Former Tyco Honchos Sentenced

Courts continue to impose lengthy prison sentences on former corporate hotshots found guilty of looting their companies.  This week, Tyco’s fallen leader, Dennis Kozlowski joined former WorldCom chief, Bernard Ebbers and Adelphia Communications founder, John Rigas, behind bars.  A New York Supreme Court justice sentenced the former Tyco CEO to a lengthy 8 1/3 to 25 year prison term – somewhat less time than prosecutors were seeking, but far from the minimum sentence that the Kozlowski legal team had sought.

Kozlowski is going to jail because a jury found him guilty of orchestrating a massive fraud that siphoned hundreds of millions of dollar from Tyco.  Mark Swartz,  TYCO’s ex-CFO, also received an 8 1/3 to 25 year sentence for his role in the fraud.  The two men, who will not be eligible for parole until they have served almost 7 years in jail, were led from the courtroom in handcuffs to begin serving their terms.

Jurors found Kozlowski and Swartz guilty in June, after a four month trial that devoted considerable attention to the opulent lifestyles enjoyed by the two defendants – courtesy of Tyco funds.  The defendants had been accused of fueling lavish lifestyles - including such items as a $6,000 shower curtain purchased by Kozlowski -  through illegal bonuses and generous loans, to the tune of $150 million.  It was the second trial for both men, who dodged a bullet the first time around when the court declared a mistrial.  They were not so fortunate this time.

In addition to imposing the prison sentences, the court ordered Kozlowski and Schwartz to pay back $134 million to Tyco.  Kozlowski and Schwartz also were ordered to pay criminal fines of $70 million and $35 million, respectively.

Because they were convicted in a New York State court, the defendants will not be spending the coming years have the opportunity to while away their days in a prison camp or minimum security prison, a so-called “Club Fed” – ala Martha Stewart.  Instead, because they received sentences of more than 6 years, the two men are likely to land in a maximum security state prison which houses violent offenders, and rarely plays host to white collar criminals.

About Hartley Bernstein: Hartley Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.