Tax

Tax Charges Dropped Against Kozlowski

A judge says the ex-Tyco chief already paid $3.2 million in taxes and penalties he owed on more than $13 million worth of paintings.
Stephen TaubDecember 15, 2006

Former Tyco International chief executive officer Dennis Kozlowski is off the hook for some of the charges he faced several years ago.

On Friday a New York judge dismissed charges against the ex-Tyco chief that claimed he avoided paying state and city sales taxes on artwork in 2001 after he agreed to pay $21.2 million earlier this year, according to several published reports. Kozlowski is currently serving 8 1/3 to 25 years in prison

The judge reportedly said Kozlowski had satisfied a restitution agreement. Under the deal struck in May, Kozlowski paid $3.2 million in taxes and penalties owed on more than $13 million worth of paintings, plus $18 million in state and city income taxes, according to Bloomberg.

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In his scheme to avoid paying taxes, the news service reported, Kozlowski had empty crates shipped to Tyco’s New Hampshire offices, but had the paintings themselves shipped to his Fifth Avenue apartment in Manhattan.

The tax-evasion charges wound up indirectly spawning the broader criminal investigation, which resulted in Kozlowski’s conviction in June 2005 on several counts of larceny and fraud for stealing $137 million from Tyco, Bloomberg pointed out.

“In view of the circumstances of Mr. Kozlowski’s other case and that the sales and income taxes have also been collected, I do think it’s appropriate to dismiss this indictment which in some sense is the tail wagging the dog,” State Supreme Court Justice Michael Obus wrote, according to the Associated Press. “I do think this is an appropriate resolution.”

Bloomberg noted that Kozlowski resigned from Tyco on June 3, 2002, the day before he was charged with conspiracy, falsifying business records, and tampering with evidence to avoid paying sales taxes.

Then, in September of that year, he and former Tyco CFO Mark Swartz were accused of grand larceny, securities fraud, and charges related to stealing hundreds of millions of dollars in unauthorized bonuses, according to press reports.

“Mr. Kozlowski paid what the government claimed that he owed, the indictment was dismissed, and we’re delighted,” Kozlowski’s attorney Austin Campriello told reporters after the hearing. “We are still working on the fine.”

Interestingly, Bloomberg pointed out that while Kozlowski didn’t file New York returns while working and living in the state, he was never charged with income-tax evasion.