Kozlowski, Swartz Found Guilty in Tyco Retrial

Former Tyco International Ltd. (TYC) Chief Executive Dennis Kozlowski (search) and finance chief Mark Swartz (search) Friday were found guilty of grand larceny, conspiracy and securities fraud for stealing more than $150 million in secretly forgiven loans and unauthorized bonuses.

The jury of six women and six men returned their verdict on the 11th day of deliberations. The trial in State Supreme Court in Manhattan lasted more than four months. The first trial ended in a mistrial last year.

Kozlowski, 58, was found guilty of conspiracy, fraud and falsifying business records. The jury found Swartz, 44, guilty of grand larceny, securities fraud and eight of nine counts of falsifying business records.

Both former executives were found not guilty on one of the charges of falsifying false documents. The pair now face up to 30 years in prison on their convictions — the maximum sentence for both under the law, prosecutors said.

"We are disappointed, and we will deal with this on appeal," promised Swartz's attorney, Charles Stillman.

Although prosecutors called for the men to be jailed pending sentencing, both were allowed to remain free on $10 million bail apiece. Their dejected wives sat in the courtroom, their heads hanging, as the jury foreman intoned guilty verdict after guilty verdict against the pair —— 22 for each.

Kozlowski and Swartz, who were each acquitted of just a single charge, were due back in court Aug. 2 for a pre-sentencing hearing.

The case is one of a series of recent government prosecutions aimed at convicting former corporate chieftains of alleged boardroom wrongdoings.

In March, former WorldCom Inc. CEO Bernard Ebbers was (search) found guilty of masterminding an $11 billion fraud that forced the telecommunications company into bankruptcy. A jury in Birmingham, Alabama is still deliberating the fate of former HealthSouth Corp. CEO Richard Scrushy (search), who is accused of orchestrating a $2.7 billion accounting fraud.

Kozlowski and Swartz were accused of enriching themselves by nearly $600 million by taking unauthorized pay and bonuses, abusing loan programs and selling their company stock at inflated prices after lying about Tyco's finances.

Often, prosecutors said, the defendants hid their alleged thefts by failing to disclose the bonuses and loan forgivenesses in company prospectuses and federal filings, and bought the silence of underlings with outsized compensation.

Both used Tyco's money to fund extravagant lifestyles of fancy art, jewelry and real estate, prosecutors said. An example of that spending was the gaudy $2 million party Kozlowski threw for his wife Karen's 40th birthday on the Mediterranean island of Sardinia, they said. Tyco paid about half of the party's cost.

The prosecution's emphasis in the first trial on the lavish spending was pared in the second. Less time was spent on the Manhattan apartment that Kozlowski said he bought for Tyco, which with an $18 million purchase price and furnishings that included a $6,000 shower curtain, raised the cost of the place to more than $30 million.

Defense lawyers for Kozlowski, with Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, had argued that Tyco's other former board directors had "selective" memories when they testified about events at Tyco to protect themselves from pending lawsuits by stockholders.

During the trial, which began Jan. 18, the jury listened to 27 witnesses — 25 called by prosecutors and two defense witnesses, Kozlowski and Swartz, who testified on their own behalf.

Kozlowski, who did not testify in the first trial, told the jury that he never abused Tyco loan programs or received a bonus to which he was not entitled, and that he never stole anything.

Asked by one of his lawyers, Stephen Kaufman, why a $25 million bonus that he received as a loan forgiveness from the company did not appear on his 1999 tax return, Kozlowski said he could not explain why.

He testified that his pay package was "confusing" and "almost embarrassingly big" but that he never committed a crime as the company's top executive.

Prosecutors called Kozlowski's explanation for this omission and for other actions by him and Swartz "ludicrous," and "despicable."

The first trial ended in a mistrial in April 2004 when a juror received a threatening letter and phone call after her name was printed by some news organizations during deliberations. According to some courtroom observers, she also gave an "OK" signal to the defense.

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.

Reuters and the Associated Press contributed to this report.