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June 17, 2005

stevemartin.gifOne of the boldest uses of ditziness yet attempted in a major criminal trial failed today. Former Tyco CEO Dennis Kozlowski was convicted on a 22 federal counts arising from his, well, generous compensation package. From the Wall Street Journal's online report:

The strongest prosecution evidence involved a 1999 transaction in which Mr. Kozlowski had $25 million wiped from the amounts he owed Tyco under a loan program, and Mr. Swartz had an additional $12.5 million of loans forgiven. Among other things, the sums didn't show up on either executive's W-2 tax form for the year, which prosecutors cited as evidence that the defendants were trying to hide the alleged theft.

Both defendants testified that the failure to include the amounts on the W-2 was a mistake they didn't catch at the time, but the notion that somebody wouldn't notice mega-millions missing from their tax returns must have strained credulity.

Years ago noted criminal law expert and Egyptologist Steve Martin recommended just such a defense:

You say.. "Steve.. how can I be a millionaire.. and never pay taxes?" First.. get a million dollars. Now.. you say, "Steve.. what do I say to the tax man when he comes to my door and says, 'You.. have never paid taxes'?" Two simple words. Two simple words in the English language: "I forgot!"

Absent success on appeal, it's back to the old drawing board for the white-collar defense community.

Mr. Kozlowski's CFO, Mark Swartz, was also convicted on 22 counts. Sentencing is set for August 2.

Those jurors must have had hearts of stone. Who hasn't forgotten about $25 million somewhere along the line? Must have been a bunch of Yankees fans...

More here.

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