Friday, November 16, 2007

Convictions of Tyco's Kozlowski and Swartz Upheld

The convictions of Tyco's former CEO Dennis Kozlowski and CFO Mark Swartz on grand larceny charges were upheld by the New York Supreme Court, Appellate Decision.  The court rejected the claim of the defendants that they were entitled to the payments they received from the company that the government accused them of effectively stealing by not disclosing the transfers.  The opinion (here) states:

Defendants' testimonial claims of entitlement -- that the bonuses represented early payouts of money that would otherwise have been due them or, at least, that they believed was due them -- presented a question of fact for the jury and was, indeed, a hard sell. While the committee could have made midyear payouts if it chose to, such an event would have run counter to Tyco's highly touted pay-for-performance philosophy.

More significantly, though, the entitlement claim was flatly refuted by Mark Foley, the Tyco executive who was responsible for the calculation of the year-end figures on which the annual bonuses were based. In fact, Foley's testimony unequivocally established that defendants received everything they were entitled to under the end-of-the-year formula. Thus, defendants' claims only succeeded in pitting their credibility against that of the committee members and Foley and various other members of their own staff. Defendants even contradicted each other on a number of points. The jury's resolution of this factual issue is amply supported by the weight of the evidence since defendants' self-serving testimony was illogical, internally inconsistent, refuted by Tyco's records and shown to be false by all other witnesses. While defendants assert that their entitlement and good-faith claims present a legal sufficiency issue, we cannot discern one except for the 1999 bonus, preserved by the motion for a trial order of dismissal, which we reject.

While the appellate court found the admission of statements by Swartz, made to David Boies during the internal investigation that implicated Kozlowski, was improper as to Kozlowski because the conspiracy had already ended, the error was deemed harmless.  The defendants received sentences of 8+ to 25 years and have been in a New York State prison since September 2005.  Kozlowski currently is in the Mid-State facility, a medium security prison, and Swartz is in the medium security prison in Oneida.  According to the New York Department of Correctional Services website (here), Kozlowski and Swartz are first eligible for parole in January 2014.  The appeal now moves to the New York Court of Appeals. (ph)

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