That's the question on everyone's lips in the wake of the indictment of Tyco's
former superstar chief executive, L. Dennis Kozlowski, on charges of evading $1
million in sales taxes on paintings he bought. Why would a man who earned $125
million last year and owns planes, yachts and multimillion-dollar homes risk it
all to save a million bucks--probably about what he spends each year to keep his
fleet of Harley-Davidson motorcycles running?
After immersing myself in Kozlowski's business history, I have a different
question: Why is anyone surprised? The alleged behavior that has him facing prison
is exactly the behavior that was the hallmark of his run as Tyco's swashbuckling,
take-no-prisoners CEO. Why is it, then, so shocking to learn that Kozlowski is
now accused of being a small-time con artist to avoid paying taxes on $13.2 million
worth of paintings wryly described by the New York Times as "second-tier work
by big-name artists"? This, after all, is the same guy who, in 1997, moved his
company's nominal headquarters to Bermuda to--you got it--avoid paying taxes on
billions in overseas earnings. Apparently, life imitates business when it comes
to the art of cutting corners.
According to the less-than-flattering portrait painted by prosecutors, Kozlowski
bought the high-end paintings--which included a Monet and a Renoir--for his $18-million
apartment on Fifth Avenue, but had them routed through Tyco's offices in New Hampshire
so he wouldn't have to pay New York City's 8.25% sales tax. In one case, the cooperative
art dealers allegedly sent them directly to Kozlowski's apartment while shipping
empty crates to New Hampshire.
Adding to this murky moral landscape, it turns out that Kozlowski funded some
art purchases with no-interest loans drawn from a Tyco program designed to help
employees buy company stock. Perhaps if he had made do with a few LeRoy Neiman
sports scenes and that perennial classic, "Dogs Playing Poker," he could have
avoided downsizing employees and raiding their stock fund.
It was maneuvers like these that, until his fall from grace, had earned Kozlowski
the admiration of Wall Street and a reputation as America's "most aggressive CEO"--the
title of a 2001 cover story in Business Week. The magazine went so far as to laud
Kozlowski, an accountant by trade, for his "willingness to test the limits of
acceptable accounting and tax strategies." It took the Enron collapse for Wall
Street to stop applauding and start asking questions. The disturbing answers caused
stock in Tyco--a conglomerate whose products include electronic parts, telecom
systems, medical equipment and burglar alarms--to lose three-quarters of its value
this year, costing investors $95 billion.
Somewhere along the way, Kozlowski, the son of a New Jersey cop, began to see
himself and the company he led as one and the same. Like so many other CEOs grabbing
today's headlines, Kozlowski adopted the outlook of France's Louis XIV, who notoriously
proclaimed: "L'etat, c'est moi"--"I am the state."
If King Louis was Kozlowski's historical ancestor, convicted felon Leona Helmsley--who
once declared that only the little people pay taxes--was his spiritual godmother.
Dennis the Public Menace's progress from tax aversion to tax evasion began with
his loophole-exploiting business practices and ended with his defrauding the public
out of tax money.
Last month, prosecutors breathing down his neck, Kozlowski gave the commencement
address at New Hampshire's St. Anselm College. Freud would have had a field day
with his message to the Class of 2002. "You will be confronted," he warned them,
"with questions every day that test your morals. Think carefully, and for your
sake, do the right thing, not the easy thing." You could almost see Kozlowski's
superego and id duking it out under his mortarboard.
We've spawned a corporate culture that has made demigods out of those doing
the easy thing. Turning it around will take more than noble commencement speeches.
It will take throwing a few of those demigods in jail. I can picture it now: "Still
Life In Prison Stripes."
Copyright 2002 Los Angeles Times