The Rittenhouse Review

A Philadelphia Journal of Politics, Finance, Ethics, and Culture

Wednesday, August 07, 2002  

The Unconscionable “Hubris and Greed” of L. Dennis Kozlowski

As if we didn’t already have enough evidence that L. Dennis Kozlowski, the former chief executive of Tyco International Ltd. was headed for the history books, today’s Wall Street Journal seals his fate, earning the crooked honcho a special place in the corporate hall of shame.

Tyco Spent Millions for Benefit of Kozlowski, Its Former CEO,” a page one masterpiece by Mark Maremont and Laurie P. Cohen, documents a pattern of “hubris and greed” that would put Louis XVI and Marie Antoinette to shame.

Kozlowski turned Tyco’s till into a personal slush fund, the article reveals, buying a $19 million mansion in Boca Raton, Fla., in 1998 with an interest free loan provided by Tyco that later was forgiven as part of a corporate “bonus program.” Even better for Kozlowski, the $13 million of taxes due on the forgiven loan were also paid by Tyco.

And that’s just the beginning. “All told, it appears that more than $135 million in Tyco funds went to benefit Kozlowski, largely in forgiven loans and company payments for real estate, charitable donations, and personal expenses,” according to the Journal.

Maremont and Cohen document a pattern of abuse that includes $25 million in loans forgiven in 1999; $11 million of antiques, art, and furnishings for Kozlowski’s New York apartment; and $18 million for the apartment itself.

Kozlowski made donations estimated at $35 million to various charities using Tyco funds. Two large donations are particularly notable: Nearly $2 million to the Berwick Academy, a private school in Maine attended by his daughters, for an athletic center that bears the name not of Tyco but of Kozlowski; and $5 million to Seton Hall University, his alma mater, to build Kozlowski Hall.

It just goes on and on. Kozlowski put his doctor, his physical trainer, a chef, a masseur, and a yachting expert on Tyco’s payroll. The latter’s duties included helping Kozlowski build a 150-foot sailboat.

In mid-1997, when Tyco acquired ADT Ltd., Kozlowski, who three months earlier had publicly expressed his contempt and disdain for stock options as “a free ride . . . a way to earn megabucks in a bull market,” was granted 3.3 million options. “Mr. Kozlowski also pocketed $9.3 million in pay in the first three months after the ADT deal closed,” according to the Journal. “His pay rose to about $24 million in fiscal 1998 -- plus another $41 million in options gains. Tyco then added a rich retirement program for Mr. Kozlowski that currently guarantees him at least $4.1 million a year for life after age 65. A huge life-insurance policy was also executed for his benefit.”

The conclusion of Maremont and Cohen: “All told, Mr. Kozlowski reaped more than $400 million in salary, stock grants and gains from the sale of stock options during the past four years.”

The New York apartment, a Fifth Avenue duplex, was decorated by Wendy Valliere, a friend of Kozlowski and his second wife. “Her firm’s tab for furnishings and decoration totaled about $7.5 million, according to people familiar with the company,” write Maremont and Cohen. “Nearly $4 million was spent on other furnishings and art.”

Valliere, when contacted by the Journal, said the $7.5 million figure cited in the article is “too high,” but declined to provide an alternative figure. The job she did for the Kozlowskis, Valliere said, was “so mid-range compared to what a lot of people do.”

Perhaps, but there was nothing mid-range about L. Dennis Kozlowski did.

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