Tyco Trial Awaits Jury's Verdict
Mario Tama  /  Getty Images
Former Tyco chief executive officer L. Dennis Kozlowski arrives at Manhattan State Supreme Court with his wife Karen for the fifth day of jury deliberations in New York City. Kozlowski and Mark Swartz, the former chief financial officer, are charged with looting the conglomerate of $600 million.
updated 3/24/2004 6:04:26 PM ET 2004-03-24T23:04:26

Jurors in the trial of two ex-Tyco International executives accused of looting the company of $600 million asked the judge on Wednesday to review the former chief financial officer’s testimony about bonuses, along with documents on the payouts.

Those bonuses, paid to ex-Tyco CFO Mark Swartz and ex-chief executive L. Dennis Kozlowski, total $84 million.

Swartz and Kozlowski are accused in their grand-larceny trial of taking unauthorized bonuses and abusing company loan programs.

Swartz testified during the nearly six-month trial that he did not do anything he believed was illegal. He said he and Kozlowski received bonuses and had their loans forgiven at many informal company board meetings at which no minutes were recorded.

The judge said it would take time to gather the readback materials, and he sent the jurors home. Deliberations were to resume Thursday morning.

The jurors, who received the case last week, started their fifth day of deliberations Wednesday morning mulling evidence about a $20 million finder’s fee paid to a company board member and the conglomerate’s New York and Florida relocation plans. The panel had requested the material Tuesday.

The finder’s fee and the bonuses are related to one of the top charges, grand larceny, against Swartz and Kozlowski.

Frank E. Walsh Jr. convinced his fellow Tyco board members to approve a proposal, championed by Kozlowski, for acquiring a company called CIT. After initially resisting, Kozlowski arranged payment of the $20 million finder’s fee demanded by Walsh, testimony showed.

The board later demanded that Walsh return the money. He refused.

He later was prosecuted, and that investigation led to the trial of Kozlowski and Swartz.

Two lesser counts being reviewed by the jury involved the alleged alteration of the company’s New York and Florida relocation plans. Swartz allegedly added benefits to the plans, unbeknownst to the board, that favored both defendants.

Swartz and Kozlowski are charged with 32 counts of grand larceny, falsifying business records and violating state business laws. They each could face up to 30 years in prison if convicted.

The jury on Tuesday heard a reading of a lawyer’s testimony on loans that Tyco forgave the co-defendants: $25 million to Kozlowski and $12.5 million to Swartz.

Marian Tse, an outside attorney for Tyco, had testified about whether the forgiven loans needed to be listed as the defendants’ income on a proxy statement that was seen by shareholders.

Tse testified that she would consider Swartz’s $12.5 million loan forgiveness a bonus that needed to be disclosed and that “any loan forgiveness would have to be disclosed in the proxy statement.”

Jurors during the trial heard 47 witnesses and saw more than 700 exhibits, including two videotapes of a birthday bacchanal on a Mediterranean island and an $18 million Fifth Avenue apartment with a $6,000 shower curtain in the maid’s room.

Prosecutors say Kozlowski, 57, and Swartz, 43, stole $170 million to finance their lavish lifestyles by taking unauthorized bonuses and abusing company loan programs. They say the two netted an additional $430 million by pumping up Tyco stock prices and selling their shares at market rates from 1995 through 2002.

The defense argued that the two men earned every dime and that the board of directors and the company’s auditors knew about the compensation and never objected. Kozlowski once made more than $100 million in one year.

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. Its operations headquarters are in West Windsor, N.J., but the company is based in Bermuda.

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