NEW YORK – From the $18 million Manhattan apartment with a $6,000 shower curtain to a $2 million birthday party in the Mediterranean, the case against former Tyco CEO L. Dennis Kozlowski (search) and a subordinate came to epitomize corporate greed. On Friday, a jury convicted Kozlowski and Tyco's former finance chief, Mark H. Swartz (search), of looting nearly $600 million from the company to finance lifestyles of kingly opulence. They face up to 30 years in prison.
The pair left the courthouse through a back door without speaking to reporters, but their lawyers promised prompt appeals. They were allowed to remain free on $10 million bail apiece pending an Aug. 2 pre-sentencing hearing.
Kozlowski and Swartz have joined a string of executives convicted in recent years in high-profile corporate wrongdoing cases, among them former WorldCom CEO Bernard Ebbers (search) and Adelphia Communications Corp. founder John Rigas (search) and his son, Timothy.
Richard Scrushy, founder and former chief executive at HealthSouth Corp., is on trial on fraud charges and awaiting a jury verdict in federal court in Birmingham, Ala. And former Enron Corp. executives Kenneth Lay and Jeffrey Skilling are scheduled to go on trial early next year.
Kozlowski, 58, and Swartz, 44, were convicted of grand larceny, falsifying business records, securities fraud and other charges. The jury deliberated over 11 days after a four-month trial in Manhattan state Supreme Court.
The men had testified they were unaware of any wrongdoing when they accepted enormous corporate bonuses and hefty loans that were later forgiven by Tyco.
Their wives sat in the courtroom, their heads hanging, as the jury foreman intoned guilty verdict after guilty verdict — 22 for each. The men were each acquitted of one charge of falsifying records about company loans for homes in Boca Raton, Fla.
The trial was the second for both men. Their first ended in a mistrial last year after one juror was identified in news reports as a holdout for acquittal and was improperly contacted.
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.
Both used Tyco's money to buy extravagant lifestyles that featured art, jewelry and real estate, prosecutors said. An example of that spending was the $2 million toga party Kozlowski threw for wife Karen's 40th birthday on the Mediterranean island of Sardinia, they said. Tyco paid about half of the party's cost.
Kozlowski became the object of ridicule after it was revealed that the furnishings at his Manhattan apartment included a $6,000 shower curtain and other extravagances that brought the price of the place to more than $30 million.
The prosecution's emphasis in the first trial on such lavish spending was pared in the second.
Lawyers for Kozlowski, with Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, said the executives believed they were acting lawfully when they accepted compensation and loan forgivenesses or spent Tyco's money. There was no criminal intent by either man, they said, and therefore there were no crimes.
A major difference in the second trial was four days of testimony by Kozlowski, who did not testify in the first. He 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.
"I just was not thinking when I signed my tax return that I had a $25 million loan forgiveness," Kozlowski said. "Year in and year out at Tyco, my tax returns for the most part had been correct. I didn't pick up on it."
Prosecutors called Kozlowski's explanation for this omission and for other actions by him and Swartz "ludicrous," and "despicable."
Tyco has been reorganizing under new management since Kozlowski left in 2002 amid the charges against him. The company, based in Bermuda but with operational headquarters in West Windsor, N.J., reported earnings last month that slightly beat analysts' expectations.
While it has many divisions, Tyco is best known for its ADT Security business.