Prosecutors said the defendants could face a maximum sentence of 15 years to 30 years, but legal experts said they were likely to be sentenced to considerably shorter terms. Justice Michael Obus set a tentative sentencing date of Aug. 2; both defendants will remain free on bail until sentencing.

The case centered on whether the defendants had received board approval for a series of multimillion dollar "bonuses" between 1999 and 2001. The defendants testified that a now-deceased director had verbally given the nod, but prosecutors pointed out that not a single piece of paper backed up that tale. A number of former Tyco directors took the stand to swear that they hadn't approved the payments.

The trial became a symbol of corporate greed, in part because of Mr. Kozlowski's lavish spending of Tyco funds on a $30 million apartment, a yacht, expensive jewelry and a $2 million Sardinia birthday party for his wife.

Stephen Kaufman, the lead attorney for Mr. Kozlowski, said he was "disappointed" in the verdict but said his client would appeal. Charles A. Stillman, Mr. Swartz's lead lawyer, said, "I'm disappointed. We'll deal with this on appeal."

Flanked by a dozen prosecutors, Manhattan District Attorney Robert M. Morgenthau afterward indicated that the verdict should send a message to Corporate America: "Crimes committed in corporate offices will be treated according to the same standards as other crimes," he said. "No one is above the law."

Gregory J. Wallance, a white collar litigator at Kaye Scholer LLP in New York, said the jury's decision to acquit the former executives on one count could help the prosecution on appeal. Mr. Wallance, a former federal prosecutor in the Eastern District of New York, said the district attorney may argue on appeal that the split verdict shows the jury was careful and thorough in its deliberations.

The verdict comes as government prosecutors in general have had a mixed record in recent corporate trials, following an earlier string of successes.

Last week, former Bank of America Corp. broker Theodore Sihpol was found not guilty of improperly trading mutual funds. And jurors so far have been unable to reach a verdict in what seemed to be one of the strongest cases yet for prosecutors -- the fraud and conspiracy trial of former HealthSouth Corp. chief executive Richard Scrushy, who is accused of masterminding a $2.7 billion accounting fraud at the Birmingham, Ala.-based medical concern.

The verdict also is a big win for Mr. Morgenthau's office, which lost an earlier Tyco case when a New York jury acquitted Tyco's former general counsel, Mark Belnick, of grand larceny, securities fraud and other charges.

The first Kozlowski and Swartz trial ended in a mistrial last year when a juror who had been in favor of acquittal received a letter she perceived as threatening. The juror's name had been published by several media outlets, including The Wall Street Journal, after she appeared to make an "OK" hand signal to the defense team. Some jurors said afterward they were 11-1 in favor of conviction on many counts, and had hoped to convince the lone holdout, who later denied making any signals.

WALL STREET JOURNAL VIDEO • Dennis Kozlowski's lawyer1 says the verdict will be appealed. Plus, Mark Swartz's attorney2, Charles Stillman, comments on the conviction.   • Lawyer Andrew Stoltmann3 says the guilty verdict sends a clear message to CEOs and emboldens prosecutors, and he comments on what the ruling may mean for the Enron trial.

During deliberations in the just-concluded retrial, jurors asked to see dozens of exhibits and listened to hours of testimony read back. They completed listening to a readback of more testimony Friday morning, then delivered the verdicts soon after lunch. They found each of the defendants innocent on one charge – a falsification of business records count related to a company relocation to Florida.

Juror No. 11, Mr. Richardson, who works in technical operations for Time Warner Inc., said jurors "went through everything systematically, count by count." He said the panel "wanted to be absolutely certain. These were individuals' lives hanging in the balance." Other jurors included a building superintendent, a construction worker, a mortuary technician and a former bank employee who was now a housewife.

Both defendants took the witness stand in their own defense in the retrial. Mr. Richardson said the panel found Mr. Swartz more credible than Mr. Kozlowski, but said the weight of evidence suggested neither defendant was telling the truth.

The prosecutors were widely criticized in the first trial for putting on a disjointed case that focused too heavily on Mr. Kozlowski's lifestyle and lavish spending.

In the retrial, the district attorney's office cut the number of government witnesses in half, to 24, and eliminated much of the emphasis on Mr. Kozlowski's lifestyle and lavish spending habits. Jurors in the second trial saw only a five-minute snippet of the infamous Sardinia video, which chronicled the $2 million, Roman-themed party thrown for Mr. Kozlowski's wife, partly paid for by Tyco.

An accountant by training, Mr. Kozlowski helped build Tyco into a huge conglomerate with more than $36 billion in annual revenues, and became one of the highest-paid corporate executives in history.

But that apparently wasn't enough for the Tyco chief, who according to prosecutors stole millions more in a series of giant "bonuses" that weren't approved by the company's board.

"There is not a single piece of paper from the compensation committee showing they were authorized to take that money," Assistant District Attorney Owen Heimer said as part of the prosecution's closing arguments.

What's more, the sums were never disclosed to shareholders, as required, in annual proxy statements. The payments were in addition to tens of millions of dollars in regular pay for the two Tyco executives.

The strongest prosecution evidence involved a 1999 transaction in which Mr. Kozlowski had $25 million wiped from the amounts he owed Tyco under a loan program, and Mr. Swartz had an additional $12.5 million of loans forgiven. Among other things, the sums didn't show up on either executive's W-2 tax form for the year, which prosecutors cited as evidence that the defendants were trying to hide the alleged theft.

Both defendants testified that the failure to include the amounts on the W-2 was a mistake they didn't catch at the time, but the notion that somebody wouldn't notice megamillions missing from their tax returns strained credulity in the minds of the jurors.

Despite a mountain of evidence, the case was more difficult for prosecutors than it initially appeared. Defense attorneys skillfully pointed out that board minutes were sketchy and that the defendants made little effort to hide the payments from numerous employees and Tyco's outside auditor. At the heart of the defense argument – a contention that the former Tyco executives didn't try to cover up their actions, and thus lacked the "criminal intent" needed to convict.

"Criminals act in criminal ways," one of Mr. Kozlowski's attorneys told jurors in closing arguments. "When a person doesn't act like a criminal, there's a pretty good chance they're not a criminal."

Unlike in some other high-profile trials, no former Tyco employees got on the stand to admit that they helped the defendants commit fraud. To the contrary, at least a half-dozen former Tyco employees testified that they were aware of the disputed bonuses, but had never been asked to conceal anything. Tyco's main outside auditor also testified he was aware of all of the disputed bonuses except the 1999 payments.

Robert A. Mintz, a former federal prosecutor, now a white-collar defense attorney at McCarter & English in Newark, N.J., said the testimony by the two defendants was likely to have been the deciding factor for the jurors, who had a chance to weigh their body language and the way they answered questions. "Ultimately, the notion that these defendants could have been so well paid, under several different compensation schemes, all without any documentation to support these payments, strained their credibility in front of this jury and led to these convictions."

Justice Obus hinted that if the defendants acted in accordance with their requirements before the sentencing it may factor into his sentencing decision.

"Obviously the sentences that are possible here are potentially very lengthy" and given the "wide range" possible based on the charges, the judge said, "it is in their interest" to participate in any hearings or requests for information. "The defendants actions can have bearing" on their sentence, the judge said. He set sentencing for August 2.

Steven R. Peikin, a former federal prosecutor in the Southern District of New York, said the judge has a good deal of discretion in determining potential sentences for Messrs. Kozlowski and Swartz, but a third of the maximum possible sentence is a good measure.

"These are very serious charges involving a large amount of money," said Mr. Peikin, now a lawyer at Sullivan & Cromwell LLP in New York.

Other attorneys suggested the defendants were likely to be sentenced to roughly five or six years in prison.

Write to Mark Maremont at mark.maremont@wsj.com⁴ and Chad Bray at chad.bray@dowjones.com⁵