Taking Down the Lion: The Rise and Fall of Tyco's Dennis Kozlowski (21 page)

Throughout five months of testimony, many witnesses were asked directly or indirectly about Tyco corporate culture: what was it like to work there? Tyco in-house counsel Brian Moroze testified a couple of weeks after the trial began. Moroze had an impressive background: Yale undergrad, law degree from the University of Virginia, and he served as an officer in the U.S. Army. After the Army,
he worked in the Civil Rights Division of the U.S. Department of Health, Education, and Welfare. Moroze was an attorney for another publicly traded corporation before he joined Tyco in 1986, when John Fort was the CEO. When he testified at Kozlowski’s trial, Moroze had been with Tyco for seventeen years and he was still Deputy General Counsel at the company.
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Much like Brad McGee and Mark Belnick, Brian Moroze did not seem like the kind of person you would want around if you were trying to do anything questionable. Another Boy Scout.

Moroze was asked about Tyco corporate culture. Because he had experience inside other large corporations, he was able to testify with some perspective. He told the jury that Tyco was “not a company that was overly concerned with formalized decision-making protocols.” Moroze joined the company several years before Kozlowski was named CEO, and he confirmed that the informal nature of decision-making was done the same way when John Fort was the CEO as it was when Kozlowski headed the company.
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Moroze also testified about legal documents he drafted and retained in the normal course of business at Tyco. Counter intuitively, the prosecution entered into evidence documents that showed indisputably that the transactions they described to the jury as concealed crimes were found on the books and records of the company. Moroze told jurors that many people, from secretaries to lawyers to heads of operating divisions, played a part in processing and recording transactions that the prosecution used as proof of Kozlowski’s secreted criminal activity. Moroze said he regularly discussed those documents, policies, loans, and other records with outside law firms and with Tyco’s auditor, PwC.
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It was an odd criminal case; both sides used the same evidence. There seemed to be few disputed facts because almost everything in question was recorded in Tyco company documents and records.

Many Tyco employees, whether current or former employees at the time of their testimony, were asked if they felt they did anything wrong while performing their duties at Tyco. They were questioned about whether they were asked to do anything wrong and if they were pressured to do anything wrong. The witnesses were also asked if they were told to hide information or keep any secrets. The answer to those questions, in every case but one, was no. The sole exception was head of human resources Patty Prue, who testified that she was asked by a Director to alter meeting minutes. However, not a single Tyco employee testified that he or she was asked by Kozlowski or Swartz to hide or conceal information. Despite all the bad press, with dozens of lawsuits pending against the company and its Directors, not a single employee testified that he or she hid, concealed, or was asked or pressured by the Defendants to hide or conceal anything from anyone.

Moroze, who was still employed as a Tyco attorney when he testified, said that he was never asked to conceal, hide, destroy, or do anything else that he believed was wrong. He also confirmed that if he had concerns about anything, if
he believed anyone was doing something wrong, he could have gone to both Senior Vice President Irving Gutin and to former Tyco CEO John Fort to discuss any problems. However, Moroze didn’t need to go to them because he had no concerns about anything he did or saw or was asked to do at Tyco.
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In addition to calling scores of witnesses to walk through the details behind hundreds of numbers and to explain the contents of dozens of documents, prosecutors spent an inordinate amount of time introducing evidence of Dennis Kozlowski’s lifestyle. They showed video of the Roman orgy–themed birthday party in Sardinia. But Kozlowski was not charged with stealing the $1 million Tyco paid for the business expenses incurred in Sardinia. The prosecutors brought in a jewelry salesperson to tell the jury about the expensive items Kozlowski purchased from Harry Winston, including the wedding ring for his second wife (who was referred to as his “mistress” instead of his wife), even though the purchases had nothing to do with the charges in the indictment. Prosecutors introduced evidence about Kozlowski’s yachts, his homes, and his spending habits—much of which was clearly irrelevant to the charges for which Kozlowski was on trial. The six-month trial could have been conducted in a fraction of the time if only evidence relevant to the charges was introduced to the jury. Even the jurors identified the prosecutors’ thinly veiled efforts to bias them against the rich, greedy, overpaid executive who had big houses, bought pricey gifts, threw extravagant parties, and had expensive taste. In that courtroom, to those jurors, the prosecution likened being wealthy to being a criminal.
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After the jury heard four months of testimony from prosecution witnesses, the Manhattan DA rested. Dennis Kozlowski did not testify in his own defense and he called no witnesses. It was a risky strategy, but somewhat understandable because it appeared the prosecutors failed to prove their case. However, it seems the defense could have countered the damaging evidence of Kozlowski’s vast compensation and generous executive perquisites with a parade of executives who lived the same way. The jurors could have used some perspective—no one on the jury had compensation and benefits anything like those Tyco provided to Kozlowski. The defense also could have called forensic accountants and fraud examiners to explain how the transactions in question were recorded in the normal course of business—and that there was nothing unusual or hidden. The defense could have called expert witnesses to explain corporate governance and the authority vested in executive officers. The same witnesses could have told the jury that the role of director of a publicly traded corporation is not a passive job; Tyco Directors had both legal and ethical duties. White-collar crime expert Christo Lassiter opined, “The defense should have called witnesses. They could and should have established that Kozlowski was acting within the accepted norm.”
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There was only one witness for the defense. Mark Swartz opted to take the stand, which he did on February 9, 2004. Swartz testified for several days after
which the prosecution called one rebuttal witness: attorney David Boies. Boies testified briefly about a conversation he said he had with Mark Swartz regarding one of the disputed loans.
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After Boies stepped down from the witness stand on March 1, 2004, there was no more evidence to be presented. The attorneys discussed passionately with Justice Obus how the jury would be instructed on each of the felony counts. After those discussions concluded, Justice Obus addressed the jury on March 18, 2004—almost six months after the trial began.

The fundamental duty of the jury, as we told you at the outset, is to determine the facts. You are a fact-finding body and the law says you are the exclusive judges of the facts. On the other hand, and with equal emphasis, I charge you that you are bound to accept the law of the case as it is given to you by the Court. After you have determined the questions of fact, apply the law as charged and render your verdicts based upon the facts as you have decided them to be under the law as charged by the Court.

Whatever your verdicts may be in this case, each verdict must be by unanimous vote of the 12 members of the jury.

. . . [E]very defendant in every criminal case is presumed to be innocent until and unless his guilt is proven beyond a reasonable doubt. And the burden to proof a defendant guilty beyond a reasonable doubt always rests with the People.

There is no burden upon either defendant to prove anything. The law accords each defendant the presumption of innocence and requires you give each one of them the benefit of that presumption throughout the trial until such time that you are convinced that the People have proven his guilt to your satisfaction beyond a reasonable doubt.

Now, what does our law mean when it requires proof of guilt beyond a reasonable doubt. The law uses the term, proof beyond a reasonable doubt to tell you how convincing the evidence of guilt must be to permit a verdict of guilty. The law recognizes that in dealing with human affairs, there are very few things in this world that we know with absolute certainty. Therefore, the law does not require the People to prove a defendant’s guilt beyond all possible or conceivable doubt. On the other hand, it is not sufficient to prove that the defendant is probably guilty. In a criminal case the proof of guilt must be stronger than that; it must be beyond a reasonable doubt. . . . Proof of guilt beyond a reasonable doubt is proof that leaves you so firmly convinced of the defendant’s guilt that you have no reasonable doubt of the existence of any of the elements of the crime, or of the defendant’s identity as a person who committed that crime.

Before the jury began deliberations, Justice Obus explained the charge of grand larceny under New York Penal Law: “Under our law, a person is guilty of grand larceny in the first degree when he steals property and when the value of the
property exceeds one million dollars. A person steals property and commits larceny when, with the intent to deprive another of property or to appropriate the same to himself or a third person, such person wrongfully takes, obtains or withholds such property from an owner of the property.”

Justice Obus also instructed the jury that the defendants could not be found guilty if the prosecution failed to prove the requisite criminal intent: “I note further in this regard in order to establish that a defendant acted with the requisite larcenous state of mind, the People must prove that the defendant did not act under a claim of right made in good faith. That is that he did not believe that he had authority to take the property. The defendant does not have the burden of proof in taking the property he acted under a claim of right made in good faith. Rather, the prosecution must prove beyond a reasonable doubt that the defendant knew he did not have authority to take the property.”
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Jury deliberations in
People v. Kozlowski and Swartz
began on March 19, 2004.

* * *

Two weeks before Kozlowski’s case went to the jury, Martha Stewart was convicted in a federal courthouse only two blocks from the state courthouse where Kozlowski’s case was being heard. In a verdict that ignited a media feeding frenzy, Stewart was convicted of four counts of conspiracy, obstruction of justice, and making false statements. The stories spawned by scores of media outlets reflected the highly charged, almost rabid environment. It was not a good time to be a wealthy corporate executive—especially not an executive accused of white-collar crimes.
USA Today
reported that “ . . . for federal prosecutors here, the verdict was a huge victory. At a time when the Justice Department has gone after the architects of massive frauds at Enron, WorldCom and Global Crossing, Manhattan prosecutors were criticized for picking on Stewart over a profit of about $50,000.”
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Of course, numerous articles reporting Stewart’s conviction also mentioned the trial wrapping up just a couple of blocks away.
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“mistrial by media”

Twelve days after the case was given to the jury, Justice Obus suddenly ended the deliberations when one of the jurors received a threatening letter at her home. On April 2, 2004, after six months and four days of trial, Justice Obus informed the jury, the Defendants, and the prosecutors that “[t]he court has no choice but to declare a mistrial at this time.”

Jury deliberations had become contentious over the nearly two weeks jurors spent reviewing evidence and determining guilt or reasonable doubt on multiple felony charges. Frustrated jurors informed Justice Obus that the atmosphere in the
jury room was “poisonous” and many believed they would not be able to reach a verdict. Much of the tension seemed to center on Juror No. 4, a seventy-nine-year-old retired teacher who had a law degree from New York Law School. Juror No. 4 told the panel during deliberations that she would vote to acquit on all charges. But when the judge declared the mistrial, the jury was reportedly close to rendering a split verdict, finding the defendants guilty of some counts and not guilty of others.

Juror No. 4 was first identified publicly as Ruth Jordan when a reporter claimed to see what he described as Jordan signaling the defense table with an “OK” sign as she came into the courtroom during jury deliberations. Although that journalist reported that he saw the “OK” gesture, others said Jordan was simply brushing back her hair. Justice Obus was quoted by journalist Andrew Ross Sorkin in the
New York Times
as saying “There is no finding that this juror has done anything wrong.”
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After the trial, Jordan vehemently denied giving any kind of gesture to anyone in the courtroom.
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Dennis Kozlowski said, “I didn’t see the juror do anything. I didn’t see an “OK” sign or any other gesture. I honestly had no idea what Maremont thought he saw.”
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Mark Maremont of the
Wall Street Journal
—the same Mark Maremont who wrote dozens of articles about Tyco and Dennis Kozlowski—was the first to release Ruth Jordan’s name to the public. And he identified her in a
Wall Street Journal
article
during
jury deliberations. David Carr of the
New York Times
wrote: “Last week, breaking journalistic convention, The Wall Street Journal’s Web site and The New York Post published the juror’s name.” Carr quoted David Bookstaver, then the communications director for the New York State Office of Court Administrators. Bookstaver said, “It has been an unwritten rule in the news business that even though jurors’ names are public information, you gather those facts, but then hold them. You now see what happens when those conventional rules fall apart.”
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