updated 2/8/2004 6:54:49 PM ET 2004-02-08T23:54:49

The defense of Dennis Kozlowski, the former Tyco chief executive on trial, begins on Monday after more than four months of witnesses and testimony for the prosecution.

The trial is the first involving a chief executive since corporate America erupted in scandal with Enron in 2001. New York prosecutors rested their case last week. The final piece was submitting to the jury Mr. Kozlowski's July 2000 divorce agreement.

Mr. Kozlowski and Mark Swartz, Tyco's former chief financial officer, are on trial for allegedly stealing $600 million in unapproved compensation and improper share deals.

They face 30 years in state prison for 33 charges of grand larceny, securities fraud, conspiracy, falsifying business records and enterprise corruption. They have pleaded not guilty.

It is not clear whether Mr. Kozlowski or Mr. Swartz will take the witness stand in their defense. Legal experts say it is always a tough call to put a well-known defendant on the stand.

It is also unclear who the defense will choose as the first witness. Attorneys for Mr. Kozlowski said one potential witness is an expert on Bermuda law with regard to restricted stock. Tyco is a Bermuda-incorporated company.

Following the order of the indictment by the New York district attorney, Mr. Kozlowski's defense team -- led by Stephen Kaufman -- will present its case first. Mr. Swartz's defense -- led by Charles Stillman -- follows.

The defense case could last most of February, potentially sending the trial into its sixth month.

Already on the attack
Attorneys for Mr. Kozlowski officially start their case Monday, but they have already begun their attack. They struck last week, trying to discredit key prosecution testimony and attacking the district attorney's office by linking the trial to an oil scandal, under federal and state investigation. Although the judge denied the defense motion, it showed rougher play.

They struck at what defense attorneys admitted in the motion as "damaging" testimony from Leon Cooperman, chairman of prominent Wall Street hedge fund Omega Advisors. Mr. Cooperman testified last month that Mr. Kozlowski lied to him, telling him personally that the board approved a belatedly disclosed $20m finders fee payment for the CIT acquisition to ex-director Frank Walsh. It had not. Based on that false information, Mr. Cooperman said he bought $50 million more of Tyco shares, and lost money.

The defense's motion tried to connect Mr. Cooperman with a federal indictment against Swiss lawyer Hans Bodmer -- accused of bribing senior Azerbaijan officials. The indictment alleges Viktor Kozeny's investment vehicles convinced Omega to purchase $126 million in privatization vouchers in 1998.

Manhattan prosecutors also indicted Mr. Kozeny in October, accusing him of using the privatization investment to defraud Mr. Cooperman's Omega of $182 million. Mr. Kozlowski's attorneys claimed they were deprived information about Mr. Cooperman's status in the oil investigation, or agreements reached to secure his testimony.

Copyright The Financial Times Ltd. All rights reserved.


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