(Sept. 18) - Former Tyco International chief executive L. Dennis Kozlowski, who allegedly used company funds to buy a $15,000 umbrella stand and a $17,100 traveling toilette box, cannot make bail and could be sent to jail Thursday.
Kozlowski was indicted last week for massive fraud. His lawyers told Manhattan Supreme Court Judge Michael Obus Tuesday that Kozlowski is flat broke and cannot access bank accounts because they are frozen.
Earlier Tuesday, Tyco revealed it paid for a $6,000 shower curtain, a $2,200 wastebasket and many other expensive items for Kozlowski's New York City apartment.
Tyco accused Kozlowski of recklessly tapping company funds, including more than $1 million for his wife's birthday party in Sardinia last year. The event's planners called for gladiators and an ice sculpture of Michelangelo's David with vodka streaming from his penis into crystal glasses, according to Tyco's filing.
Other unauthorized expenses Kozlowski allegedly incurred include a $6,300 sewing basket, a $445 pin cushion, a $1,650 notebook and $5,960 for sheets.
At last week's arraignment, the judge released Kozlowski on a $100 million personal recognizance bond that was to be secured by $10 million in personal assets. Tyco's former chief financial officer, Mark Swartz, was released on a $50 million bond, secured by $5 million in personal funds.
Lawyers for Swartz also said he couldn't make bail.
Both men were ordered to come up with the necessary funds by Thursday or face time at Riker's Island, one of the nation's toughest jails. The island near LaGuardia Airport in the East River is the largest U.S. penal colony.
Kozlowski's lawyer Stephen Kaufman said Kozlowski's ex-wife had agreed to post her $10 million home in Greenwich, Connecticut, but lead prosecutor John Moscow objected, saying the house could be the result of the former CEO's alleged criminal actions.
Moscow said the defendants must come up with assets that were not gained from their alleged criminal conduct.
Prosecutors froze $600 million of Kozlowski assets "mostly cash and securities," Moscow said. That means the defendants cannot use this money as collateral toward their bail.
Tyco is in the process of seizing most, if not all of Kozlowski's assets, including a $17 million Fifth Avenue apartment, a $7 million Park Avenue apartment he turned over to his ex-wife, a $5 million Nantucket home and a $30 million compound in Boca Raton, Florida.
Details from the company's internal investigation, authored by a committee headed by attorney David Boies, were contained in a filing to the Securities and Exchange Commission.
The SEC alleges that Kozlowski, Swartz, and former general counsel Mark Belnick treated Tyco as their private bank, "taking out hundreds of millions of dollars of loans and compensation without ever telling investors."
Swartz's lawyer disagreed with the SEC's contentions.
"Mark Swartz never received a penny from Tyco that was not fully authorized," said his attorney, Charles Stillman. "Today's report does not change that fact."
Belnick, charged with falsifying business records to cover up $14 million in improper loans from Tyco, was released last week on an unsecured personal recognizance bond of $1 million.
In 2000, Kozlowski had Tyco authorize nearly $96 million in unapproved bonuses for 51 employees to offset relocation loans for employees moving to Florida.
"Forgiveness was offered to some people who never moved ... and people who did not even have a Tyco mortgage, Tyco said.
Patricia Prue, Tyco's senior vice president of human resources, questioned the program, but Kozlowski assured her the board had authorized the payments, Tyco said.
Kozlowski and Swartz allegedly received about $50 million as part of the program, which was purportedly paid out from the proceeds of Tyco's successful initial public offering of TyCom, its undersea fiber-optic cable network, documents show.
Only a few weeks after the Florida loans were improperly forgiven, Kozlowski introduced another unauthorized bonus program that cost Tyco more than $55 million, Tyco alleges. Sixteen executives, including Kozlowski and Swartz, participated, Tyco said.
