Dennis Kozlowski, the former chief executive officer of Tyco International Ltd., pleaded innocent Tuesday to charges he cut deals to avoid paying $1.1 million in sales tax on valuable paintings he purchased.
Manhattan District Attorney Robert Morgenthau said Kozlowski, 55, faces a misdemeanor charge of conspiracy, and felony charges of tampering with physical evidence, falsifying business records and sales tax violations. The felonies carry a penalty of up to four years in prison.
He was released on a $3 million personal recognizance bond. Kozlowski’s next court date is June 26. Neither Kozlowski nor his lawyer, Stephen Kaufman, would comment on the charges outside the New York court.
“The city needs the money,” Morgenthau said at a news conference Tuesday announcing the charges. “Nobody’s going to wink. If you don’t pay your taxes, you’re going to be prosecuted.”
Morgenthau said Kozlowski has paid back the company for some but not all the purchases without interest.
Kozlowski, who bought $13 million in paintings, resigned Monday after helping to build Bermuda-based Tyco into a massive conglomerate with 277,000 employees. He joined Tyco in 1975, and was appointed as its CEO in 1992.
The company makes fire alarms, security systems, bandages and other medical products, and undersea fiber-optic cable, among other products.
Tyco gained 72 cents, or 4.49 percent, to close Tuesday at $16.77 on heavy volume of 65.1 million shares traded on the New York Stock Exchange.
The company said Kozlowski resigned for “personal reasons” after informing board members Friday about the investigation.
The paintings included “Pres Monte Carlo” by Claude Monet. Morgenthau, who did not name the alleged co-conspirators, said the investigation was ongoing.
The indictment alleges that from Aug. 11, 2001, through Monday, Kozlowski and his conspirators avoided having either the customer pay or the vendor collect the sales tax due on the sale of at least six paintings valued at $13.1 million.
Kozlowski and his co-conspirators agreed to generate false documents, such as invoices and shipping documents, to make it appear as though the art was shipped out of state and therefore not covered by New York State sales tax provisions, the indictment said.
Tyco employees were directed to sign false documents reflecting the receipt, in New Hampshire, of artwork in an effort to avoid tax auditors.
According to New York State, a sales tax is imposed on the sale of tangible personal property or, as an alternative, a compensating use tax on purchases made out of state for use in New York. The combined city and state sales tax in Manhattan is 8.25 percent.
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