Tyco, Investors Want Judge to Freeze Assets of Former CEO Kozlowski

A New Hampshire federal judge has given imprisoned former Tyco International CEO Dennis Kozlowski until Tuesday to say why his assets shouldn't be frozen until a lawsuit against him by his former company and investors is settled. Judge Paul Barbadoro temporarily ordered the assets frozen after Tyco claimed Kozlowski may be using a divorce settlement to hide money from the company and other investors. Kozlowski was convicted of conspiracy, grand larceny, securities fraud and falsifying business records.

Norma Love

2008-10-13 12:00:00 AM

A federal judge in New Hampshire has given imprisoned former Tyco International Chief Executive Officer Dennis Kozlowski until Tuesday to say why his assets shouldn't be frozen until a lawsuit against him by his former company and investors is settled.

U.S. District Judge Paul Barbadoro temporarily ordered the assets frozen on Monday after Tyco claimed Kozlowski may be using a divorce settlement to hide money from the company and other investors. On Thursday, the state of New Jersey added its plea to Barbadoro to freeze the assets.

In his order, Barbadoro gave Kozlowski until Tuesday to respond. Tyco has until the end of the day Thursday to supply counter arguments. Barbadoro's order expires the next day if no further action is taken.

Robert Shwartz, Kozlowski's lawyer, was unavailable Friday to respond, a spokeswoman said.

Kozlowski and former finance chief Mark Swartz were each sentenced to 8-1/3 to 25 years in prison in 2005 after being convicted of conspiracy, grand larceny, securities fraud and falsifying business records. Prosecutors said the two amassed $170 million in unauthorized compensation and $430 million through stock manipulation. The company was run from Exeter, N.H., at the time. It is based in Bermuda and operates out of West Windsor, N.J.

The two men are appealing their convictions.

A New York court froze Kozlowski's assets in 2002, but last month dismissed the freeze order after Kozlowski paid a $70 million fine and $98 million in restitution to Tyco that were part of his criminal sentence.

In the civil case, Tyco argues the restitution does not include more than $325 million in pay, $43 million in alleged charitable contributions benefiting Kozlowski, tens of millions of dollars in improper expenses or the more than $120 million Kozlowski improperly awarded to other senior executives.

"The approximately $98 million in restitution that Kozlowski paid Tyco in connection with his grand larceny convictions does not even scratch the surface of the money and assets that Kozlowski wrongfully pilfered from Tyco," Tyco said in its filing.

In its filing Thursday, New Jersey estimates more than $62 million in damages is due the state.

They want Barbadoro to prevent Kozlowski from sheltering money through his former wife, Karen Mayo Kozlowski. Kozlowski and his wife reached a confidential divorce settlement in July after five years of marriage.

In its filing, Tyco said published statements by the couple's divorce lawyers suggest Kozlowski may use his newly regained control over the assets to funnel millions of dollars to his ex-wife.

"It is Tyco's property and Tyco has a significant, overriding interest in protecting the assets that Kozlowski stole from Tyco as well as other assets that Kozlowski is legally required to return to Tyco," Tyco said in its filing.

Karen Kozlowski, a former waitress who was Dennis Kozlowski's second wife, sought half of the couple's assets including her share of a 15,000-square-foot Boca Raton, Fla., mansion they bought for $19 million. That waterfront home was to be sold.

The couple married in May 2001, and Kozlowski famously once threw her a $2 million, Roman-themed birthday party complete with costumed gladiators and togas on the Mediterranean island of Sardinia. The party featured a performance by singer Jimmy Buffet and his band, who were flown in at a cost of $250,000, according to testimony as his criminal trial.