Taking Down the Lion: The Rise and Fall of Tyco's Dennis Kozlowski (6 page)

When Fort was CEO, he named thirty-six year old Dennis Kozlowski President of Ludlow—in 1982.
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Kozlowski described his effectiveness at Ludlow during his second criminal trial. He said:

When I first got to Ludlow we were break even or maybe earning a little bit of money. It was—we had a lot of work to do. We had a number of divisions that were losing money. A number of operations that were not functioning very well. People there, the morale was pretty low in the organization. They went through this lengthy takeover, but by the end of my stay at Ludlow, by putting in pay for
performance systems, good incentive systems, motivating the management with these types of systems, which I thought were key—one of the key things to running a business, Ludlow became quite profitable.”
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Because of his success at Ludlow, Fort placed Kozlowski at the head of other Tyco divisions. As President of Grinnell, for example, Kozlowski transformed in a very short time frame a company that was barely breaking even into a profitable one, with annual revenue of over $100 million.
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Kozlowski’s skill as a manager took him to the head of three of the four operating businesses
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before he was named President and Chief Operating Officer of Tyco in 1989 at the age of forty-three.
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By the end of the 1980s, John Fort was leading the company with Kozlowski pushing him from behind. Robert A. G. Monks, a Director at the time, said that Fort was CEO but that “Dennis was doing all the hard work.”
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The somewhat frenetic collection of businesses under the Tyco corporate umbrella at the time of Joe Gaziano’s death had transformed into four cohesive operating divisions: electrical and electronic components, healthcare and specialty products, fire and security services, and flow control products.
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* * *

During the 1970s and 1980s, Dennis Kozlowski became a manager by running businesses in all of Tyco’s operating divisions.
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During his years in the trenches, he honed his management skills and his successes solidified his belief in a few strongly held strategies for achieving organizational goals: hire the right people, motivate them with pay-for-performance compensation programs, decentralize control, allow only minimal bureaucracy, engage in no hostile takeovers, and always look for ways to “make more for less.”

Kozlowski admittedly worked almost nonstop for most of his life. His increasingly busy schedule and the demanding positions he held as he built his career at Tyco required frequent travel that kept him from his family about eighty percent of the time.
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Unfortunately, his marriage to Angie Suarez Kozlowski didn’t survive. Kozlowski and his wife separated in 1995 and they divorced in 2000 after twenty-eight years of marriage. Corporate governance guru Robert A. G. Monks sat on the Tyco Board of Directors from 1984 until 1993, the years Dennis Kozlowski climbed the rungs of the corporate ladder until he reached the top. Monks said he’s never known a CEO of a large corporation whose marriage wasn’t negatively affected by the demands of the position. “Dennis was married to Tyco,” he explained.
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Of Kozlowski’s ascent in the company, Monks said, “For years, Dennis was the guy who ran around behind the elephant. He worked more and harder than anyone else. Dennis deserved to be CEO. He earned it.”
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Six

Becoming CEO

Both Ralph Waldo Emerson and Theodore Roosevelt are attributed with saying “big jobs usually go to the men who prove their ability to outgrow small ones.” Dennis Kozlowski personified the sentiment. During seventeen years with Tyco in positions of increasing responsibility, Kozlowski rose to each challenge. And he didn’t just do what was expected of him. He worked more and harder and produced extraordinary results. By 1992, he had outgrown all of the jobs at Tyco but one.

L. Dennis Kozlowski was named CEO of Tyco International Ltd. in July of 1992. He was forty-five years old. He became Chairman of the Tyco Board of Directors six months later, in January of 1993.
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* * *

The day the Tyco Board of Directors named Kozlowski CEO, the Directors and then, and soon-to-be former, CEO John Fort were in the company’s offices in Exeter, New Hampshire, as was Dennis Kozlowski. All were present to attend a scheduled Board meeting. A few weeks earlier while working in his Exeter office, Kozlowski received a telephone call from Philip Hampton, a member of Tyco’s Board of Directors. Hampton asked Kozlowski to meet him to discuss the Board’s plan to make a change in leadership. He wanted to talk to Kozlowski about becoming the next CEO. “I couldn’t get to New York fast enough,” Kozlowski recalled when years later he testified during his second criminal trial about how he became Tyco’s CEO. “I met with Phil in his office [in New York,] and Phil said that John Fort has typically said he wanted to be the CEO for about ten years. The Board felt they were going to take him up on his ten year offer and it was time for a transition or change. I was his candidate and I was the person he would like to see become the Chairman and CEO of Tyco.” The morning meeting stretched into lunch, so Kozlowski and Hampton continued their discussion over seafood at Oceana in Manhattan where Kozlowski shared with Hampton his vision for the company. As their meeting
concluded, Hampton asked Kozlowski to contact Directors Joshua Berman and Robert A. G. Monks, both of whom wanted to have similar discussions with him. In the days soon after, Kozlowski met Josh Berman for Chinese food at Chin Chin in Manhattan and then he made a quick trip to Washington, DC to meet with Bob Monks. Near Monks’s office in Georgetown, the two men ate Italian food as Kozlowski completed his third interview for the position of CEO.
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The three Directors shared with Kozlowski the Board’s desire to make a change at the top and of plans to replace John Fort at the next Board meeting. Kozlowski said, “You may read that John Fort resigned. He didn’t. He was fired.”
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In Fort’s telling, he retired from the position of CEO.

John Franklin Fort III joined Tyco in 1974, the year before Kozlowski was hired by the company. Although their careers took the two men to the same position, Fort’s background was significantly different than Kozlowski’s.

* * *

568 South 10th Street

The Fifth Avenue apartment, the $6,000 shower curtain, living among Manhattan’s elite—Dennis Kozlowski’s lifestyle as an adult bore no resemblance to his childhood or to his parents’ lives. Even though he had only modest material comforts when he was growing up, Kozlowski spoke fondly of his childhood. He said, “[W]e were poor. We just didn’t know we were poor.” The Kozlowski children had happy lives in Newark, New Jersey. Dennis Kozlowski and his younger sisters Joyce and Joan didn’t know there were people with far more than they found in their cozy apartment in the three story building at 568 South 10th Street.

The Kozlowski family of five lived in the four narrow rooms of a railroad style apartment on the second floor of a six family apartment house. Even though both apartments had narrow rooms, the one on South 10th Street was nothing like the luxury Tyco duplex across the street from Central Park. The front room of the Newark apartment was a kitchen where the coal stove that heated the apartment was located. Coal was delivered to the basement of the apartment house and Kozlowski remembered that, to fuel the less-than-efficient stove, he and his father shoveled coal and brought it up to the kitchen during the cold months of the year. The back room of the string of four rooms in the apartment was the living room. A half century later, Kozlowski recalled that “the living room was closed off during the winter because the heat from the kitchen at the front of the apartment didn’t reach the back room.” The apartment didn’t have a water heater, so for baths and dishes, water had to be heated on the stove.

In front of the living room was the bedroom in which the three children slept. Dennis Kozlowski had a cot and his two sisters shared a bed. This sleeping arrangement provided him little privacy. Perhaps because he had little alone time in his parents’ home, Kozlowski came to value privacy as an adult—he craved it. He said
he spent most of his waking hours as a child outside the apartment “because of the lack of space.”

Robert “Bobby” Pastore, a lifelong friend of Kozlowski’s, also grew up on South 10th Street in Newark. The Pastores lived across the street from the Kozlowski family. Even though he was four years Kozlowski’s senior, Pastore remembered that he and Dennis Kozlowski, along with the other boys in the neighborhood, played stick ball, marbles, and hide-and-seek. Pastore described the neighborhood of Polish, Irish, and Italian families as a good place to grow up. “South 10th Street in Newark, New Jersey is now very rough,” Pastore explained, “but it was not rough back when we were kids. It was a good place to grow up. We walked to grammar school and we played in the street.” Pastore painted an idyllic picture of life on South 10th Street in the 1950s. “Dennis’ parents and mine were good friends and like most people of their day, worked hard to make a better life for them as well as for us.”
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The Kozlowski family had dinner together every evening at 5:00 pm. His mother Agnes Kozell Kozlowski cooked for the family seven days a week. “My mom was a good cook,” Kozlowski said with conviction. She shopped at the many specialty shops in the neighborhood and each week, she went to the butcher shop and placed an order that was delivered to the apartment on Friday. She also shopped at the neighborhood bakery and fish shop. Kozlowski remembered his mother preparing short ribs, stew, and Polish food like pierogies. His favorite dinner was pot roast and Kozlowski said if his mother made something he didn’t like, he gave it to the family dog. “Skippy was a mutt,” he said. “We got him at a pet store around the corner.” In the evening, the family gathered in the kitchen around an off-white Formica table, each taking his or her assigned seat. Over dinner, the family talked about the day. “Everything happened around the dinner table,” Kozlowski recalled. “On Sunday, we had dinner right after church. Then Sunday night was sandwiches—mom didn’t have to cook on Sunday evenings.”

As a child, Kozlowski developed a lifelong love of baseball, no doubt encouraged by his father Leo Kozlowski, who played minor league ball as a young man. Both were die-hard Yankees fans. Kozlowski discovered another passion when he was a youngster. He fell in love with airplanes. “My parents used to take us to the Newark airport to watch the planes land,” he said fondly. “When Uncle Mike flew in from Detroit on props planes, we could walk out as he was deplaning. I remember getting on the plane and thinking it was so cool.” Kozlowski read everything about planes that he could find. “I read about the
Spirit of St. Louis
when I was in grammar school and I pictured myself in the cockpit with Charles Lindbergh as he fought off sleep over the Atlantic on his flight from New York to Paris. I read the history of planes that were built in WWI and WWII. I was fascinated with how they operated,” he said. “Aviation was far more complex then,” he explained. “There was nothing electronic. It took more intellect.” Kozlowski flew for the first time at age eighteen when he traveled with a fraternity brother from Newark to Miami,
Florida on a Cessna 150. Kozlowski’s love of flying endured. He piloted airplanes and helicopters throughout his adult life and estimated that he had over 10,000 hours in the air.

Dennis Kozlowski was a city boy and he enjoyed growing up in an ethnic urban neighborhood. However, Kozlowski was not a sophisticated or street smart kid. He described himself as an innocent Catholic boy who was naïve about the world. To illustrate, Kozlowski described his first date. “My seventh grade teacher was pretty nice,” he said. “She tried to fix me up with a sixth grader named Lorraine. I didn’t act on my teacher’s suggestion very quickly, but I finally asked Lorraine to a dance when I was in the eighth grade and she was in seventh grade.” Kozlowski walked with Lorraine to the dance where he spent the evening with his friends and she with her girl friends. “My first date was walking a girl three blocks to the school and not dancing with her,” he laughed.

As a teenager, Kozlowski left behind the strict Felician nuns at his grammar school, Sacred Heart, and attended public high school. He went to West Side High School in Newark where his history teacher, Mr. Kresfeld, had a big impact on his life. “Mr. Kresfeld oversaw the debate team. I often sparred with him in class so he put me on the team,” Kozlowski said. “In class, he asked questions that required an extra step of reasoning. I was the only one in class answering his questions.” Kozlowski spent a lot of time practicing his debate skills until he could effectively argue either side of any issue. Eventually, Mr. Kresfeld made Kozlowski the head of the debate team. “He told me I was smart and capable,” Kozlowski recalled. “He told me I was exceptionally smart. He was the first person to ever tell me that.”

Kozlowski was often bored in school so he kept extra books under his desk. “I read as the other students caught up,” he recalled. For as long as he could remember, reading was one of his greatest joys. “When I shared a bedroom with Joyce and Joan, after my sisters went to sleep, I used a pen light to read on my cot,” he said. He liked to read biographies; he read about individuals who did great things with their lives and he read about inventors. “I liked to read about exceptional people,” he explained. “Like Jackie Robinson, Dwight Eisenhower, and Charles Lindberg.” Kozlowski’s love of biographies grew in adulthood. During the years he was incarcerated, Kozlowski read hundreds of life stories about people who did anything from ending the Civil War to surviving weeks in a life raft in the Pacific Ocean during WWII to blowing a call in the ninth inning that ruined a pitcher’s perfect game.

Even though he was a voracious reader and gifted student, college was not a certainty for Dennis Kozlowski. “My dad encouraged me to go,” he said, “but my mom thought I should get a civil service job or join the military. She was more concerned about job security than education.” Neither of Kozlowski’s parents attended college and his dad didn’t even graduate from high school. Kozlowski said both of his parents were intelligent, just not highly educated. As he recalled conversations
he had with them, Kozlowski said, “[M]y parents pushed me to get a government job with security and a pension. They didn’t encourage me to do big things or great things with my life.”

Kozlowski said he parented differently and encouraged his daughters to pursue whatever they loved, but admitted that he didn’t always know what those things were. “I pushed them toward business,” he admitted, “because that was my thing.”

“I grew up with nothing. I swore I would give my children a better education than I had,” he said. “I thought with my hard working genes and a better education, they could do even more than I did.”

As his high school graduation neared, Kozlowski interviewed with the Federal Bureau of Investigation (FBI) in a bureau location above the post office in Newark. Leo Kozlowski was a New Jersey public service transit system investigator. He also had a private detective business. Through his work, Leo had friends in the FBI, which is how his son got the interview. Dennis Kozlowski was offered a job as an office worker and was told that if he worked during the day and went to college at night, he could become an agent. For that reason, Kozlowski limited his college applications to universities in New Jersey. “I applied to night school and I also applied to go during the day,” he explained. “When I was accepted, I thought it would be better to attend full time because of the draft.” Kozlowski decided on Seton Hall, a Catholic university in South Orange, New Jersey. “I went to Seton Hall because it was only four or five miles from home,” Kozlowski said of his choice. “I lived at home and usually rode my motorcycle to campus.”
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Kozlowski worked between thirty and forty hours a week while he was a full-time college student. He paid his own tuition, which he remembered as approximately $700 a semester—$1,400 a year. More than forty years after he graduated from Seton Hall, Kozlowski’s memory about his hard-earned tuition payments was surprisingly accurate. According to U.S. Department of Education statistics, the average tuition for private universities from 1964 to 1968, the years Kozlowski attended Seton Hall, was $1,414 per year.
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Kozlowski also had to pay for the books required in his classes; he always bought used text books. On top of the funds needed for tuition and books, Kozlowski had to earn enough to pay his parents rent while he was in college. “It was important to my mother that I paid room and board while living at home,” he explained.
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During his college years, Kozlowski had several jobs. He waited tables and he worked at a car wash. He also had a job working for pharmacist Frank Lewis at a drug store in Newark. Kozlowski considered Lewis a significant influence in his life. “He pushed me to do well academically,” Kozlowski recalled. “He challenged my ideas about what I wanted to do and who I wanted to be.” Kozlowski said Lewis brought discipline into his life. “He taught me to be proactive in the store,” he recalled. “He taught me to sell, he taught me to think, he pushed me, and he became a valued mentor.”

In addition to his jobs waiting tables, washing cars, and working at the pharmacy, Kozlowski played guitar in a band. He learned to play the guitar when he was twelve or thirteen years old, however the guitar was not the first musical instrument he mastered. Kozlowski first learned to play the accordion. There were many Polish-American families in his neighborhood and as a result, many children in his school played the accordion, which is why Kozlowski picked up the polka-band essential. “But I liked the Ventures,” he explained, “so I switched to the guitar and it was a fairly easy transition. The music reads the same, the chords are the same, plus the guitar was much easier to carry around. And of course, the guitar is much cooler.” Kozlowski’s instinct about the coolness of the guitar was confirmed in 2013 by two independent studies conducted in France and Israel and published in
Psychology of Music
and
Letters on Evolutionary Behavioral Science,
respectively. The studies showed definitively that women are more attracted to a man when he is holding a guitar.