“Two down, one to go,” I thought (actually, according to my wife, unknowingly speaking out loud). Aloud or kept within, the sentiment remains as strong several days later as it did in the first blush of the news.
The greed shown by former Tyco International CEO Dennis Kozlowski and his right-hand man, ex-CFO Mark Swartz, clearly was excessive, even by the low standards set by certain of their peers. The “one to go” in the above spoken-out-loud thought is Richard Scrushy, ex-CEO of HealthSouth, whose guilt or innocence of manipulating corporate financial results still was being debated by a Birmingham, Alabama, jury as this was written.
I own no stock in either company and thus was not among those damaged by the actions of Kozlowski, Swartz and allegedly by Scrushy. But I was darned glad to read of the pair of convictions by a New York jury late last week and hope to feel the same emotions about the findings in the Scrushy case, although it appears there may be little cause for similar celebration when that decision comes down.
Since they headed companies this publication follows because of the nature of their business, I have had a lot more interest in these cases than in other instances of corporate malfeasance.
The fact that Kozlowski and Swartz already were being compensated at levels far beyond the most fanciful dreams of the average working man or woman didn’t keep them from stealing hundreds of millions of dollars from the sprawling industrial conglomerate that employed them.
Even though each man’s pay and benefits was beyond even the exalted levels of the majority of those holding comparable positions in the corporate world, they still dipped into the unguarded cookie jar to scarf up millions more. Through their defense attorneys, they had the gall to maintain that their self-awarded bonuses and forgiveness of corporate loans had been either tacitly approved by the Tyco board or approved by a now-deceased director who had headed the firm’s executive compensation committee.
The latter claim obviously was unverifiable, and former directors of the company testified that they never approved the extra payments to the two executives. One juror who was quoted by USA Today said of Kozlowski’s testimony during the trial: “It seemed to us he told a few lies.”
The so-called “smoking gun” in the case was that neither Kozlowski nor Swartz managed to remember the forgiveness of $25 million and $12.5 million respectively in “forgiven” loans in income tax filings covering 1999. At their levels of compensation, forgetting $25,000 or $12,500 – or even 10 times those amounts – in payments might be thought of as reasonable, but $25 million and $12.5 million? That stretches credibility far beyond the bursting point.
The cases of Kozlowski and Swartz differ from that of Scrushy, who is being tried on accounting fraud charges. But all come down to the same basic thing: personal greed driven by a lifestyle that makes “lavish” an all-too-inadequate adjective.
Reports of the scene when the verdicts were read in Manhattan last Friday indicate that Kozlowski’s face was “scarlet red” and that his wife was crying and Swartz’s wife “appeared to be in shock.” What they didn’t appear to be was sorry.
— Jim Stommen, Executive Editor