Mistrials And Tribulations
(FORTUNE Magazine) – Pete McEntegart, a writer at Fortune's sister magazine Sports Illustrated and a former Goldman Sachs banker, spent six months as a juror at the Tyco trial. After a mistrial was declared, McEntegart, still angry and disappointed at the result, spoke to FORTUNE about Kozlowski and Swartz's eight-figure bonuses; infamous Juror No. 4, Ruth Jordan; and the difficulty even smart juries have with complex financial cases. --Mark Gimein
Outside the jury room, the big story was Kozlowski's over-the-top lifestyle. Did the infamous party tape help the prosecution?
It hurt the prosecution's case a lot. When we first walked in there, roughly six people thought the prosecution had wasted their time talking about Sardinia and Jimmy Buffett. They didn't think that was a crime. A few other people said, "They're crooks." I thought, together with another person or two, that a lot of what the prosecution said was bogus, but on these bonuses I think I heard something and I wanted to get into that.
Did your own background at Goldman affect your thinking about Tyco?
I didn't think there was any way I'd get on the jury. I actually thought the defense would want me but the prosecution wouldn't. When times were really good--and times were really good when I was at Goldman--if [a company] wanted to spread the money around, I have no problem with that. It's just that you can't take another $20 million here or $30 million there that you're not allowed to take. That's grand larceny.
Could Swartz have been genuinely confused about the bonuses he was entitled to?
No, he was a CFO. Ruth and other people said, "You know this is very confusing stuff. It's easy to see how it might be an honest mistake." I said this is not confusing to him.
Talk about the holdout juror.
She believed these guys had been made into scapegoats and they were doing business just as everyone else at Tyco did, and as everyone else in corporate America did, and now everyone was trying to stick it to them.
But before the judge declared a mistrial, the jury was close to convicting on some charges. How was the impasse broken?
Mark Swartz got on the stand and said the reason several bonuses were legitimate and the reason they were not in the [board] minutes was because they were early payouts of the annual bonus plan. Period. And memos from the time on the accounting treatment said the exact opposite. When we went back in and heard that testimony on Tuesday and Wednesday and when it was stripped of all the noise and just read back without inflection it was clear. At one point [Ruth] got emotional and said, "I'm upset, but I'm not upset because I'm losing. I'm upset because I'm disappointed in the defendants."
Is an ordinary jury capable of deciding a financial case as complicated as Tyco?
I honestly think the best thing for a trial like this would be no jury, maybe three judges who know finance. For one thing it would have been a much shorter trial. The defense has a motive ...
Exactly. If it's confusing at the beginning, and they throw so much out there, there's so much to sift through at the end.