The trial of two former Tyco executives ended in high drama on April 2nd, as the judge, Michael Obus, declared a mistrial. Dennis Kozlowski, the firm’s ex-boss, and Mark Swartz, Tyco’s former finance chief, had stood accused of looting their employer of $600m, via fraudulent share sales and unauthorised compensation. Now, the two men must prepare for a retrial—or negotiate pleas with Manhattan’s district attorney, Robert Morgenthau, whose office prosecuted the case. In the meantime, however, Americans have been struggling to make sense of the extraordinary sequence of events that wrecked the trial in the first place.
Much of the immediate finger-pointing has been at the media. On March 26th, the Wall Street Journal published the name of one of the jurors, Ruth Jordan, after she appeared to flash an “OK” sign at the defence in the midst of jury deliberations. (She denies doing so.) The next day, the New York Postput a drawing of Ms Jordan, a 79-year-old resident of Manhattan’s posh Upper East Side, on its cover, and called her a “hold-out granny” and a “batty blueblood”. After obtaining assurances from Ms Jordan that she did not feel pressured, the judge allowed the jury to continue its deliberations for four more days. At this point, Ms Jordan told him that she had received a telephone call and a letter from members of the public. She later said the letter was “disturbing”.
His voice wobbling with emotion, Mr Obus called a mistrial, blaming “efforts to pressure the jury from the outside”. Though lawful, he said, printing Ms Jordan’s name violated an unwritten convention “that is ordinarily observed and wisely observed.” Quite so. But there is more here to question than merely the role of the press.
One Angry Granny
Accounts given to the media by the jurors, though not entirely consistent, suggest the following version of events.
At the outset, the jury found itself evenly split. Some of the jurors thought that the prosecution had put forward strong evidence that Messrs Kozlowski and Swartz had failed to seek approval, as they should have done, for certain payments to themselves from the board of directors. These payments included forgiven loans totalling $37.5m, together with bonus payments worth $49.6m for work done on the initial public offering of TyCom, a company subsidiary. Other jurors, however, found Mr Swartz’s testimony credible, and were reluctant to press for guilty verdicts.
Ms Jordan, meanwhile, had felt a powerful reaction against the trial itself. As one juror, Pete McEntegart, put it in Time magazine: “[Ms Jordan] offered her view that when things went to hell at Tyco, the Ivy League-educated, Waspy board of directors closed ranks and served up, in her words, the ‘Polack and the Jew’ on a platter for a DA eager to make an example of somebody—anybody—for the corporate greed of the late 90s.”
Mr McEntegart mocks this position. Yet lawyers for Messrs Kozlowski and Swartz did offer some evidence to support Ms Jordan’s alleged plot line—albeit without the racial overtones (which, anyway, Ms Jordan denies using). For a start, the board’s worries about the large bonuses that Messrs Kozlowski and Swartz were stuffing into their pockets appear to have materialised well after the payments took place—and in a more hostile and threatening legal climate. Tyco’s former outside auditor, Richard Scalzo, testified that he had raised some of the biggest disputed bonus payments at a board audit-committee meeting, where he discussed their accounting treatment. If board members had asked about these payments, said Mr Scalzo, he would have provided more detail about them. But, “I was not asked”.
Moreover, Mr Swartz testified that Mr Kozlowski offered to resign after the board learned about another controversial payment (this one to a Tyco director), but that the board declined his offer. The board paid Mr Swartz a handsome severance package in return for leaving the firm. This payment took place well after the “shocking” discovery of the previous, unauthorised payments. Other directors now professing “astonishment” confirmed, under cross-examination, that they had signed corporate proxy statements that disclosed some of these transactions (though not their purposes) to shareholders. Even Mr McEntegart seems to have reacted badly to the efforts of prosecutors to sway the jury by lingering on Mr Kozlowski’s free-spending lifestyle and unappealing sexual habits.
By the end of the first week of deliberations, only Ms Jordan was holding out against conviction on at least one of the charges. Under New York law, a verdict requires a unanimous jury. A juror, Patrick Donovan, wrote a note to the judge claiming that one juror had “stopped deliberating in good faith”, and that the atmosphere in the jury room had turned “poisonous”. Ms Jordan then penned a note to the judge arguing that one or more jurors “do not have an open mind as to the possibility of the defendants’ innocence.” Declining to call a mistrial, the judge sent the jurors home for the weekend to relax.
When the jury resumed its work the following week, the situation had changed. “Miraculously…we seemed to have a breakthrough,” wrote Mr McEntegart. After pausing briefly to ponder whether they, the press, or the public, had bullied Ms Jordan into changing her mind, the jury “ploughed ahead”, and, according to some jurors, by Thursday evening seemed to have reached a consensus of guilt on several charges. However, Ms Jordan insists that she would not have voted guilty. Then Ms Jordan told the judge about the letter and the phone call prompting him finally to declare a mistrial.
Mr Morgenthau immediately said that the prosecution would seek a retrial, and Mr Obus scheduled a hearing for May 7th to discuss when to hold the new trial. After six months, 48 witnesses and more than 12,000 pages of testimony, the prospect of another trial seems daunting.
Both prosecution and defence will now tailor their efforts to what they have learned about the jury’s deliberations. The prosecution’s barraging of the jury with mind-numbing detail, and its focus on the defendants’ greed and lavish lifestyles seemed to alienate many jurors, even some who thought the defendants were guilty. On the other hand, some did see solid evidence of stealing, and expertly dismantled Mr Swartz’s polished rationalisations on the witness stand. If a second trial goes ahead, prosecutors are likely to try to present a far more focused case.
The defence can take heart from the fact that for many jurors, and Ms Jordan in particular, evidence of the defendants’ criminal intent seemed flimsy, as it did to some outside observers. Without this, usually the hardest thing to prove in complex fraud cases, jurors should not convict. Ms Jordan says that, despite pressure, she clung to her belief that the prosecutors failed to demonstrate beyond reasonable doubt that Messrs Kozlowski and Swartz intentionally meant to defraud Tyco or its shareholders. As she told Newsday: “I wasn’t unfair, but I did have a firm resting on the presumption of innocence. I’m not sure [the other jurors] ever got that concept.”