Kozlowski to Settle Tax Case for $21.2M

By SAMUEL MAULL
The Associated Press
Saturday, May 13, 2006; 3:24 AM

NEW YORK -- Former Tyco CEO L. Dennis Kozlowski agreed Friday to pay $21.2 million to settle a New York state tax case related to his grand larceny conviction for looting the company.

The amount covers $3.2 million in sales taxes that Kozlowski owed on the purchase of $15 million worth of art, as well as $18 million he owes for state and city income taxes, said defense lawyer James DeVita and Assistant District Attorney Ann Donnelly.

The sales tax case, which began as a criminal prosecution, preceded the investigation into thefts from Tyco which resulted in the grand larceny convictions last June of Kozlowski and former Chief Financial Officer Mark H. Swartz.

The two were convicted of looting Tyco of hundreds of millions of dollars to finance lavish lifestyles that included such touches as Kozlowski's now-infamous $6,000 shower curtain. The men are now serving prison sentences of 8 1/3 to 25 years.

The tax deal was announced before state Supreme Court Justice Michael Obus, who presided at the trial for Kozlowski and Swartz. Both are appealing their convictions for conspiracy, grand larceny, securities fraud and falsifying business records.

Obus, with the agreement of prosecution and defense lawyers, gave Kozlowski until Sept. 19 to pay the $21.2 million.

"In light of the sentence the defendant is now serving and his agreement to pay $21.2 million to New York's taxing authorities, no further purpose would be served by continuing the sales tax prosecution," said Manhattan District Attorney Robert Morgenthau.

Morgenthau said the case would not be dismissed unless the money was paid.

Kozlowski still owes about $70 million in fines and $97 million in restitution stemming from his grand larceny conviction. DeVita said $90 million has been raised toward those debts by selling real estate and other assets.

Swartz was ordered after trial to pay a $35 million fine and $37.6 million in restitution. Prosecutors said he has paid $25 million of the total $72.6 million.

Bermuda-based Tyco, which has an operating headquarters in West Windsor, N.J., is best known for its home alarm systems. It is readying for a split by early 2007 into three separate operations: fire and security, electronics and health care.

Last week, Sotheby's auction house sold for a combined $7.9 million two paintings _ a Monet and a Renoir _ that once hung in a $30-odd million Manhattan apartment Kozlowski used. The money was to be put in escrow while lawyers sort out whether Tyco or Kozlowski was the owner.

Morgenthau said the Kozlowski tax case was part of his ongoing investigation into whether galleries, dealers and customers had avoided paying state sales taxes. He said his office has recovered $37.5 million in taxes and fines for the state and city.


© 2006 The Associated Press