Former Tyco International chief executive Mr Dennis Kozlowski and Mr Mark Swartz, its former chief financial officer, were yesterday accused of stealing $170 million (€174 million) from the company and obtaining a further $430 million through fraudulent stock sales.
Mr Robert Morgenthau, the Manhattan district attorney, indicted Mr Kozlowski and Mr Swartz on allegations of "enterprise corruption".
Mr Kozlowski is the most prominent US executive to be charged in relation to the recent string of corporate scandals.
Mr Mark Belnick, former chief corporate counsel, was charged with falsifying records to conceal $14 million of illicit company loans.
The charges add to Mr Kozlowski's earlier indictment for allegedly evading personal sales tax on art purchases.
Both Mr Kozlowski and Mr Swartz, who had been one of the most aggressive and respected deal-making teams in corporate America, could face up to 30 years in jail and fines.
The Securities and Exchange Commission (SEC) simultaneously lodged civil charges against Mr Kozlowski, Mr Swartz and Mr Belnick. It will seek to bar them from holding corporate office.
Mr Morgenthau said his office was seeking an order to freeze $600 million in assets of Mr Kozlowski and Mr Swartz while the case is pending.
The indictment alleges that, from early 1995, Mr Kozlowski and Mr Swartz were part of a "criminal enterprise... which was created... for the purpose of stealing money from Tyco and defrauding investors".
Mr Morgenthau said the indictment alleges that Mr Kozlowski "was in charge of the \ enterprise and looted the company" by awarding himself bonuses and using millions of dollars of company funds for personal expenses.
The SEC, which conducted a joint probe with the district attorney's office, said Mr Kozlowski and the two others failed to disclose multimillion-dollar low-interest and interest-free loans they took from the company and, in some cases, never repaid.
The SEC complaint alleges that the three former executives also sold shares of Tyco stock valued at millions of dollars while their self-dealing remained undisclosed.
Unlike other recent debacles, such as Enron and WorldCom, Tyco has not had to file for bankruptcy. A new management team is trying to pull the group, whose interests range from electronic security to medical products, out from the shadow of scandal and improve corporate governance.
The company itself filed a lawsuit yesterday against Mr Kozlowski alleging that he concealed "larcenous acts" from the board. The suit seeks repayment of up to $100 million for unauthorised funds and loans, forfeiture of all Mr Kozlowski's income and benefits back to 1997 and punitive damages. The SEC also wants to force the three men to return their compensation since the alleged fraud began.
Tyco said a preliminary internal investigation had not yet revealed anything to cause a restatement of earnings and yesterday's disclosures were expensed in earlier financial results.
Attorneys for Mr Kozlowski and Mr Swartz were not available for comment, ahead of the arraignment, which was expected later yesterday. Mr Belnick's attorney said in a statement: "We are certain that, when this painful process ends, he will be cleared of the unsupported allegations which have been made against him."
