Untainted: Enniscorthy owner seeks 'clean' bail money
NEW YORK and ALBEMARLE– Lawyers for Mark Swartz, the former Tyco chief financial officer who has been charged with swindling hundreds of millions of dollars from the company, have proposed using $5 million he received from a deferred compensation plan to secure his $50 million bail bond.
That represents an alternative to the 500,000 Tyco shares Swartz initially planned to offer as collateral on his bail. Prosecutors have contended that at least some of the Tyco stock stems from the 1995 to 2002 conspiracy period alleged in the indictment.
Tyco is based in Exeter, New Hampshire, but Swartz, according to reliable sources, is the owner of Enniscorthy, a plush Albemarle County estate he purchased for $17 million to $18 million in 2001.
At the time, it was the most expensive real estate deal in county history– by a factor of three. The previous record was the $5.7 million spent for Castle Hill in 1997.
Judge Michael Obus of the New York State Supreme Court in Manhattan ruled last Friday, October 4, that Swartz has until October 11 to either prove that the stock he offered is not tainted by criminal activity or secure the bail bond with other collateral.
"We wanted to show the judge that we're trying to get this done," Swartz's lawyer, Charles Stillman, said after the hearing, which Swartz didn't attend.
"If that's what they post as collateral, we'll still have questions to ask," said Assistant District Attorney John Moscow.
Swartz and L. Dennis Kozlowski, Tyco's former chief executive, were indicted last month on charges they looted Tyco of $170 million and obtained $430 million from fraudulent stock sales. Both have pleaded not guilty.
After Kozlowski's former wife offered $10 million to secure his $100 million bail bond, Judge Obus accepted Kozlowski's bail request.
At the time that he and Swartz were charged with "enterprise corruption," Kozlowski was already under indictment for a comparatively nickel-and-dime scheme. Using funds borrowed from Tyco, Kozlowski allegedly bought six paintings worth $13.2 million and then dodged the sales tax by arranging for art gallery employees in New York and London to ship empty boxes to the company's offices in Exeter.
In a similarly chintzy but so far legally unchallenged vein, Swartz avoided paying an approximately $50,000 transaction tax into Albemarle County coffers when he purchased Enniscorthy. A little-known provision in the Virginia Code allows the transaction to happen tax-free if the sellers, in this case, the Picketts of Palm Beach, have a stake in the buying entity, Sea Ridge LLC.
According to the indictment, Swartz has funneled at least $1.7 million of Tyco money into his KMS Family Partnership, which, a reliable source tells The Hook, was the company that paid for upkeep at Enniscorthy. Despite this, Enniscorthy has not been seized or frozen. "We haven't taken any public acts with respect to that," says Tom Newkirk, an enforcement officer with the S.E.C.
Former executives Swartz and Kozlowski, still free on personal recognizance bail, have run into problems posting secured bail because their personal assets, totaling about $600 million, have been frozen.
Swartz could ask the judge who issued the restraining order to unfreeze the assets, but it's not immediately clear if that attempt would succeed.