Jury Gets Tyco Looting Case
Jurors will resume deliberations Friday whether two former executives looted more than $600 million from Tyco International and used the money for personal excesses.
Jurors began their talks after hearing more than five months of arguments and testimony and a morning of instructions from State Supreme Court Justice Michael Obus.
On Wednesday, a prosecutor attacked the testimony of former chief financial officer Mark Swartz. As the defense's only called witness, Swartz took the stand to explain money he and co-defendant L. Dennis Kozlowski, Tyco's former chief executive officer, received while they were running the company.
About most things, Assistant District Attorney Marc Scholl said Swartz was simply lying. The prosecutor called an arithmetic demonstration "hocus pocus" when the former CFO tried to show the jury the formula for calculating his bonus. Scholl said Swartz made up some of the numbers.
The prosecutor also said the defendants never produced minutes of meetings at which they said the board of directors had approved tens of millions of dollars worth of bonuses and loan forgiveness for them. That, Scholl said, was because there were no such minutes or approvals.
Taking money that was not authorized in the company director's records was wrong, "plainly and simply," Scholl told the jury.
Prosecutors say Kozlowski, 57, and Swartz, 43, wrongfully took $600 million. They say the two stole $170 million by taking unauthorized bonuses and by abusing company loan programs and netted another $430 million by pumping up Tyco stock prices and selling their shares at market rates from 1995 through 2002.
The defendants are charged with a total of 32 counts of grand larceny, falsifying business records and violating state business laws. The grand larceny charge — a mega-larceny under state law since it alleges theft of more than $1 million — is punishable by up to 25 years in prison.
Prosecutor Ann Donnelly described the frantic efforts of the defendants to keep Tyco's stock price from collapsing after Kozlowski paid an improper $20 million fee to one of the board members. "It really marks the unraveling of the conspiracy between the two defendants," she said.
It was then the board of directors hired a law firm to investigate and the findings of the investigation led to charges against Kozlowski and Swartz.
Donnelly said the defendants in the meantime, as Tyco stock fell, were "desperate to stem the tide."
"Dennis Kozlowski tells lie upon lie," she said.
The prosecution has presented evidence of the pair's excesses — including a video tour of an $18 million Tyco-owned Manhattan apartment, a $6,000 shower curtain, and a $2 million birthday party on the island of Sardinia for Kozlowski's wife.
Kozlowski's lawyer, Stephen Kaufman, has said that Tyco paid Kozlowski huge sums of money because he helped the company earn billions, and the board of directors was aware of every penny he received. Swartz's lawyer, Charles Stillman, has said there was "not one thimbleful of proof" against his client.
Tyco, which has about 270,000 employees and $36 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.