Kozlowski Agrees To Settle New York Tax Evasion Charges

by Leroy Baker, for LawAndTax-News.com, New York

16 May 2006

Former Tyco CEO L. Dennis Kozlowski has agreed to pay more than $21 million to settle tax evasion charges on purchases of fine art connected to his conduct of the Bermuda-based firm, for which he now languishes in jail.

Justice Michael Obus of Manhattan Supreme Court on Friday agreed to dismiss charges including conspiracy to evade the New York state sales tax on $13.2 million in artworks bought by Kozlowski but paid for by Tyco.

Obus, with the agreement of prosecution and defense lawyers, gave Kozlowski until September 19 to pay the more than $3 million in unpaid sales tax, upon which the charges will be formally dropped. He will also pay about $17 million in back state income taxes covering the years 1995 through 2002.

"In light of the sentence the defendant is now serving and his agreement to pay $21.2 million to New York's taxing authorities, no further purpose would be served by continuing the sales tax prosecution," stated Manhattan District Attorney Robert Morgenthau.

The Kozlowski tax case was part of an ongoing investigation into state sales tax evasion by galleries, dealers and customers, Morgenthau explained.

Kozlowski and the firm's former chief financial officer, Mark Swartz were last year sentenced to maximum prison terms of 25 years for their theft of unauthorized loans and bonuses from the company.

The two were found guilty last June on 22 of 23 counts, including grand larceny, conspiracy, securities fraud and falsifying business records, and were said to have received more than $150 million in unauthorized loans and bonuses from Bermuda-based Tyco.

The two men were also fined $70 million and $35 million, respectively, and ordered to pay $134 million in restitution.

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