Depending on the math and the time of the telling, Dennis Kozlowski and Mark Swartz have been accused of stealing $150 million from Tyco International or “looting” the company of as much as $600 million. But when you’re sitting through their criminal trial, it can be hard to get a grip on the details.
First, the Manhattan district attorney’s charges have always been a little hazy, especially regarding what acts constitute larceny. Second, Tyco’s books and records left a lot to be desired, leaving ample room for argument about what the company’s board authorized.
Third, whatever the “Tyco Two” stole, assuming they stole anything, they were paid even more.
Both Kozlowski and Swartz say that the payments were authorized and that they stole nothing. So as their second trial enters closing arguments today, it’s worth reviewing the bidding and checking the facts that get lost in the minutiae of board minutes and bonus calculations.
In the amended indictment filed before the second trial, the defendants are alleged to have stolen $132 million. As with the first indictment, none of the larceny charges detail exactly how the money was stolen, but that’s the total. It’s less than is often reported, and less than the district attorney has alleged in press releases. Still, it’s a lot of money. But it is less money–much less–than Tyco publicly said it paid its two top executives during their last years on the job.
Between 1998 and 2001, Kozlowski, then Tyco’s CEO, was paid a total of $427.4 million. Swartz, Tyco’s then CFO, was paid a total of $226.1 million.
This compensation is not based on allegations, let alone allegations of wrongdoing. These are the numbers disclosed in Tyco’s proxy statements. Even without options (the totals of which were based on projections, much of which never materialized), Kozlowski, now 58, and Swartz, now 44, were paid $173 million over four years.
This total is not in addition to the amounts they allegedly stole. The money that was allegedly stolen is part of what the company publicly disclosed it paid the executives. The totals were derived from formulas agreed upon in advance.
The basic allegation appears to be–but again it’s hazy and the charges tend to shift over time–that certain bonuses and perks were never authorized by the board or the compensation committee. The first Tyco trial ended in a mistrial last year.