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Ex-Tyco Execs Sentenced

By Ben White
Washington Post Staff Writer
Monday, September 19, 2005; 3:36 PM

NEW YORK, Sept. 19-A state judge Monday sentenced former Tyco International executives L. Dennis Kozlowski and Mark H. Swartz to 8 1/3 to 25 years in prison for looting their company of millions to pay for lavish parties, luxurious homes and extravagances such as the $6,000 shower curtain that hung in Kozlowski's $31 million Fifth Avenue apartment

In a case that came to symbolize an era of corporate greed, State Supreme Court Judge Michael Obus also ordered Kozlowski and Swartz to pay nearly $240 million in fines and restitution. Kozlowski and Swartz were immediately taken into custody and led from the packed courtroom in handcuffs as family members of both men sobbed.

In June, a jury found former Tyco chief executive Kozlowski, 58, and former chief financial officer Swartz, 45, guilty of criminal counts of grand larceny, conspiracy, securities fraud, and eight of nine counts of falsifying business records.

Obus on Monday imposed the same prison sentence on both men. He ordered Kozlowski to pay a $70 million fine and Swartz to pay a $35 million fine. He ordered both men to pay a combined $134.4 million in restitution of illegal bonuses back to Tyco.

Under state law, Kozlowski and Swartz will be officially eligible for parole in eight years and four months, though they could apply for work release in about six years. There is no parole in the federal system under which other corporate executives have been tried and sentenced. Legal experts said it is unlikely, though not impossible, that either Kozlowski or Swartz would serve much more than eight years and four months.

Obus did not specify where the two former executives will serve their terms. He said that decision would be made by the state corrections officials. But he said he did not view either man as a security risk, indicating he would not object if they are sent to a minimum security facility.

Former prosecutor David Gourevitch, however, said there were no facilities in the state system comparable to federal minimum security prisons such as the one where media entrepreneur Martha Stewart spent her jail time.

"In the federal system, outside of maximum security places, generally people are physically safe. I don't think anybody would say that about New York State prison," Gourevitch said. "And from a state perspective, this is one of the longest sentences in a corporate fraud case that I can recall."

The stiff sentences for Kozlowski and Swartz follow strong punishments for other white-collar defendants convicted in the wave of cases that followed the collapse of the Internet bubble and multi-billion frauds at companies such as WorldCom Inc and Enron Corp.

WorldCom chairman Bernard J. Ebbers, 63, was sentenced to 25 years in prison for orchestrating an $11 billion accounting fraud at his company. Because of Ebbers' age, that could amount to a life sentence.

John J. Rigas, the 80-year-old founder of Adelphia Communications Corp., received 15 years in prison for stealing millions from the cable company for personal extravagances, hiding more than $2.3 billion in debt and systematically lying to investors. Rigas's son and former Adelphia chief financial officer Timothy J. Rigas was given 20 years in prison for his role in the scheme.

Kozlowski and Swartz each made brief statements in court Monday, asking Judge Obus to be lenient. Lawyers for each also pleaded with the court to recognize the former executives' charitable works and the dozens of letters sent on their behalf by friends and family.

Prosecutors, by contrast, asked Obus to send a message that corporate theft will be treated the same as the kind of grand larceny committed with a handgun. They asked for the maximum term of 15 to 30 years for both men.

In imposing the sentence, Obus said, "The heart of this case is basic larceny" and described the charges as "extremely serious." He expressed befuddlement at Kozlowski and Swartz's plight, at one point asking, "how the defendants, with all they had going for them, managed to get themselves into this disastrous position."

Attorneys for Kozlowski and Swartz said they would seek to have their clients released on bail pending appeal of their convictions.


© 2005 The Washington Post Company