"I'm Serving a Worse Sentence Than Many Murderers, Rapists, and Child Molesters"
from January/February 2008
by Colin Leinster
On weekends the visitors’ room at the Mid-State Correctional Facility near Syracuse, New York, looks and sounds like a crowded cafeteria as, table by table, a hundred or more inmates and their family members gather across from one another to catch up. Corrections officers watch lest a girlfriend, say, try to deliver drugs by way of a kiss. But not this Wednesday morning. Aside from the officer seated at a kind of proctor’s desk, the only person present is L. Dennis Kozlowski, standing in the middle of the room in his prison garb, waiting for an interview with Corporate Board Member . The following day, 24 hours shy of his 61st birthday, a state appellate court will reject Kozlowski’s appeal of his 2005 conviction for, among other things, stealing bonuses worth $150 million during his tenure as chairman and CEO of Tyco International, a onetime valve and water-sprinkler company he turned, via an estimated 1,000 acquisitions, into a multinational conglomerate with revenues of $35 billion. The ruling leaves him some two years into a 25-year sentence (though he could be out in 2013). But today Kozlowski talks about his legal woes, the Tyco board and its compensation committee, two strategic errors he thinks he made as CEO, what he planned to do next at the company, and how he endures prison life. Excerpts:
On his prison routine
Maybe the worst part is never being able to make a decision, about when I get up, when I eat, when I go to bed. Every day is the same. It’s like Groundhog Day . During the week I have a laundry job, and I teach a few guys math and reading. I’m in protective custody, which is like being in a prison within a prison with 10 or so other guys. We all work and eat and watch TV together. But I can’t use the gym, I can’t go to the library or attend programs, I can’t go to the mess hall. I can’t mix with the general population at all. Our small group has TV in the evenings—cartoons, sitcoms, or sporting events. We have a rotating committee that decides what we watch. I vote for sports when it’s my turn. On Thursdays we have a movie. I did see one good one [ The Departed ], but most of them are about ax murderers. I’d rather read a book. My friends send them. I get through three a week and have read hundreds since I’ve been in prison. I just finished Alan Greenspan’s new one [ The Age of Turbulence ], which I very much enjoyed. I read newspapers, the Financial Times , the Journal , the New York Times , all the business magazines.
On who visits him, and who doesn’t
My sisters, my two daughters—one of whom recently got married, but I couldn’t be there, of course—come and see me. So have a couple of people from Tyco—the Tyco I knew, not the new one: senior people and administrative assistants, and close friends from New York City. Others write, and some I talk to on the phone. I’ve been surprised at who does stay in touch. I’ve also been surprised at who doesn’t, very surprised in two cases. I won’t name them. A lot of people have dropped me. Some vaporized at the first sign of trouble.
On staying focused
I try to stay as involved as I can with people outside. My favorite part of the day is mail call, which happens around three. I like getting letters and I like writing them, which is something I do after six o’clock, at the end of the day.
On his punishment
I’m serving a worse sentence than many murderers, rapists, and child molesters. Another thing, I was convicted of stealing my bonus. Well, I never actually got it. It’s still in Tyco as deferred compensation I never collected. It’s like finding somebody guilty
of bank robbery when the money is still in the bank.
On what the jury (and the appeals court) didn’t get about his bonuses
My bonus plan was negotiated in the early ’90s, and set out in writing what would trigger it. Buying a company for millions and selling it for billions, for example, would get me a bonus. Remember, in my third year at Tyco annual revenues were $150 million. In 2002 they were $100 million to $150 million a day. My bonus plan was reinforced in ’97 and reviewed by Price Waterhouse, the outside auditors. I know what was negotiated in terms of how my bonus was calculated, and I know the compensation committee and the full board had total access to the plan. The directors had every opportunity to discuss it or to ask me questions. That never happened. Instead, the first time I ever saw a Tyco board member after I left the company was when some of them wound up in court testifying against me.
On what he’d do differently at Tyco
The world changed soon after we’d done our CIT deal. [Tyco paid $9 billion in stock for the finance outfit in 2001.] Enron filed for Chapter 11, and S&P, Moody’s, and the other ratings agencies took a harder look at our finance company and downgraded us. Once that happened, money got more expensive. For us it was like the cost of raw materials had gone up, because our product was money. I wish we hadn’t done CIT at all. The other thing I’d do differently is to go ahead and break Tyco into three or four companies. We announced we’d do this in January of 2002 but then changed our minds a couple of months later. That cost me credibility. We should have stuck to what we said the first time.
On what he had in the works before his resignation
I wanted to keep growing in the health-care and security businesses. There’d been some discussion with [General Electric CEO] Jeffrey Immelt about what we might buy from them and what they might want from us.
On his prediction that there’ll be another round of corporate scandals
The subprime mortgage mess looks like it will produce a replay of the savings-and-loan crisis of the 1980s. There’ll be lawsuits and questions of what the CEO knew and when. Prosecutors will investigate and, if they do a good job, will become higher-paid defense attorneys. Defense attorneys will continue to have big paydays.
