Tyco Execs Found Guilty

Kozlowski, Swartz Convicted For Looting Company Of $600 Million

(CBS/AP)  The first trial of the former Tyco executives ended in an April 2004 mistrial because a juror, identified by a newspaper as a holdout for acquittal, received a menacing telephone call and letter.

Kozlowski and Swartz 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 buy extravagant lifestyles that featured art, jewelry and real estate, prosecutors said. An example of that spending was the gaudy $2 million party Kozlowski threw for wife Karen's 40th birthday on the Mediterranean island of Sardinia, they said. Tyco paid about half of the party's cost.

The prosecution's emphasis in the first trial on the lavish spending was pared in the second. Less time was spent on the Manhattan apartment that Kozlowski said he bought for Tyco, which with an $18 million purchase price and furnishings that included a $6,000 shower curtain, raised the cost of the place to more than $30 million.

Lawyers for Kozlowski, with Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, 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 there were no crimes.

A major difference in the second trial was four days of testimony by Kozlowski, who did not testify in the first. He told the jury that he never abused Tyco loan programs or received a bonus to which he was not entitled, and that he never stole anything.

Asked by one of his lawyers, Stephen Kaufman, why a $25 million bonus that he received as a loan forgiveness from the company did not appear on his 1999 tax return, Kozlowski 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."

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