Oct. 9 (Bloomberg) -- The assets of former Tyco International Ltd. Chief Executive Officer L. Dennis Kozlowski were frozen by a federal judge after the company claimed the imprisoned ex-CEO may be using a divorce settlement to put his money out of reach.

U.S. District Judge Paul Barbadoro in Concord, New Hampshire, ordered Kozlowski on Oct. 6 not to transfer any assets before Oct. 17. The order comes after Kozlowski paid off a $70 million fine and a New York judge dissolved an asset freeze there. The company is suing Kozlowski over fraud claims.

Tyco claims Kozlowski is trying to improperly shelter money through his former wife, Karen Mayo Kozlowski, according to court papers. Lawyers for the two said in July they'd reached a confidential divorce settlement after five years of marriage.

Public statements by the couple's divorce lawyers raise ``the clear suspicion that the divorce settlement is actually an asset transfer arrangement designed to take assets out of Kozlowski's name and place them in the hands of a `supporter,' but out of reach of this court and his creditors,'' Tyco said in court documents.

Kozlowski is serving a prison sentence of 8 years and four months to 25 years for his 2005 conviction on charges of grand larceny, securities fraud and falsifying business records when he was at Tyco's helm. He was ordered to pay $97 million in restitution and a $70 million fine.

`Seven-Year Rampage'

Barbadoro is overseeing all federal civil securities suits relating to Kozlowski's time as Tyco chief. The company, the world's biggest maker of industrial valves and security systems, is suing Kozlowski for the return of money it paid him and other damages from what it called his ``seven-year rampage through Tyco's treasury.''

In its request for the latest asset freeze, Tyco quoted a press account of remarks by Kozlowski's divorce lawyer, Martin Haines.

``Karen will be a wealthy lady, and Dennis will have some money one day when he's permitted to leave jail,'' Haines was quoted saying by Reuters news service. ``Is it fair? Who the hell knows. Is it something Dennis wanted to do? Absolutely.''

According to Tyco, Haines was also quoted as saying to the Royal Gazette newspaper in Bermuda: ``She'll do well. She should be getting millions from the settlement.''

Haines didn't immediately return a call seeking comment. Jason Marks, Karen Kozlowski's divorce lawyer, declined to comment.

New York Freeze

After Kozlowski finished paying the fine and restitution, a New York state judge on Sept. 22 dissolved an asset freeze that had been in effect since 2002, when Kozlowski was charged.

``Mr. Kozlowski now has completely lived up to his obligations to the court,'' his criminal defense attorney, Austin Campriello, said in a phone interview.

Kozlowski and his co-defendant, Tyco's former chief financial officer, Mark Swartz, were convicted of stealing $137 million in unauthorized compensation, and gaining another $410 million through illicit stock sales. The New York court froze as much as $600 million of their assets.

Kozlowski is appealing the conviction to New York's highest court.

Dennis and Karen Kozlowski were married in Antigua in 2001. Kozlowski threw a $2 million party for her 40th birthday that became fodder for his trials.

Tyco is based in Bermuda and operates out of West Windsor, New Jersey.

The federal civil suits are In Re Tyco International Ltd. Securities Litigation, 02-MD-1335, U.S. District Court, District of New Hampshire (Concord). The criminal case is People v. Kozlowski, New York State Court of Appeals (Albany). The divorce case is Kozlowski v. Kozlowski, 2006-DR-9471, Circuit Court for Palm Beach County, Florida.

To contact the reporters on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: October 9, 2008 00:01 EDT