By Samuel Maull
The Associated Press
NEW YORK - Prosecutors accused L. Dennis Kozlowski and another executive Tuesday of raiding Tyco International to pay for lavish homes and decadent parties, while defense lawyers said the pair deserved every dollar they got.
The former Tyco CEO and Mark Swartz, the company's former chief financial officer, are accused of stealing $600 million and lying about it in a case that came to symbolize executive excess, down to a $6,000 shower curtain.
According to prosecutor Kenneth Chalifoux, they "didn't win the jackpot, they stole it."
On his way into the courtroom, Kozlowski said: "I'm just glad it's finally getting under way."
While prosecutors consider what happened at Tyco an example of massive corporate larceny, defense attorneys say the executives were being properly rewarded for building Tyco into one of the world's largest companies.
Kozlowski, 56, and 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.
Each could get up to 30 years in prison if convicted.
Stephen Kaufman, Kozlowski's attorney, explained that the company's compensation committee rewarded senior executives for meeting or exceeding corporate goals each year. And the committee's pay and bonus recommendations would be reviewed and approved by an outside auditor, he said.
"There is no second set of books," Kaufman said. "There is no person who's going to come in here and speak in hush-hush tones about secret payments. Criminals act in criminal ways. Dennis Kozlowski did nothing with the intention of violating laws."
Charles Stillman, Swartz' lawyer, said to the jury, "How could Mark have been trying to steal when the company's external auditor was aware of everything?"
Prosecutors say Kozlowski and Swartz stole $170 million by claiming unauthorized compensation and made another $430 million on their Tyco shares by lying about the conglomerate's financial condition from 1995 into 2002.
During opening arguments, Chalifoux said the men stole money even on top of handsome salaries. In 2000, the prosecutor said, Kozlowski earned $106 million in pay and Swartz $54 million.
Chalifoux noted their alleged thefts tended to mirror that ratio. From the pool of money they allegedly stole, he said, Kozlowski usually gave himself about twice as much as he gave Swartz.
A closer look by the Manhattan district attorney's office and the federal Securities and Exchange Commission later revealed huge expenditures, payments and loans that prosecutors say were illegal.
In a now-famous example, Kozlowski allegedly charged to Tyco at least part of a $2 million birthday party for his second wife on the Mediterranean island of Sardinia. The party featured an ice sculpture of Michelangelo's statue David squirting vodka into glasses.
Prosecutors also claim company money was used by Kozlowski to buy a $6,000 shower curtain, a $15,000 umbrella stand, a $17,000 toilette box, a $2,200 gilt metal waste basket, $2,900 worth of coat hangers, and a $445 pin cushion.
Swartz is accused of using millions of Tyco dollars for personal investments and real estate speculation. He allegedly worked with Kozlowski to take millions of dollars in improper bonuses and loans, which he did not have to repay.
Tyco, which has about 270,000 employees and $36 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business. It is nominally based in Bermuda but has its operations headquarters in Portsmouth, N.H.
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