Friday, June 17, 2005

Accounting: Lured to dark side of the force?

Former Tyco CEO Dennis Kozlowski and ex-CFO Mark Swartz were found guilty Friday of looting Tyco of $150 million worth of undeserved bonuses and secretly forgiven loans.

They were also charged with misrepresenting Tyco's financial condition in order to inflate the company's share price and then sell $575 million in company shares and options.

A jury of six men and six women came back with their verdict after 11 days of deliberations following a trial in a New York State court that lasted over four months.

After the verdicts were read Friday afternoon, Dennis Kozlowski's face was scarlet red and his daughter buried her face in her hands, according to an eyewitness. Swartz' wife appeared to be in shock and Kozlowski's wife was crying.

Both men were found guilty of 12 counts of first-degree grand larceny, one count of fourth-degree conspiracy, one count of violation of general business law, and eight counts of first-degree falsifying of business records.

This was the two former executives' second trial -- the first ended in a mistrial in April 2004 after a juror claimed she had received threatening phone calls. It was a close call for Kozlowski and Swartz: the juror was reportedly the only one holding out for an acquittal. The 11 other jurors wanted to convict the duo.

Because Kozlowski and Swartz narrowly escaped a conviction, legal experts said Friday they weren't surprised by the outcome this time around.

"While it's hard to compare-and-contrast (the two trials), there's no question that prosecutors tried a more streamlined case this time," said Jacob Frenkel, a former prosecutor.

The case uncovered lavish spending by Kozlowski during his tenure as Tyco's top executive, including a $1 million birthday party he threw for his wife. Prosecutors left out of the second trial sordid details about that lavish birthday party which Kozlowski threw for his wife on the Italian island of Sardinia. They omitted too references to a $6,000 shower curtain that Kozlowski allegedly bought using Tyco's money.

After the verdict was read Friday, the government requested mandatory jail time of 15 to 30 years in state prison.

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