Taking Down the Lion: The Rise and Fall of Tyco's Dennis Kozlowski (23 page)

Morgenthau was long known for stepping into investigations and prosecutions that were generally handled by federal prosecutors, and at times his office was criticized for its investigation techniques and for its choice of targets.
21
Individuals accused of white-collar crimes by Morgenthau’s office often chose plea agreements rather than going to trial, persuaded by the DA’s reputation, New York’s harsh sentencing guidelines, and a very tough state prison system.

In addition to the DA’s interest in seeing Kozlowski and Swartz convicted, Tyco and its former Directors also had a stake in the outcome of the trial. If the men were acquitted, the Directors faced far greater culpability in dozens of civil actions that were filed against them. Plus, the Directors had to be thinking about the outrageous Retention Agreement they had entered with Kozlowski. Former Tyco Director Robert Monks hypothesized that after Enron, with the stock price down and the enormity of Kozlowski’s compensation in the spotlight, “there were only two stories that could be told. Either the Board was negligent, maybe even criminally negligent, or Dennis was a thief. If the Directors intended Dennis to have everything he received, they would be seen as reckless and careless and would be held responsible. But if he stole everything, well that was certainly a better scenario for them.” Monks explained, “So, the Board hired David Boies and Boies told the Board’s version of the story—Dennis stole everything.” The Directors’ after-the-fact denials, their claims of ignorance about Kozlowski’s compensation, “they weren’t credible,” Monks said. “That Board would have paid him every penny he wanted.”
22

* * *

The mistrial provided the DA’s office a rare second bite at the apple, and prosecutors took advantage of the opportunity. They significantly changed the presentation of evidence based on feedback from jurors who sat through the first trial.
23
Kozlowski said he thought the DA’s office hired one of the jurors from the first trial to serve as a consultant during the second trial.
24
Clearly, it was a case the DA wanted to win. Morgenthau’s office zealously prosecuted Kozlowski and Swartz a second time, and vehemently opposed the defendants’ critical evidence requests during the trial and throughout the appellate process.

After resolving the arguments about evidentiary matters, but prior to the beginning of
voir dire
(the questioning of potential jurors) and jury selection, the court addressed the DA’s request that both sides be prohibited from speaking with the press during the course of the trial.
25
The DA’s request was provoked by an article that appeared on the front page of the Sunday
New York Times
just two days before the second trial began. Andrew Ross Sorkin interviewed Kozlowski and in his article, observed that Kozlowski “portrayed himself as a self-made entrepreneur
who has become the victim of an overzealous prosecutor interested in sensational headlines and a board trying to protect itself from shareholder lawsuits.”
26
The article appeared balanced and presented both prosecution and defense views of the charges for which Kozlowski was about to be retried.

However, much to the prosecution’s chagrin, Sorkin observed that “unlike Enron, WorldCom, or Adelphia, which all suffered from huge accounting frauds and sought bankruptcy protection, Tyco never entered bankruptcy proceedings or even laid off employees
en masse.
Indeed, today, Tyco’s stock price has rebounded and is even higher than when Mr. Kozlowski left the company, though it still remains lower than its peak.” Although Sorkin’s article appeared factually accurate, the DA felt it painted a sympathetic picture of Kozlowski and that the timing of the interview was calculated to influence the jury pool. For that reason, the DA wrote a letter to the court requesting a ban on contact with the press.
27

Ironically, another article about the case appeared in the
New York Times
the morning the second trial began. This article included an interview of John Moscow, who was formerly of the Manhattan DA’s office. Moscow headed the investigation of Kozlowski, Swartz, and Belnick in cooperation with David Boies and Tyco. The Moscow article was certainly untimely for ADA Heimer and weakened his argument about using the media. Regardless, Heimer said “we stand by our letter. We think given recent events, it would be appropriate for the lawyers in this case to be directed not to speak to the press.”
28

In response to the ADA’s letter, defense attorney Austin Campriello said, “Let me begin by suggesting in as gentle a tone that I can, I’m startled with what I perceive to be the hypocrisy and approach being taken by the People. What is, to use the ancient anglosaxin [
sic
] phrase, chutzpah.” Campriello agreed with Heimer that “there is no comparison between the two articles because the article that appeared today criticizes and holds up to ridicule a juror on the day we are about to pick jurors. The article today criticizes the Court. The article today contains an interview of the District Attorney who felt compelled to make a comment. The article today is replete with quotes from the person who Mr. Heimer suggests has bad judgment, who is the architect of the case that brings us here today.”
29

Campriello went on to argue that there had been no misconduct of defense attorneys during the first trial and that the DA’s request was unnecessary. Justice Obus agreed that “we did get through the last trial without a great deal of difficulty along these lines in terms of comments being made in the press by people participating in the trial.” Justice Obus didn’t ban the attorneys from talking to the press, but cautioned them that it was going to be difficult to find an unbiased jury, and that well-timed articles would not make the task any easier.
30
It’s surprising that Kozlowski’s defense counsel didn’t happily agree to ADA Heimer’s request for the media ban. Kozlowski’s attorneys advised him not to address the media during both the first and second trials, but the DA’s office made good use of the press. It
would have been helpful to the defense if the DA’s office didn’t pitch the prosecution’s case to the media throughout the second trial.

After taking care of preliminary matters, the court began the process of selecting jurors for what would inevitably be a very lengthy trial. Justice Obus summarized the charges for the jury pool and explained that “[i]n case there is any confusion about the matter, the company in question is not the toy company, it is a large company known as Tyco International.”
31

Justice Obus then educated the jury pool about the presumption of innocence, and he made very clear that individuals in the pool were not precluded from serving as jurors in the trial just because they possessed knowledge about the Defendants. The judge stated:

. . . [E]ven if you have already made some impressions about the matter generally, you are nevertheless eligible to serve here as long as you recognize the verdicts to be entered in this case must be based solely on the evidence introduced here and you feel that you are able to put everything else aside, approach the matter with an open mind, listen to the testimony of witnesses, consider whatever the evidence may be, reserve your decision until the end of the trial and then after you have heard everything, including the arguments of counsel, the Court’s legal instructions, the evidence itself, at that point during the deliberations at the very end of the trial make a determination as to whether or not the evidence meets the People’s burden of proof.
32

Naturally, the defendants were concerned about a tainted jury pool, considering the extensive and exceedingly negative media coverage of Kozlowski, Swartz, and Tyco during the first trial, and in the months preceding the second one. The judge was also cognizant of the environment and cautioned the jury that “[w]e are not here for any larger purpose. Certainly the jury is not here to be sending messages to anybody. We are not here to conduct some kind of sociological study. We are not making some general evaluation of corporate governance in the United States.”
33

Despite the negative media coverage in the post-Enron environment, Kozlowski was optimistic as the second trial began. After the Kozlowski and Swartz mistrial was declared on April 2, 2004, Mark Belnick was acquitted of all charges on July 15, 2004. This gave both Kozlowski and Swartz reasonable hope that they too would be acquitted. Their optimism was also fueled by the offer of a plea deal. During the first week of the second trial, the DA offered a deal that would result in a prison sentence of between two and six years for both Kozlowski and Swartz. The offer required both Defendants to accept the plea bargain.
34

Kozlowski met with his attorney Stephen Kaufman the evening after the deal was offered. The two met at Kaufman’s townhouse in downtown Manhattan and then went out for pizza. Ever the dealmaker, Kozlowski thought they should
negotiate with the DA, and suggested a counteroffer of one to three years. He recalled that “Stephen Kaufman was inclined to accept the DA’s offer because he didn’t think I could get a fair trial in New York. But Steve also thought it was a very ‘tri-able’ case.” The other members of Kozlowski’s criminal defense team thought they could win. He recalled that Bob Shwartz of Debevoise & Plimpton, one of the attorneys handling a half-billion dollar civil action Tyco had filed against Kozlowski, thought a plea deal would be devastating to the civil case—meaning it would cost Kozlowski a lot of money.
35

Kozlowski remembered that both he and Mark Swartz were on the fence about the deal. He discussed it with his daughter Sandy and said she had no strong feelings either way. Of course, Sandy was a young woman, only in her mid-twenties. It would have been difficult for her to disagree with the rest of his attorneys, especially when that decision would have sent her father to prison. As he considered the plea deal, Kozlowski sincerely believed he had committed no crimes, and he felt certain he would be acquitted of all the charges levied against him. Unlike the first trial, Kozlowski planned to testify during the second one. He felt that by addressing the jurors directly, he could convince them that he and Mark Swartz did not steal money from Tyco.
36

Kozlowski and Swartz ultimately declined the deal, a decision that cost them years of their lives. Kozlowski explained that “[i]f we believed we had stolen anything, we would have taken the deal. We thought we could easily prove beyond a reasonable doubt that we didn’t steal the money.” Kozlowski revisited this decision often during the years he spent in prison, especially after the first two years, knowing he would have been a free man had he accepted the plea deal. With the regret and clarity of hindsight, he said, “I should have taken the deal and considered it a cost of doing business.”
37

Although optimistic because of Belnick’s acquittal and the offer of a plea deal, Kozlowski was greatly concerned about jury selection. Justice Obus told the jury pool that “[t]he defendants here are entitled to a jury of their peers, to a jury that includes people from various walks of life and who represent the diversity of this city.”
38
However, the jury seated for the Defendants’ second trial was not filled with their vocational peers. There were no corporate executives, no bankers, not even a single juror with a business degree. In fact, only one of the jurors had a four-year college degree. The charges against Kozlowski and Swartz were directly related to and intertwined with their occupations. In reality, the Defendants did not have a jury of individuals who had the backgrounds necessary to comprehend the mountain of sophisticated business, financial, and accounting information that was presented during the trial.

Neither Kozlowski nor his daughter Sandy recalled much serious discussion about waiving his right to a jury trial, a strategy often considered when the subject matter of a trial is so complex that jurors may have difficulty understanding the
evidence.
39
In addition, a bench trial, where the judge acts as both the judge and jury, is sometimes favorable when defendants are not sympathetic. It is safe to say that Kozlowski and Swartz were not sympathetic defendants. But the defense teams opted to try the case
again
in front of a Manhattan jury.

Justice Obus informed the pool of potential jurors of the anticipated time commitment required for the trial. Jurors would be required to be in court Monday through Thursday from 9:30 am until 5:00 pm. The judge estimated a four-month trial, which was a significant underestimate. He explained that potential jurors could be excused from serving if the demanding time commitment would pose a hardship. Financial hardship allowed individuals in the pool who may have been better equipped to comprehend the evidence to be dismissed. Professionals with the education and experience necessary to understand the complex issues of the case were unable to be away from their jobs for several months, leaving in the jury pool individuals without the professional and business experience that may have allowed them to more easily comprehend the evidence presented during the trial. Among the many professionals dismissed was a self-employed publicist, who in addition to claiming financial hardship expressed bias about the defendants based on what he had read. “I had a vice-president pursuing business with the Tyco Company and I stopped it and they’re on the black list.”
40

The publicist was not alone in his preconceived notions. Many in the jury pool shared their negative feelings about Kozlowski and Swartz. As the Defendants feared, many potential jurors were undeniably and detrimentally biased. One prospective juror told that judge “if you have not heard about the Tyco case you have been living in a cave.” Knowing the gentleman was right, the judge said, “We understand everybody heard about it. Do you feel you can put this aside and wait until you hear the evidence and judge it based on whatever the evidence in the court is?” The prospective juror replied, “I really don’t think I can do that.” The opposite bias also appeared among the prospective jurors, but only once, when a potential juror told the judge, “I followed the first trial very closely in the newspaper, there is no way in the world I would find Dennis Kozlowski guilty.”
41