NEW YORK – Ex-Tyco International Ltd. (TYC) head Dennis Kozlowski (search) and his former finance chief could face lengthy prison terms when sentenced today if the recent punishments of some other U.S. executives convicted of fraud are any guide.
Kozlowski and ex-Tyco CFO Mark Swartz (search) are set to be sentenced by Manhattan Supreme Court Judge Michael Obus after their June convictions of looting the company. Each faces a maximum of 30 years in state prison, though legal experts have said they likely will receive lesser sentences.
Still, the prison terms handed down by judges in similar cases recently "don't bode well for the defendants," said Randy Mastro, a former federal prosecutor who now handles white-collar criminal defense at law firm Gibson, Dunn & Crutcher.
"It's an indication of a trend in sentencing in these major corporate scandals," he said.
Lawyers for Kozlowski and Swartz did not immediately respond to requests for comment last week.
Kozlowski, who as chief executive was credited with building Tyco into one of the world's biggest manufacturing conglomerates, and Swartz were convicted of stealing more than $150 million from the company through secretly forgiven loans and undeserved bonuses.
Prosecutors said they used the money to pay for pricey artwork, extravagant parties and a fancy Manhattan apartment for Kozlowski that was furnished with a $6,000 shower curtain and $15,000 umbrella stand.
They remain free on bail pending their sentencings.
The Tyco case was one of a string of government prosecutions aimed at convicting corporate chieftains of boardroom wrongdoings.
Former WorldCom (search) CEO Bernard Ebbers (search) was sentenced in July to 25 years in prison for orchestrating a massive fraud at the telecommunications company -- a sentence that surprised many legal observers for its severity.
Adelphia Communications Corp. (search) founder John Rigas (search) was ordered in June to serve 15 years in prison for conspiring to loot the cable company of millions of dollars. Both Ebbers and Rigas, who is 80 and in frail health, have been allowed to stay out of jail while they pursue appeals.
One big difference between the Tyco case and some other corporate fraud cases is that Kozlowski and Swartz were tried in a New York state court, rather than in a federal court.
In terms of sentencing, that could work in the two men's favor, said James Moss, a former federal prosecutor who now handles white-collar criminal matters at law firm Herrick Feinstein.
Moss said that Kozlowski and Swartz could be eligible for parole under the state system, whereas the federal system has abolished parole and only grants small reductions in prison terms for inmates' good behavior.
Also, state judges in white-collar cases are not required to deal with restitution issues, although the judge in the case certainly could order the defendants to pay restitution, Moss said.
However, Kozlowski and Swartz also face the prospect of rougher prison conditions in the state system. Federal prison facilities for white-collar criminals sometimes are termed "Club Feds" because they are not as heavily guarded and frequently resemble college dormitories.
"You don't have some of the cushier options in the state system," Moss said.