A federal grand jury in New Hampshire is weighing potential income tax evasion charges against former Tyco International CEO Dennis Kozlowski and ex-CFO Mark Swartz, according to people familiar with the investigation.
Separately, New York prosecutors who last year obtained racketeering indictments against Kozlowski and Swartz, along with lesser charges against former Tyco general counsel Mark Belnick, are expected to expand their investigation with new allegations as early as this week.
The moves escalate the legal stakes facing the three executives, who were ousted from the troubled conglomerate last year in a scandal that erupted with charges that Kozlowski ducked more than $1 million in New York sales tax on art purchases. That case snowballed into broader allegations that he and Swartz made more than $600 million in improper Tyco bonuses, loans and stock sales. They have pleaded not guilty.
Bill Morse, an assistant prosecutor in New Hampshire U.S. Attorney Thomas Colantuono’s office, would neither confirm nor deny an investigation. Kozlowski lawyer Stephen Kaufman did not return messages. Swartz’s lawyer, Charles Stillman, declined to comment.
However, the annual report Tyco filed Dec. 30 disclosed that Colantuono had subpoenaed records from the company, which is headquartered in Bermuda but run from New Hampshire. The subpoena focused on the compensation paid to Kozlowski and Swartz, a person close to Tyco said.
Kozlowski received more than $4 million in salary and other compensation from Tyco during the firm’s 2002 fiscal year, plus stock worth millions more, according to a proxy report filed Jan. 22. Swartz made well over $2.2 million in salary, other compensation and stock during that same period, the proxy showed.
The federal grand jury investigation has been examining if federal tax returns filed by Kozlowski and Swartz reported all compensation including the millions the New York indictment accused them of looting from Tyco.
A preliminary court hearing in the case against Kozlowski and Swartz is scheduled for Friday. A separate hearing is also set that day for Belnick, who is charged with falsifying business records to hide $14 million in loans used to buy homes in New York and Utah.
Manhattan prosecutors are expected to file additional charges prior to the hearings, people familiar with the investigation said. The sources wouldn’t discuss potential targets. But Assistant District Attorney John Moscow, who is directing the Manhattan case, said at earlier hearings that Belnick could face more charges and that new defendants could be indicted.