is a day of disappointment," Kozlowski's lead attorney, Stephen E. Kaufman, said outside the Lower Manhattan courthouse. "I can assure you we are going to appeal this verdict." Charles A. Stillman, an attorney for Swartz, said, "We are disappointed, and we will deal with this on appeal."
The two men face up to 25 years in prison on the most serious charge of grand larceny. The State Supreme Court justice overseeing the case, Michael J. Obus, set a sentencing hearing for Aug. 2. Obus said both men could remain free on bail, denying a request from prosecutors that they be taken into custody.
The convictions represent a major victory for Manhattan District Attorney Robert M. Morgenthau, who first brought charges against Kozlowski in 2002 and is facing his first significant reelection campaign in decades.
"This verdict is an endorsement of the principle of equal justice under the law," Morgenthau said in a written statement. "Crimes committed in corporate offices will be treated according to the same standards as other crimes."
The win vindicated a change in strategy by Morgenthau's office in the second trial. Prosecutors tightened their case and spent far less time on Kozlowski's extravagant lifestyle. "Prosecutors learned their lesson, put their case on a diet and got the convictions they were looking for," said Joseph A. Grundfest, a Stanford University law and business professor .
In interviews after the first trial, jurors said the racy details had little bearing on their deliberations. Jurors in the second case left the courthouse together on Friday and declined to speak to reporters. Several jurors did not respond to phone messages left at their homes on Friday evening.
The convictions come at a pivotal and difficult moment in the government's three-year-old effort to punish corporate wrongdoing. Among other recent setbacks, the U.S. Supreme Court last month overturned the criminal conviction of Arthur Andersen LLP, Enron Corp.'s accounting firm.
In Birmingham, a jury continues to struggle to reach a verdict in the criminal trial of former HealthSouth Corp. chief executive Richard M. Scrushy, the first major case to cite a violation of the 2002 Sarbanes-Oxley corporate reform law, which requires corporate leaders to vouch for the accuracy of financial statements. The jury ended its 16th day of deliberations Friday.