A New York appellate court has upheld the convictions of former Tyco International executives L. Dennis Kozlowski and Mark J. Swartz, who were charged with stealing more than $100 million from their company.
"Contrary to their arguments, the larceny convictions relating to bonuses were based on legally sufficient evidence and were not against the weight of the evidence," Justice Joseph P. Sullivan wrote for the unanimous four-judge Appellate Division, 1st Department, panel in People v. Kozlowski, 5259/02. "The evidence amply supports the conclusion that defendants took unauthorized bonuses from Tyco in 1999 and 2000."
Justices David Friedman, John T. Buckley and Bernard J. Malone joined the opinion.
Kozlowski, Tyco's ex-chief executive officer, and Swartz, the ex-chief financial officer, were charged, as Sullivan wrote in the decision, with "engaging in large-scale self-dealing and drawing on Tyco's treasury, as they saw fit, for their own personal use, including investments, luxuries and expenses."
In June 2005, a jury convicted the men each of 22 of 23 counts, including grand larceny, falsification of business records, securities fraud and conspiracy. Their convictions followed a 2004 mistrial.
Manhattan Supreme Court Justice Michael J. Obus sentenced both Kozlowski, 60, and Swartz, 47, to eight and-a-third to 25 years in prison and ordered them to pay fines of $70 million and $35 million, respectively. They have been in prison for two years.
The defendants appealed, raising what Sullivan called a "host" of issues.
Following oral arguments last month, the 1st Department Thursday affirmed their conviction, refusing to reduce either the length of the sentences or the size of the fines.
Sullivan's 17-page decision walked through the specific counts, finding that the evidence was sufficient to convict the executives and that the guilty verdicts were not against the weight of the evidence.
Sullivan wrote that only the company's compensation committee had the authority to grant the 1999 and 2000 bonuses. "Every member of that committee, with the exception of Philip Hampton, who had died early in 2001, before the trial, testified to never having heard of those mid-year payments, much less to have voted approval," the judge said.
He also wrote that the "evidence was legally sufficient to support Kozlowski's conviction for stealing $1.975 million (count 10) for the purchase of three paintings at a London gallery, and that conviction is not against the weight of the evidence. Kozlowski did not have authority to spend Tyco's money on paintings for his personal use ... There is no indication of a business purpose for the purchase of these paintings, used to furnish the luxurious Fifth Avenue apartment Kozlowski and his wife occupied and title to which was in his name personally."
NO 'ENTITLEMENT'
Further, the panel rebuffed the defendants' claim that the bonuses merely represented early payouts of money due them. Sullivan said that was a question for the jury, but that "was, indeed a hard sell." He said that the "entitlement" claim was "flatly refuted" by testimony of the executive responsible for calculating year-end figures on which the bonuses were based.
The panel also rejected the defendants' various evidentiary challenges, including several claims regarding the testimony of attorney David Boies, whose firm Boies, Schiller & Flexner oversaw an internal investigation for Tyco.
Amyjane Rettew and Gina Mignola represented the Manhattan District Attorney's Office on appeal.
In a statement Thursday, District Attorney Robert M. Morgenthau praised the decision.
"Today's Appellate Division decision recognizes that Dennis Kozlowski and Mark Swartz were convicted after a full and fair trial of grand larceny and other crimes," he said. "The jury found from the overwhelming testimony and documentary evidence that the defendants were guilty of theft on an unprecedented scale. They actively conspired to steal and to deceive not only Tyco's Board of Directors but the investing public as well."
Austin V. Campriello, James R. DeVita, Beth Brandler, Cari Sommer and Kathryn E. Gebert of Bryan Cave; John S. Martin of Martin & Obermaier; and Stephen E. Kaufman and Andrew Kaufman of Stephen E. Kaufman, P.C., represented Kozlowski.
Campriello said, "We are disappointed in the decision, we are reviewing our options and we intend to pursue any appropriate appellate avenues."
The Appellate Division decision followed an extensive Tuesday interview by Fox Business News with Kozlowski. In that interview, the former executive continued to insist he was innocent, saying that the performance of Tyco's stock during his watch justified the compensation he received.
Nathaniel Z. Marmur, Michael J. Grudberg, Lara A. Shalov and Mary Margulis-Ohnuma of Stillman, Friedman & Shechtman represented Swartz.
"We are disappointed by the ruling, which does not even address our basic point: that Mark Swartz was entitled to everything that he received under the plain terms of Tyco's bonus plan," Marmur said Thursday. "We will continue to pursue this appeal in order to vindicate Mr. Swartz's innocence."