Tyco Trial Guilty Verdict

MARGARET WARNER:

We begin with today's conviction in the Tyco case. The guilty verdicts against the company's former CEO, Dennis Kozlowski, and one-time financial officer Mark Swartz came after a retrial that lasted more than four months. For the latest on the verdict, I'm joined by Andrew Ross Sorkin of the New York Times. And, Andrew, welcome.

ANDREW ROSS SORKIN:

How are you?

MARGARET WARNER:

Fine, thank you. Tell us what it was like in the courtroom after this long-awaited verdict was read by the judge.

ANDREW ROSS SORKIN:

Well, I have to tell you, it has been a very long trial. This is really a case that's gone on for three years because, if you remember, this is a retrial and they had done this for six months last year that ended in April. And then we had ten days of deliberations. And so between all of that, there was a lot of tense people, obviously, and it was a grim situation — virtually all guilty counts across the board. It was actually surprising that they had acquittals on one count for each man.

MARGARET WARNER:

How did Kozlowski and Swartz react and were their families in the courtroom and how did they react?

ANDREW ROSS SORKIN:

Their families were there. They were there — very stoic. Mr. Kozlowski was a little flush. Mr. Swartz, who's a pretty casual guy, seemed to keep it together. Mrs. Kozlowski, on the other hand, you know, was shedding some tears and her daughter…Mr. Kozlowski's daughter…there were two daughters in the room. In fact, one of them was a lawyer for Mr. Kozlowski. She had stopped her practice to join the team. And they were clearly shaken up.

MARGARET WARNER:

Now, as we reported, they were convicted, among other things, of larceny, securities fraud, and falsifying business records. But translate that for us. What did prosecutors say they did to warrant those charges?

ANDREW ROSS SORKIN:

Basically, they were charged with stealing about $150 million from the company, and the way they did that was to take bonuses which ostensibly were not authorized by Tyco's board of directors. That's the basic premise of the case and it's not about whether they were spending the money. I mean, a lot of the case was about spending the money and how they spent it on $6,000 shower curtains and assorted other things, but the case at base was really about stealing. It was the exact same thing as walking into the corner store and stealing a candy bar. It was just with a lot more money.

MARGARET WARNER:

Now, did the prosecutors approach the case any differently this time? As you pointed out, this was the second time they've taken this to trial after the mistrial.

ANDREW ROSS SORKIN:

Right. This was actually a very fundamentally different case. It was actually for us, I think, in the gallery, very interesting because you had the same set of facts presented, relatively, in a very different fashion. The first case was really about putting corporate greed on trial. It was at the same time that some of the stuff with Enron had just happened and there was really a lot of attention on the salacious details, the $6,000 shower curtain that he was supposed to have, his, you know, $20 million apartment on Park Avenue.

But in the end, that didn't work actually in the first case and so they reverted. They trimmed down the case; they really changed a lot and focused on the counts themselves, the grand larceny counts, which were very intricate counts because there were a lot of complex details about the accounting and how that — that money was not just wired one way or the other, it was about how that money was justified or, in this case, not justified.

MARGARET WARNER:

Now, the defense also did something different the second time around. Namely; they put Kozlowski on the stand.

ANDREW ROSS SORKIN:

Absolutely. And that's going to be the big question. You know, we're out there interviewing jurors this afternoon trying to get a gauge of what really happened and whether that was the linchpin in terms of changing the mind of this jury. He did take the stand. Mark Swartz had taken the stand in the previous trial but it was a real gamble. And so far you should note that for most corporate cases, folks who've taken the stand have not fared well. Mr. Ebbers took the stand, Frank Quattrone took the stand, Martha didn't take the stand but so far the batting average is not so great.

MARGARET WARNER:

And what was their essential defense?

ANDREW ROSS SORKIN:

The essential defense was that the payments were approved, that they were authorized, that if you looked at this bonus formula that the board does authorize at the beginning of the year, that the numbers at the end of the year worked out. And that's all that was authorized, that he was allowed to spend the money, how he spent the money, it was in the bylaws. But at the same time there were director after director who came and said, "We didn't authorize this. We didn't know about this." And clearly the jury believed them.

MARGARET WARNER:

And, finally, how significant is this case and this verdict considered in the whole kind of landscape of big-time corporate fraud cases that we've seen over the last three years?

ANDREW ROSS SORKIN:

Well, you know, it's very different, actually, than the big fraud cases because, unlike Enron, unlike MCI WorldCom, unlike many of those other cases, this wasn't about fraud at Tyco. This was about larceny. This was about robbing the company. And I'm not sure how much we can take away from it in that respect, but I do think it does something for society. It puts CEOs on notice, and I do think that there probably is going to be kind of a long-term implication for this for corporate America.

MARGARET WARNER:

Andrew Ross Sorkin of the New York Times, thanks so much.