NEW YORK – Jurors weighing charges against two former top executives of Tyco International (TYC) resumed deliberations Wednesday with plans to focus on evidence about a $20 million finder's fee paid to a board member and the company's relocation program.
The panel requested the material Tuesday just before ending its fourth day of deliberations.
Frank E. Walsh Jr. convinced fellow Tyco board members to approve a proposal, championed by Kozlowski, to acquire a company called CIT. Kozlowski, after initially resisting, then arranged payment of the $20 million finder's fee demanded by Walsh, testimony showed.
The board, discovering the payment buried in a proxy statement, demanded that Walsh return the money. Walsh, responding with the term "Adios," walked out of the boardroom and never returned. He later was prosecuted, and that investigation led to the trial of Kozlowski and Swartz.
Two lesser counts being reviewed by the jury involved the alleged alteration of the company's New York and Florida relocation plans. Swartz allegedly added benefits to the plans, unbeknownst to the board, which favored both defendants.
Swartz and Kozlowski are accused of looting the company of $600 million. They are charged with 32 counts of grand larceny, falsifying business records and violating state business laws. They each could face up to 30 years in prison if convicted.
On Tuesday, for the second time since they began deliberating last Thursday, the jurors focused on the concept of "criminal intent."
As he did last week, Manhattan State Supreme Court Justice Michael Obus told the jurors: "A defendant is not guilty of larceny if he believes he had the authority to take the property."
"If he is aware that he is not authorized to take the property, then taking the property is a crime," Obus added.
The jury also heard a reading Tuesday of a lawyer's testimony about loans to the defendants that Tyco forgave: $25 million to Kozlowski and $12.5 million to Swartz.
Marian Tse, an outside attorney for Tyco, had testified about whether the forgiven loans needed to be listed as the defendants' income on a proxy statement that was seen by shareholders.
Tse said she would consider Swartz's loan forgiveness "a bonus that would have to be disclosed" and that "any loan forgiveness would have to be disclosed in the proxy statement."
The jury had spent Monday rehearing Swartz's testimony about the loan he was forgiven in lieu of part of a bonus.
Prosecutors say Kozlowski, 57, and Swartz, 43, stole $170 million from Tyco to finance their lavish lifestyles by taking unauthorized bonuses and abusing company loan programs. They say the two netted an additional $430 million by pumping up Tyco stock prices and selling their shares at market rates from 1995 through 2002.
The defense argued that the men earned every dime and that the board of directors and the company's auditors knew about the compensation and never objected. Kozlowski once made more than $100 million in one year.
Swartz testified that he did not do anything he believed was illegal. He said he and Kozlowski received bonuses and had their loans forgiven at many informal company board meetings at which no minutes were recorded. Kozlowski's defense team rested without calling any witnesses.
During the nearly six-month trial, jurors heard from 47 witnesses and saw more than 700 exhibits, including videotapes of a birthday bacchanal on a Mediterranean island and an $18 million Fifth Avenue apartment with a $6,000 shower curtain in the maid's room.
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. Its operations headquarters are in West Windsor, N.J., but the company is based in Bermuda.