2 major trials in Wall Street scandals under way in N.Y.

2 major trials in Wall Street scandals under way in N.Y.


Associated Press

NEW YORK — Jury selection began Monday in two of the first Wall Street scandal cases to reach trial, with a former CEO accused of looting $600 million from his company and a banker accused of ordering the destruction of records sought by a grand jury.

Dennis Kozlowski, the former CEO of conglomerate Tyco International Ltd., is being tried along with former Tyco financial chief Mark Swartz, both accused of turning the conglomerate into their personal piggy bank. The trial is expected to last two months.

Frank Quattrone, a dot-com-era banker accused of ordering important documents destroyed, also went on trial Monday in a separate court.

Reports after Kozlowski was charged last September showed he spent company money at will on high art and furniture — from a $6,000 shower curtain to a $15,000 antique umbrella stand.

In one well-known incident, Tyco picked up half the tab for a $2 million birthday party for Kozlowski's wife in Italy that featured musician Jimmy Buffett and an ice sculpture of Michelangelo's David.

Besides lavish salaries and perks, Kozlowski and Swartz arranged to be paid $84 million in unauthorized bonuses, Manhattan prosecutors say.

Both men have pleaded innocent. The pair are expected to argue that the millions they are accused of stealing were actually loans and bonuses approved by the board and disclosed to outside auditors.

Their lawyers will try to convince a jury that the board knew about the compensation, and that Kozlowski worked hard to improve Tyco and deserved the pay, said Robert D. Zatorski, a former New Jersey white-collar crime prosecutor.

"You have to show that he, in fact, deserved the accouterments of wealth," Zatorski said. "There's a big difference between being wealthy and being a criminal."

Kozlowski, 56, and Swartz, 43, could each get 30 years in jail if convicted on grand larceny and other lesser counts.

Meanwhile, Quattrone, an influential investment banker at Credit Suisse First Boston during the 1990s, went on trial in federal court. He was paid tens of millions of dollars a year to help take technology companies public.

He is accused of encouraging CSFB employees to get rid of documents that were being sought by a grand jury and regulators looking into how CSFB doled out shares of initial public offerings. U.S. District Judge Richard Owen told potential jurors Monday that the trial could last two weeks.

The government says Quattrone deliberately obstructed justice on Dec. 5, 2000, when he distributed an e-mail proposed by one of his subordinates that urged workers to "catch up on file cleaning before the holidays."

Quattrone attached his own note at the top: "I strongly advise you to follow these procedures."

The trick for prosecutors will be proving criminal intent. Quattrone insists he did not know the documents were being sought by investigators, and that he was following CSFB policy on getting rid of old files.

To win their case, prosecutors must portray Quattrone as a man who was arrogant, under incredible stress and defiant of government investigators, said Christopher J. Bebel, a former federal prosecutor. "The government's challenge will be to bring those cold, bland, corporate-speak instructions to life," he said.

Quattrone, 47, has pleaded innocent. He faces 25 years in prison if convicted on all counts — two of obstruction, one of witness tampering — but would likely get far less under federal sentencing guidelines.

Copyright © 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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