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PREVIEW / SEPT. 28 -- OCT. 5

Wall Street Trials to Get Underway

September 29, 2003|From Associated Press

One defendant is an ex-CEO whose alleged greed came to symbolize the scandals that have racked Wall Street. The other is a former banking star accused of ordering key documents destroyed.

Former Tyco International Ltd. Chief Executive L. Dennis Kozlowski and banker Frank Quattrone go on trial today less than a block apart in lower Manhattan -- the first major trials since white-collar corruption erupted into the headlines last summer.

And while the charges against each man are different -- Kozlowski is accused of grand larceny, Quattrone of obstruction of justice -- both trials will be watched closely by the financial community.

"The investing public feels like it has been trampled on by Wall Street," said Christopher J. Bebel, a former Justice Department prosecutor. "And it has a thirst for vengeance that has not been quenched at this point."

Kozlowski and former Tyco Chief Financial Officer Mark Swartz, who will be tried with him, are accused of turning the conglomerate into their personal piggy bank, looting it to the tune of $600 million.

Reports after Kozlowski was charged last September showed he spent company money at will on high art and furniture, including a $6,000 shower curtain and a $15,000 antique umbrella stand.

In one well-known incident, Tyco picked up half the tab for a $2-million birthday party for Kozlowski's wife in Italy that featured musician Jimmy Buffett and an ice sculpture of Michelangelo's David.

Besides lavish salaries and perks, Kozlowski and Swartz arranged to be paid $84 million in unauthorized bonuses, Manhattan prosecutors say.

Both men have pleaded not guilty. The pair are expected to argue that the millions they are accused of stealing were actually loans and bonuses approved by the board and disclosed to outside auditors.

The trial, at state Supreme Court in Manhattan, is expected to last several months. Kozlowski, 56, and Swartz, 43, could each get 30 years in jail if convicted on grand larceny and other lesser counts.

The Quattrone obstruction trial, just down the street at a federal courthouse, features fairly simple evidence and is expected to last only two to three weeks.

Quattrone was a highly influential investment banker at Credit Suisse First Boston during the 1990s. At the height of the dot-com boom, he was paid tens of millions of dollars a year to help take technology companies public.

He is accused of encouraging CSFB employees to get rid of documents that were being sought by a grand jury and regulators looking into how CSFB doled out shares of initial public offerings.

The government says Quattrone deliberately obstructed justice on Dec. 5, 2000, when he distributed an e-mail proposed by one of his subordinates that urged workers to "catch up on file cleaning before the holidays."

Quattrone attached his own note at the top: "I strongly advise you to follow these procedures."

The trick for prosecutors will be proving criminal intent. Quattrone insists that he did not know the documents were being sought by investigators, and that he was following CSFB policy on getting rid of old files.

Quattrone, 47, has pleaded not guilty. He faces 25 years in prison if convicted on all counts -- two of obstruction, one of witness tampering.

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