Mr. Enniscorthy: Ex-Tyco CFO indicted; faces 30 years in jail
Corporate scandal struck close to home last week when an Albemarle County landowner, Mark Swartz, took a perp walk in Manhattan after being indicted for allegedly bilking Tyco International out of $600 million.
On September 12, former Tyco chief financial officer Swartz, who owns historic Enniscorthy near Keene, and his ex-boss, Dennis Kozlowski, were each charged with "enterprise corruption," a racketeering charge usually reserved for Mafia prosecutions. Manhattan District Attorney Robert Morgenthau froze $600 million in assets belonging to Swartz and Kozlowski.
Swartz, 42, also charged with 13 counts of grand larceny and 13 counts of falsifying records, was released on a $50 million recognizance bond. If convicted on all charges, Swartz faces 30 years in jail.
At the same time, the Securities and Exchange Commission filed civil fraud charges against the two men and former Tyco general counsel Mark Belnick, alleging they failed to disclose millions in secret unauthorized loans from the company that went to personal investments, business ventures, real estate holdings, and trusts.
In a complaint reminiscent of charges against Adelphia's Rigas family, the SEC said, "This is a looting case," involving "egregious, self-serving, and clandestine misconduct by the three most senior executives at Tyco."
"Kozlowski, Swartz, and Belnick treated Tyco as their private bank, taking out hundreds of millions of dollars of loans and compensation without ever telling investors," says Stephen M. Cutler, SEC director of enforcement, in a release.
Kozlowski, who'd already been indicted for trying to avoid $1 million in taxes on art purchases, didn't use the money just to enrich himself. The SEC complaint notes that he took Tyco millions and donated them to such institutions as Seton Hall and Columbia University in his own name.
Swartz, too, made contributions to partnerships he controlled. According to the indictment, Swartz pushed at least $1.7 million to his KMS Family Partnership, which, a reliable source tells The Hook, used to pay for upkeep at Enniscorthy.
In 2001, high-rollers Swartz and Kozlowski used Tyco to fund over $1 million for a party for Kozlowski in Sardinia.
Swartz bought Enniscorthy in 2001, paying what was reported at the time to be an unprecedented $18 million through Sea Ridge LLC. While the exact amount of the sale wasn't recorded in county records (thereby avoiding over $50,000 in recording fees), knowledgeable sources say Swartz paid at least $17 million for the property, the highest price paid for residential real estate in Albemarle County history.
Associate SEC enforcement officer Tom Newkirk says the names of Enniscorthy and Sea Ridge LLC were found in the SEC's investigation of Swartz, but they "were not identified in our complaint or in the U.S. District Attorney's indictment."
Other questionable real estate transactions were.
From 1997 to 2002, according to the SEC complaint, Swartz tapped into $85 million in loans from Tyco under its Key Employee Corporate Loan Program, which is designed to help Tyco execs pay taxes on stock he held. He took $13 million to pay taxes and used the remaining $72 million to fund other investments, including real estate without disclosing the loans to shareholders.
Swartz also borrowed more than $32 million from Tyco's relocation program, again without telling shareholders. He purchased a $6.5 million apartment in tony Upper East Side New York and a $17 million waterfront compound in Boca Raton, where recently indicted Worldcom CFO Scott "Beachfront Mansion" Sullivan also owns property. In September 2000, Kozlowski and Swartz arranged to have $16.6 million of the relocation loans forgiven and written off Tyco's books.
The SEC complaint also notes a tendency of Swartz and Kozlowski to buy and sell real estate at prices that had little to do with market value.
For instance, Kozlowski sold a home in New Hampshire to a Tyco subsidiary for $4.5 million three times its apparent fair market value.
In 1995, Swartz sold his New Hampshire property to a Tyco subsidiary for $305,000. The company unloaded it in 1997 at "a far lower price" than it had paid Swartz, says the SEC complaint.
Swartz's woes are just the latest addition to Enniscorthy's rich history. The 18th-century plantation, built by the Coles family, hosted local luminaries like Thomas Jefferson, James Madison, and James Monroe.
In 1993, former part owner of the New York Islanders hockey team John Pickett Jr. purchased the 100-acre Enniscorthy estate from billionaire John Kluge for $1.6 million in cash. Pickett bought additional land, increasing the estate to nearly 1,400 acres.
Pickett's many renovations, including the destruction of an 1815 barn, caused the property to be removed from the Virginia Landmarks Register in 1997 because of "a loss of integrity," according to the Virginia Department of Historic Resources.
Up until Swartz forked over approximately $17 million for Enniscorthy, the highest price paid for land in Albemarle County was the $5.7 million paid for Castle Hill in Keswick in 1997.
Now that Swartz may be residing at much less expensive real estate, especially if he's convicted, there's some speculation that Enniscorthy could be for sale. And if it's listed, local real estate watchers can hardly wait to see what price will be attached to it this time.