Former Tyco International Ltd CEO Dennis Kozlowski and ex-Chief Financial Officer Mark Swartz were charged with looting the company in a scheme that made them more than US$600 million through stock fraud and outright theft.
Also indicted was Tyco's former General Counsel Mark Belnick for allegedly falsifying records to hide more than US$14 million in company loans to himself. A New York judge Tuesday signed a temporary order, unsealed Thursday, freezing more than US$600 million in assets held by Kozlowski and Swartz.
After Enron Corp's collapse last year, authorities targeted America's board rooms and executive suites for prosecution as breeding grounds for corruption. Today's indictment recalls charges in July against Adelphia Communications Corp founder John Rigas and his family, accusing them of siphoning more than US$1 billion from the sixth-largest US cable operator, driving it into bankruptcy.
"Tyco is a replay of Adelphia in the sense that there was an extraordinary level of self-dealing and diversion of assets to corporate insiders," said John Coffee, a Columbia University law professor. "In the recent cases, Tyco looks the most sordid in terms of all the distortions of the mechanisms of corporate governance."
Paul Lapides, director of the Corporate Governance Center at Kennesaw State University in Georgia, called the alleged scheme "greed beyond comprehension."
All three men were brought into a Manhattan courtroom Thursday afternoon handcuffed behind their backs. State Supreme Court Justice Michael Obus set bail at US$100 million for Kozlowski and US$50 million for Swartz. Obus released both men and said they must post 10 percent of their bail in cash or secured by property by next Thursday.
Belnick was also released on his own recognizance and must post a US$1 million bond by next week.
The three Tyco executives treated the company "as their private bank, taking out hundreds of millions of dollars of loans and compensation without ever telling investors," the Securities and Exchange Commission said in a separate civil case.
Tyco, registered in Bermuda and based in Exeter, New Hamp-shire, is the largest maker of undersea fiber-optic cable and electrical connectors, with US$36 billion in revenue in the most recent fiscal year. In July, it named Motorola Inc's Edward Breen as chairman and chief executive to replace Kozlowski, who was ousted June 3, the day before he was indicted on charges of evading US$1 million in New York sales tax owed on art purchases.
Tyco sued Kozlowski Thursday in Manhattan federal court, seeking hundreds of millions of dollars in damages.
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