Ex-Tyco bosses get 8 years in prison

Andrew Dunn

Monday, Sept. 19, 2005 | 11:21 a.m.

L. Dennis Kozlowski, whose $6,000 shower curtain and $15,000 umbrella stand made him a symbol of corporate greed, and his former top deputy Mark Swartz were sentenced to 8 1/3 to 25 years in prison for looting Tyco International Ltd.

Justice Michael Obus sentenced the pair today in state Supreme Court in New York and rejected their request to remain free pending appeals. He ordered them to pay a total of $134.3 million in restitution.

Kozlowski, 58, the former Tyco chief executive, and Swartz, 45, the former chief financial officer, were convicted in June of 22 felonies each. Their crimes included a dozen counts each of grand larceny, the most serious crime, for awarding themselves and others more than $150 million in unauthorized bonuses and misusing Tyco loan programs.

"The heart of this case is basic larceny," Obus said. He called the crimes "extremely serious charges." Kozlowski and Swartz were also convicted of defrauding shareholders of more than $400 million.

Obus distinguished the case from those involving corporate scandals at Enron Corp. and WorldCom Inc. "This is not about any other case," he said.

WorldCom and Enron filed and largest and second-largest bankruptcies in U.S. history, respectively, after their CEOs were ousted amid claims of accounting fraud. Tyco averted bankruptcy and has a market value of $59.3 billion.

Former WorldCom Chairman Bernard Ebbers was sentenced to 25 years in prison for directing a scheme to cook the company books. Adelphia Communications Corp. founder, John Rigas, 80, was sentenced to 15 years in federal prison for fraud and his son Timothy, 49, to 20 years. All three are free pending appeals.

Enron's former chairman, Kenneth Lay, and ex-CEO Jeffrey Skilling are to be tried in January on fraud charges.

Kozlowski and Swartz were tried twice. The first case ended in a mistrial in April 2004 when a juror identified as a holdout for acquittal said she had been threatened. Between the two trials, former Tyco general counsel Mark Belnick was tried for grand larceny and acquitted.

The second trial of Kozlowski and Swartz lasted five months. Five former Tyco board members and 12 former and current employees testified, as did both defendants. During the course of the trial, jurors were shown reams of company records listing various company loans and bonuses that prosecutors with the office of Manhattan District Attorney Robert Morgenthau said were unauthorized.

The jury got a glimpse of the birthday party Kozlowski threw for his wife on the Italian island of Sardinia with $1 million in company money and the $30 million Fifth Avenue apartment that he charged to the company.

Kozlowski was ousted in June 2002 just before Morgenthau accused him of evading sales tax on purchases of artworks. New management took over at Tyco and avoided bankruptcy. Swartz left in September 2002.

Bermuda-based Tyco, which operates out of West Windsor, N.J., is the world's biggest maker of electronic connectors, industrial valves and security systems.