Prosecutors open Tyco trial with toned-down claims
By wire services
Published January 27, 2005
NEW YORK - Prosecutors opened the larceny retrial of two former top Tyco International executives Wednesday with a more focused list of crimes showing "they were systematically looting" the company they were pretending to serve.
Assistant District Attorney Owen Heimer showed jurors a list with what he said totaled "$150-million in outright thefts" by L. Dennis Kozlowski, 58, Tyco's former chief executive officer, and Mark Swartz, 44, the company's former finance chief.
"The defendants did not earn this $150-million," Heimer told the state Supreme Court jury in Manhattan. "The evidence will show that these defendants stole this $150-million and they knew what they were doing when they did it."
Heimer also said the defendants had grossed more than $575-million by selling Tyco stock "while deceiving and defrauding the public" and keeping Tyco's stock price up.
Challenged about that amount by defense lawyers, Heimer conceded that the total alleged illegal profit within that $575-million was probably "immeasurable."
Absent from Heimer's opening was the assertion made by prosecutors in the first trial that Kozlowski and Swartz had stolen $600-million by outright theft and by deceiving the government and the public and defrauding Tyco shareholders.
While Heimer mentioned that some of the allegedly ill-gotten gains were spent on jewelry, art and real estate, he never promised jurors that they would see the videotapes that were a sensation at the first trial.
The videotapes included a tour of a Fifth Avenue apartment that Heimer said Kozlowski had bought and furnished with nearly $30-million of Tyco's money and a $2-million Roman-themed birthday party for Kozlowski's wife on the Mediterranean island of Sardinia.
He said the thefts occurred chiefly between 1999 and 2002, despite the fact that Kozlowski legally earned $260-million in that period and Swartz earned more than $127-million.
"But this was just not enough for the defendants, so they stole another $150-million," Heimer told the jury.
Kozlowski and Swartz are on trial for the second time on charges of grand larceny, securities fraud, filing false business records and related crimes. If convicted on the grand larceny charge alone, they each could face 25 years in prison.
Their first trial, which stretched across six months, ended with a mistrial in April.
Fired HealthSouth CEO wanted numbers "fixed'BIRMINGHAM, Ala. - Fired HealthSouth CEO Richard Scrushy told his staff to "fix the numbers" to conceal a potential earnings shortfall in 1996 when a large accounting scandal was just beginning, the company's former chief financial officer testified Wednesday.
Aaron Beam, one of 15 former HealthSouth executives who reached plea deals and are expected to testify for the government in Scrushy's corporate fraud trial, described Scrushy as being at the heart of the fraud for which he is on trial.
With HealthSouth's financial results from the second quarter of 1996 inadequate to meet Wall Street earnings forecasts, Beam said he and another finance executive who pleaded guilty, Bill Owens, went to Scrushy to discuss a problem that began on a smaller scale as early as 1991.
"We said, "Richard, we're short. We're not going to meet Wall Street expectations. ... We've done everything we can' " using aggressive accounting, Beam testified.
"He said, "It's not an option to miss our numbers. You guys need to fix the numbers,"' Beam testified.
Beam said he participated in the fraud for a year because Scrushy intimidated him.
Beam came under sharp questioning from defense attorney Jim Parkman, who got him to admit to repeatedly lying to investors, auditors, analysts and directors amid the scheme while being unable to remember dates and other basic facts on the stand.
Defense attorney Art Leach also got Beam to admit he didn't recall the size of the discrepancy between HealthSouth's results and numbers that were released to the public.
Defense: Ex-WorldCom chief unaware of fraudNEW YORK - A defense lawyer played two audiotapes of WorldCom's former chief in court Wednesday in hopes of convincing jurors that Bernard Ebbers knew too little about the company's accounting to have overseen the $11-billion fraud that drove it into bankruptcy.
On the first day of testimony in Ebbers' fraud trial, the defense aimed to show that he left the numbers to his chief financial officer, Scott Sullivan, who has pleaded guilty and is expected to testify against his former boss.
"Those sound like all Scott questions to me," Ebbers said in an October 2001 tape in response to a detailed question from stock analyst Adam Quinton.
On that tape and one taken of a conference call with stock analysts in February 2002, Ebbers deflects complex questions about revenue, earnings and economic trends.
But Quinton, testifying for the prosecution Wednesday, said Ebbers also addressed some of his concerns about the telecommunications company's accounting procedures in "a reasonable amount of detail."
In the 2002 conference call, Quinton asked Ebbers if he can give any estimate of when the U.S. economy would emerge from recession.
"Adam, as far as indicators of . . . when we're going to come out of the recession, you know, remember, I'm a P.E. graduate, not an economist," Ebbers said. "So I don't know that I can speak to that with any credibility or anything."