Updated from 1:10 p.m. EST

The judge hearing larceny and fraud charges against former Tyco ( TYC) executives Dennis Kozlowski and Mark Swartz declared a mistrial Friday, as controversy surrounding a holdout juror made it impossible to carry on.

The decision, announced Friday by judge Michael Obus in New York state Supreme Court in Manhattan, brought a circus conclusion to the case and the second high-profile mistrial for prosecutors trying to clean up white-collar crime on Wall Street. In October 2003, the obstruction of justice trial of former Credit Suisse First Boston banker Frank Quattrone also ended in a hung jury.

"I've been doing this 40 years," said Charles Stillman, Swartz's lawyer. "If I piled up all the experiences top to bottom, I ain't seen anything like this yet."

Kozlowski and Swartz were accused of pocketing $600 million through unauthorized bonsues and illegal stock sales. Kozlowsi, along with WorldCom's Bernard Ebbers and Enron's Kenneth Lay and Jeffrey Skilling, became a symbol for the excess that went along with a string of corporate scandals that came to light on Wall Street over the last three years.

Legal observers said the mistrial proved the adage that defense lawyers don't necessarily have to win, just not lose.

"That's a great victory for the defendants and their attorneys," said Stephen Ryan, a former federal prosecutor, now a partner at Manatt, Phelps & Phillips in Washington. "This trial is a win for the defense, there's just no doubt about that. If you're not going to jail, it's that simple."

Defense attorneys appealed to Obus on Monday for a mistrial after newspapers printed the name of a female juror believed to be the one holdout against conviction. She was identified after appearing to flash an "OK" hand signal toward the defendants during a courtroom meeting last week.

Published reports Friday afternoon said the juror subsequently received a threat, and quoted the judge saying that while he found the hand gesture "equivocal," he had no choice but to end the six-month-old proceeding. "It appears a great misservice has been done to her and her family," he was quoted saying about the juror.

While lawyers commenting on the case said any number of factors could contribute to a mistrial, they agreed the level of media scrutiny directed at the apparent holdout juror was without recent precedent.

"Jurors need to be unafraid of jury service and not feel that they can't deliberate according to their consciences, or that their personal lives will be looked into unnecessarily," said Mark Zauderer, a partner at New York law firm Piper Rudnick and chairman of the state's Commission On the Jury, a reform panel created by Chief Judge Judith Kaye. "I'm sure the judge concluded there was no way the juror could fairly deliberate, given what's occurred."

Zauderer said sequestering jurors in New York criminal trials was mandatory until a 1995 judicial reform law. Isolating a jury and protecting members' identities was commonly associated with organized crime trials, he said. "People don't think about these kinds of problems with corporate criminal cases, but this one obviously generated a lot of passion," he said.

"Maybe the pendulum will swing back a bit," he said. "We should not go back to routine sequestrations, but we need to protect jurors where this sort of thing is foreseeable. It's unfortunate not only in this particular case, but think of the chilling effect it will have on people who would be serving on a jury, the fact if they should happen to serve on a high-profile case, their private lives may be subject to scrutiny."

The proceeding was adjourned to May 7. Lawyers on both sides said they expected their clients to be retried.

"It is unfortunate that, after a six-month trial, the proceedings ended in a mistrial," read a statement on the Web site of Manhattan District Attorney Robert Morgenthau. "The Manhattan district attorney's office intends, at the earliest opportunity, to seek a retrial. For that reason, any further comment would be inappropriate."

While prosecutors are reeling from the mistrial ruling, they may profit from a second chance, in which they can refine their case and conclude it more quickly. They also have a preview of the defense strategy through Swartz's earlier testimony.

Susan Resley, a former Securities and Exchange Commission lawyer now a partner in the San Francisco office of Gray Cary, says that will be critical in the Tyco case and other high-profile corporate trials.

"When I look at the very complex cases in the pipeline like WorldCom and Enron, there are going to be some problems," she said. "The biggest one is just explaining it to the jury. Certainly with Tyco the complexity of the issues and possibly the way it was presented caused the jury to deliberate a long time and ultimately to have some problems. This is going to make government prosecutors look at how they present their cases."

Whatever the specific reason for the mistrial, prosecutors' inability to convict the Tyco defendants is certain to reflect badly on them with Martha Stewart due to receive a prison sentence next month on charges she lied about a $240,000 stock sale.

Kozlowski, Tyco's former chief executive, and Swartz, the former chief financial officer, were being tried on 32 counts of larceny, fraud and conspiracy.

"We are disappointed that because of events that occurred outside the courtroom we were unable to bring this case to verdict," said Stephen Kaufman, Kozlowski's attorney.

A smiling Swartz told reporters outside the courtroom he had no comment, and his lawyer, Stillman, said no comment on the judge's rationale was possible because the ruling was sealed. Stillman said the ruling was "anticlimactic," and said it was "too soon" to comment on the future.

"We need to get ourselves ready and think about what comes next," Stillman said. Of Obus, Stillman said, "He tried as hard as he could to hold this together," but ultimately arrived at a decision that was "absolutely correct."

Richard Deane, a white collar defense specialist at Jones Day in Atlanta, said Stillman will sleep well.

"Whenever you walk out the door and you haven't heard the word guilty, that's a good thing for a defense attorney,' Deane said. "If he was so set on a win, he should have taken note of the count -- 11- 1."

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