A precedent looms

With companies destroyed, employees laid off, and pensions lost, the next wave of corporate executives on trial make Martha Stewart look like a lightweight.

Next in line for a verdict are L. Dennis Kozlowski and Mark H. Swartz, the former chiefs of Tyco International Ltd. who each face up to 30 years in prison for charges related to stealing $600 million from the industrial conglomerate and using much of the money to support lifestyles so extravagant as to make Robin Leach blush.

Closing arguments in the Tyco case are expected to be completed next week, and Kozlowski's and Swartz's fate will soon be in the hands of the jury. That decision is likely to have a dramatic impact on the other corporate scandal trials underway more so than Stewart's conviction for a $228,000 stock scandal, legal specialists say.

''If these two people are convicted, the other defendants in all the other corporate scandals have to ask themselves how their cases are the same as the Tyco case," said James A. Cohen, a professor at Fordham University School of Law.

The Tyco trial is just the first and flashiest in what promises to be a long season of corporate America on the stand:

The trial against Adelphia Communications Corp. founder John Rigas and two of his sons began earlier this month in federal court in New York. The Rigases and another company executive are charged with stealing millions from the former Pennsylvania cable TV company and using the money, in part, to pay for a luxurious lifestyle.

Bernard J. Ebbers, the former chief executive of WorldCom Inc., was charged earlier this month with fraud and conspiracy for his role in allegedly overseeing an $11 billion accounting fraud that led to the communication company's bankruptcy and the firing of thousands of employees. Scott Sullivan, the company's former chief financial officer, pleaded guilty to charges and agreed to testify against Ebbers.

Perhaps the best-known corporate scandal is that of former energy giant Enron Corp. Last month its finance chief, Andrew Fastow, pleaded guilty to two counts of conspiracy and agreed to help the government with its case. Former CEO Jeffrey Skilling was indicted for his role in what is alleged to be a massive accounting fraud, bringing to more than 20 the number charged in an investigation by the Justice Department. Although several have pleaded guilty, none have yet gone to trial. Prosecutors are still investigating former chairman Kenneth Lay but haven't charged him.

In August, a trial is scheduled for former HealthSouth Corp. chief executive Richard Scrushy, who is charged with fraud and money laundering in an alleged $2.7 billion accounting scandal.

Stewart's convictions on four criminal counts last week indicated that public sentiment has swung sharply away from the corporate titans that had been admired just a few years ago, said Michael Gass, a securities lawyer at Palmer & Dodge LLP in Boston. ''As a general rule, people nowadays think there have been abuses, excesses, and breaches of trust, and they want to see some personal accountability," he said.

The Tyco case, filed in September 2002 by Manhattan District Attorney Robert Morgenthau, charges Kozlowski and Swartz with grand larceny, conspiracy, and falsifying business records. The government alleges they stole $170 million from the company and used the money for their personal use. In addition, the pair allegedly earned $430 million in an elaborate scheme to profit improperly by selling Tyco shares that were allegedly propped up by withholding material information from investors. Tyco, based in Bermuda, had offices in Exeter, N.H., when Kozlowski and Swartz ran the far-flung conglomerate with operations in pipes, valves, electronics, and medical products. The firm's main offices are now in Princeton, N.J.

The trial showcased Kozlowski's excess, making a $6,000 shower curtain in his Fifth Avenue apartment -- bought with Tyco's money -- a symbol of corporate greed in the 1990s. At the trial, jurors got to see a video of his $18 million apartment and learned that the expensive curtain protected the floor in the maid's bathroom.

Jurors also saw a video of the $2 million, 40th-birthday party Kozlowski threw for his wife Karen in Sardinia in June 2001. Like the shower curtain, the carved-ice statue of David, which dispensed vodka through one of its orifices, entered the pantheon of popular culture. Prosecutors allege that Kozlowski improperly used Tyco funds to foot half of the party bill.

Shots of Kozlowski clutching two toga-draped young women also may not have garnered much sympathy for the defendant, according to some criminal lawyers. ''There's no juror that can relate to Kozlowski's lifestyle on a personal level," said David Gourevitch, a former federal prosecutor who practices securities law in his own firm. ''The greatest risk to the defense in the Tyco case, the thing they can't overcome, is that a jury will want to convict Kozlowski of greed."

But Paul Summit, a partner specializing in white-collar criminal cases at Sullivan & Worcester LLP, cautioned against jumping to conclusions about the verdict. ''I don't think juries generally convict because somebody's got to pay," said Summit. ''One of the wild cards in this trial is that it's gone on for so long. In some sense, the jurors come to know Kozlowski and Swartz as human beings. That can make it more difficult for a jury to convict."

Jeffrey Krasner can be reached at krasner@globe.com.