Tyco trial tests the waters

Mr Kozlowski was released on $10m bail

Jury selection has begun in the first big trial of a businessman accused of Enron-style white-collar crime.

Dennis Kozlowski, the former boss of Tyco who has become infamous for his lavish spending habits, stands accused in a Manhattan court of looting $600m (£361m) from his company, with the help of his ex-finance director Mark Swartz.

"These are the first individuals to test the waters in this new era of zero tolerance for corporate wrongdoing," said attorney Robert Mintz of McCarter & English.

Mr Kozlowski will be the first chief executive to appear before a jury in the first trial since the Enron scandal, with trials of senior executives at WorldCom, Adelphia and Enron all still pending.

The judge - and the prosecuting and defence lawyers - will spend the next few weeks choosing 15 jurors from a pool of 1,500.

"The investing public feels like it has been trampled on by Wall Street," said Christopher Bebel, a former federal prosecutor.

"And it has a thirst for vengeance that has not been quenched at this point."

Both Mr Kozlowski and Mr Swartz are pleading innocent.

In a second trial that also began on Monday, the former top dog at investment bank Credit Suisse First Boston is also appearing in a New York court.

Frank Quattrone is accused of obstructing justice and tampering with witnesses by getting his staff to destroy files subject to a subpoena in an investigation into whether CSFB used share allocations in hot flotations to attract banking business.

Outrage

In Mr Kozlowski's trial, prosecutors are likely to dwell on the defendant's notoriously lavish lifestyle, and his alleged spending sprees in the run-up to the trial.

A $15,000 umbrella stand, a $6,000 shower curtain and $2,000 coat hangers - all charged to company expenses - made headlines around the world as the Tyco scandal unfolded.

Prosecutors also have video footage of an infamous birthday party on the island of Sardinia - half funded by Tyco - which featured an ice sculpture of Michelangelo's David dispensing vodka from between its legs and an exploding birthday cake in the shape of a life-size woman.

Mr Kozlowski's defence is expected to be built around the fact that Tyco's board and auditors were aware of how funds were being used, meaning that it was not fraud.

Precedent

Under Mr Kozlowski's management, the Bermuda-based Tyco became an international conglomerate through a string of undisclosed acquisitions.

The firm has now been forced to restate its accounts for every year since 1998.

Mr Kozlowski resigned following personal tax evasions charges over the sale of six paintings, including a Monet.

The extent of wrongdoing at Tyco then began to become apparent, with public outrage hitting a new peak after the Enron and WorldCom scandals.

The tax evasion case will not be heard until after trial, which is expected to last several months.

If convicted, both Mr Kozlowski and Mr Swartz could face 30 years in prison.

The trial is being watched as an indicator of how state and federal prosecutors might pursue the other executives accused of corporate crimes.