NEW YORK – Prosecutors began cross-examination Thursday of L. Dennis Kozlowski (search), the former chief executive of Tyco International Ltd. (TYC), seeking to show that he had no authority to dip into company coffers on his personal whims.
"Tyco was not your company, was it?" prosecutor Ann Donnelly asked the former CEO.
"Tyco belongs to the shareholders," Kozlowski answered.
"And Tyco's money was not your money to spend on yourself as you pleased, was it?" Donnelly asked.
"That's correct," Kozlowski replied.
Kozlowski, 58, and former Chief Financial Officer Mark H. Swartz (search), 44, are in their second trial on grand larceny charges in Manhattan, accused of looting the conglomerate of $600 million. Their first trial ended in a mistrial in April 2004.
• Click here to read the indictment against Kozlowski and Swartz
Kozlowski took the witness stand Wednesday in his own defense, testifying that his intent was always to boost the company's fortunes, never to commit a crime.
He also said then that he was "not thinking" when he left a $25 million bonus off his 1999 tax return and said he never abused company loan programs.
The prosecutor attacked Kozlowski's claim that he relied on others to prepare financial documents, including his income taxes. She cited his work history as internal auditor and chief financial officer at several Tyco units before he became CEO.
"Now, we're talking about your personal income taxes," Donnelly said to Kozlowski.
She asked whether a $25 million loan forgiveness that he says was a bonus should have been on his W-2 tax form as income for 1999.
"I absolutely agree that the $25 million belonged on my W-2," the former CEO said.
Hinting at a motive for the omission, Donnelly displayed a tax form showing Kozlowski earned $20.77 million and paid $9.66 million in taxes for 1999. She asked how much he would have had to pay if the $25 million had been reported.
Kozlowski replied that his tax bill would have been roughly $17.5 million.
"It's your testimony that you didn't notice that $25 million was missing (from the W-2 tax form)?" Donnelly asked.
"It is absolutely my testimony that I did not notice that it was missing," he replied.
Donnelly asked the former CEO about documents like proxy statements and annual reports that chief executives must sign. One of the charges against Kozlowski and Swartz is that they falsified business records to hide thefts.
Kozlowski said thousands of hours by experts, lawyers and accountants went into preparing the statements and said he relied on them, but he conceded that he signed the documents and was ultimately responsible.
Kozlowski, who made more than $100 million a year in some of his years at Tyco, was asked whether he was once the country's highest paid CEO. He replied, "I believe I read that someplace."
Kozlowski and Swartz are accused of stealing $170 million from Tyco by hiding unauthorized pay and bonuses and by abusing company loan programs and making $430 million by inflating Tyco stock by lying about the company's finances.
Kozlowski's cross-examination was to continue Monday.
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. Nominally based in Bermuda, its operations headquarters are in West Windsor, N.J.
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