Tuesday, September 20, 2005

Ex-Tyco Execs Get Up to 25 Years in Prison

NEW YORK - Former Tyco CEO L. Dennis Kozlowski was sentenced Monday to up to 25 years in prison for looting the company of hundreds of millions of dollars, the climax of a case of executive greed replete with tales of a $6,000 gold-threaded shower curtain and a $2 million Mediterranean birthday party.

Kozlowski, 58, was led out of the courtroom in handcuffs as his wife quietly sobbed from a bench three rows back. He will be eligible for parole after eight years and four months behind bars in a state prison in New York.

Tyco's former finance chief Mark Swartz, 44, received the same sentence, and state Supreme Court Justice Michael Obus ordered the defendants to pay a total of $134 million in restitution to Tyco International Ltd. In addition, the judge fined Kozlowski $70 million, and Swartz $35 million.

Assistant District Attorney Owen Heimer asked the judge for the maximum sentence of 30 years, saying Kozlowski had "committed theft and fraud on an unprecedented, staggering scale." He said Kozlowski and Swartz stole so much from the company that "Tyco became a worldwide symbol of kleptocratic management."

Kozlowski pleaded with the judge to be as "lenient as possible" and to consider "all the positive things I have done in my life."

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His lawyer, Stephen E. Kaufman, read from letters written on his client's behalf and said, "He's a good man. He's a decent person. His reputation has been tarnished, but his life should not be destroyed."

But the prosecutor said the defendants should be properly punished for stealing $180 million outright, and improperly made hundreds of millions more through manipulations of Tyco's stock.

"This exceeds anything ever prosecuted in this state," Heimer said.

Kozlowski and Swartz join a line of other executives sentenced to prison for lengthy stints after white-collar scandals that outraged the public.

Former WorldCom Chairman Bernard Ebbers was sentenced to 25 years in prison for the $11 billion accounting fraud that toppled the telecommunications company that emerged from bankruptcy as MCI Inc. Adelphia Communications Corp. founder John Rigas was sentenced to 15 years in prison for his role in the looting and fraud at the cable TV company. His son and former finance chief, Timothy Rigas, got 20 years.

Enron Corp. founder Kenneth Lay, former CEO Jeffrey Skilling and former top Enron accountant Richard Causey are expected to go to trial in January.

Unlike WorldCom and Enron, Tyco survived the scandal. Tyco, which has about 250,000 employees and $40 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business.

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Kozlowski's lawyer Stephen Kaufman and Swartz attorney Charles Stillman said they would apply for bail for their clients as promptly as they could. Neither would comment further about the appeals process.

The sentences cap a case that may be best remembered for its tales of executive greed and excess, most notably the $6,000 shower curtain in an $18 million Manhattan apartment. In two trials — the first ended in a mistrial last year — jurors took a video tour of the apartment that was furnished for nearly $20 million and caught scenes from a $2 million birthday party for Kozlowski's wife on the Mediterranean island of Sardinia.

Kozlowski and Swartz will be sent to one of New York's prisons because they were convicted in state court, meaning the former executives will do considerably harder time than they would have at a federal facility.

Kozlowski and Swartz were accused of giving themselves as much as $150 million in illegal bonuses and forgiving millions of dollars in loans to themselves, while also manipulating the company's stock price by lying about the state of Tyco's finances.

Heimer said that the defendants looted Tyco at a time when Kozlowski was the highest paid executive in the country. Though Kozlowski made $267 million from 1999 through 2001, Heimer said "he engaged in a shocking spree of self-indulgence with Tyco's assets."

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Kozlowski and Swartz were convicted in June after a four-month trial on 22 counts of grand larceny, falsifying business records, securities fraud and conspiracy. The first trial ended in mistrial after a juror said she received threats following reports that she made an "OK" signal to the defense team.

Swartz also asked Obus for leniency, while his lawyer, Charles A. Stillman, called him a man of "remarkable decency."

Kozlowski, employed by Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, testified that they never stole anything from Tyco or received anything from the company to which they were not entitled.

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