CEOs in Jail: Three Squares, and $76 Million

The blog footnoted.org, which keeps track of corporate filings, remarks that “it’s good to know that some people are making money in the current market, even if those folks happen to be guests of the New York State Department of Corrections.”

“That’s right: Dennis Kozlowski (aka Prison ID 05A4820) and Mark Swartz aka (Prison ID 05A4823) — the two former top executives of Tyco (TYC) — have seen their executive retirements blossom while they’re sitting in their respective prison cells, according to a footnote buried deep in the 10K that Tyco filed last week.”

“In footnote #16, which is on pg. 150 of the 10K, Tyco discloses that the accrued benefit obligations for Kozlowski’s executive retirement, which he theoretically gets to collect when he turns 65, grew to $76 million for the year ended Sept. 28, 2008. That’s an increase of $5 million or a market-beating 7% (compared with the 20% the S&P 500 lost during the same period). Swartz did slightly better with $36 million turning into $39 million — an 8.3% return.”

“Of course, it’s not really clear that the two men will ever get a chance to collect. As Tyco notes in the footnote, it may be accounting for the money, known as “Executive Retirement Arrangements”, but “amounts owed to Messrs. Kozlowski and Swartz under the ERA are in dispute by the Company.” Still, given the current climate, it’s not a bad return.”

“One other quick note about Kozlowski. He recently gave an intervew to Fox Business News about his take on the current market meltdown. “Why am I sitting here? Tyco is still a viable company, still alive and kicking,” he said. “Bear Sterns is under, Lehman Brothers is under. Merrill Lynch had to be acquired. There are all kinds of banks going under right now.””

As my mother used to say, “If everyone else is jumping off the Empire State Building, does that make it right for you?”