Paying $3 Billion to Shareholders
By THE ASSOCIATED PRESS
New York Times
Tuesday, May 15, 2007
Filed at 10:03 a.m. ET
CONCORD, N.H. (AP) -- Tyco International Ltd. said Tuesday it
has agreed to pay about $3 billion to settle shareholder claims
that arose after former Chief Executive Officer Dennis Kozlowski
and other top officers were charged with looting the company and
inflating its value.
Tyco said it would set up a $2.975 billion cash fund to pay
claims filed by former shareholders and turn over half of any
money it recovers from ongoing lawsuits against Kozlowski,
former Chief Operating Officer Mark Swartz and former board
member Frank Walsh, lawyers for the shareholders said.
''With this settlement we are taking an important step to
resolve our most significant remaining legacy legal matter,''
Tyco Chairman and Chief Executive Ed Breen said in a statement.
''Our balance sheet and cash flow remain strong and will allow
us to readily absorb these costs while removing much of the
uncertainty around legacy legal matters.''
Investors, including union and state pension funds and Tyco
retirees, were given the green light last summer to proceed with
a consolidated class-action lawsuit in the U.S. District Court
in New Hampshire, where Tyco was formerly headquartered. The
settlement still must be approved by the largest shareholders
and the court.
Tyco said it would take a charge of $2.975 billion during the
current quarter. Tyco's shares gained 12 cents to $32.31 in
early trading Tuesday.
The settlement covers shareholders from December 1999 to June
2002 and, in some of the consolidated cases, investors who owned
stock starting in October 1998, the company said.
Lawyers for the shareholders said it was the largest settlement
ever by a single corporate defendant in a class action suit and
that it would top $3 billion, including interest.
''This is a fantastic resolution and closes a chapter on one of
the largest and most appalling examples of corporate fraud in
U.S. history,'' said Jay Eisenhofer, managing partner at Grant &
''This is a settlement of historic proportions for the investors
who suffered significant financial losses and it also sends a
strong message to those who would engage in this type of
misconduct in the future,'' said Richard Schiffrin, of Schiffrin,
Barroway, Topaz & Kessler.
Shareholder claims against the company's former auditor,
PriceWaterhouseCoopers, are still pending, the lawyers said.
Kozlowski and Swartz were convicted in a New York State court in
2005 of multiple counts of grand larceny, conspiracy, securities
fraud and falsifying business records.
Prosecutors said the two conspired to defraud Tyco of $600
million to fund their extravagant lifestyles. They were
sentenced in September 2006 to eight to 25 years in prison. A
judge refused to release them on bail while they appeal.
The shareholders' lawsuits alleged the company misrepresented
the value of Tyco and companies it acquired under Kozlowski's
leadership in a giant accounting fraud scheme.
Tyco makes everything from telecommunications equipment to home
alarm systems. The company, which is registered in Bermuda, was
run from Exeter, N.H., at the time of the alleged fraud. It now
operates from West Windsor, N.J.