ADT 2005 Annual Report Download - page 103

The defendants moved to dismiss certain claims in the amended complaint on June 28, 2004. The
defendants’ motion to dismiss was denied on April 21, 2005. The defendants’ motion to extend time to
answer the complaint until thirty days after the conclusion of deliberations in the criminal trial was
granted on May 17, 2005. Both defendants’ filed their answers on July 18, 2005.
Tyco International Ltd. v. Frank E. Walsh, Jr., United States District Court, Southern District of New
York, No. 02-CV-4633, filed June 17, 2002. As previously reported in our periodic filings, we filed a civil
complaint against a former director for breach of fiduciary duty and related wrongful conduct involving
a $20 million payment in connection with a 2001 acquisition by Tyco. The action alleges causes of
action for restitution, breach of fiduciary duty and inducing breach of fiduciary duty, conversion, unjust
enrichment, and a constructive trust, and seeks recovery for all of the losses suffered by us as a result
of the defendant director’s conduct. On December 17, 2002, Mr. Walsh paid $20 million in restitution
to Tyco, which was deposited by the Company in January 2003, as a result of a plea bargain agreement
with the New York County District Attorney. Our claims against Mr. Walsh are still pending. Discovery
in this action had been stayed as a result of a motion by the New York County District Attorney’s
Office. The Judicial Panel on Multidistrict Litigation transferred this action to the United States
District Court for the District of New Hampshire. After the case was transferred to New Hampshire,
the District Court ruled that some discovery could proceed. Discovery in this and other affirmative
cases has thus far consisted of the production of documents.
Tyco International Ltd. v. Mark A. Belnick, No. 02-CV-4644 (SWK), filed June 17, 2002. As
previously reported in our periodic filings, we filed a civil complaint against our former Executive Vice
President and Chief Corporate Counsel for breach of fiduciary duty and other wrongful conduct. On
October 21, 2002, in a related proceeding, Mr. Belnick commenced an arbitration proceeding in New
York County, New York. On October 7, 2005, the Company and Mr. Belnick entered into a settlement
agreement that resolved all claims each party had previously asserted against the other.
Subpoenas and Document Requests From Governmental Entities
As previously disclosed in our periodic filings, we and others have received various subpoenas and
requests from the SEC, the District Attorney of New York County, the United States Department of
Labor, the General Service Administration and others seeking the production of voluminous documents
in connection with various investigations into our governance, management, operations, accounting and
related controls. We are cooperating with these investigations and are complying with these requests.
Certain current and former employees in Fire and Security received subpoenas from the SEC’s
Division of Enforcement seeking testimony related to past accounting practices for the ADT dealer
connect fees. As previously reported in our periodic filings, these practices have been discontinued.
The United States Department of Labor served document subpoenas on Tyco and Fidelity
Management Trust Company for documents concerning the administration of the Tyco International
(US) Inc. Retirement Savings and Investment Plans. The current focus of the Department’s inquiry
concerns the losses allegedly experienced by the plans due to investments in our stock. The Department
of Labor has authority to bring suit on behalf of the plans and their participants against those acting as
fiduciaries to the plans for recovery of losses and additional penalties, although it has not informed us
of any intention to do so. The Company is continuing to cooperate with the Department’s investigation.
In November 2004, we received an order from the SEC to report facts and circumstances involving
our participation, if any, in the United Nations Oil for Food Program governing sales of Iraqi oil. On
January 10, 2005, we responded to the order and will fully cooperate in any ongoing investigations.
2005 Financials 27