- The Washington Times - Tuesday, October 7, 2003

NEW YORK (AP) — The former Tyco International executives accused of pilfering company funds for lavish homes and decadent parties spent the money like lottery winners, a prosecutor said yesterday.

In opening arguments for the trial of L. Dennis Kozlowski, the former Tyco chief executive officer, and Mark Swartz, the company’s former chief financial officer, prosecutors said the men stole $600 million and lied about their actions.

“These defendants were trusted with the assets of their company, and they abused that trust,” chief prosecutor Kenneth Chalifoux said.

On his way into the courtroom, Mr. Kozlowski said: “I’m just glad it’s finally getting under way.”

While prosecutors consider what happened at Tyco massive corporate larceny, defense attorneys say the executives were being properly rewarded for building Tyco into one of the world’s largest companies.

Mr. Kozlowski, 51, and Mr. Swartz, 45, face larceny charges, enterprise corruption — a charge usually aimed at organized-crime figures — and lesser offenses that include filing false business records and conspiracy. Both face up to 30 years in prison.

Prosecutors say Mr. Kozlowski and Mr. Swartz stole $170 million by claiming unauthorized compensation and made another $430 million on their Tyco shares by lying about the firm’s financial condition from 1995 through 2002.

During opening arguments, Mr. Chalifoux said the men stole money even on top of handsome salaries. In 2000, Mr. Kozlowski was paid $106 million and Mr. Swartz $54 million.

Mr. Chalifoux said their thefts tended to mirror that same ratio. From the pool of money they stole, he said, Mr. Kozlowski usually gave himself about twice as much as Mr. Swartz.

“They schemed to steal money and cover it up, and they were very successful,” Mr. Chalifoux said.

The two are expected to argue that the millions they are accused of stealing were actually loans and bonuses approved by the board and disclosed to outside auditors.

The key to their acquittal will be convincing a jury that the company’s board knew about the compensation, that they worked hard to improve Tyco and deserved the pay.

Mr. Kozlowski’s attorney, Stephen Kaufman, said previously that while his client made more than $100 million in one year, “he earned all of it.” Mr. Kaufman has also contended that all the people who were supposed to know about the compensation did know.

Assistant District Attorney Mark Scholl has called the “all the right people knew” argument “rhetoric and sophistry” intended to distract jurors from inherently improper deals. Justice Michael J. Obus said he would allow the defense to make its argument within limits.

The Tyco leaders’ luxurious lifestyles first attracted attention when Mr. Kozlowski was charged in August 2002 with evading more than $1 million in New York sales tax on $13 million worth of art.

A closer look by the Manhattan District Attorney’s Office and the Securities and Exchange Commission revealed huge payments and loans that prosecutors say were illegal.

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