ADT 2006 Annual Report Download - page 125

(which in turn could negatively impact our business with non-governmental customers) or suffer other
penalties, each of which could have a material adverse effect on our business. It is not possible to
estimate the amount of loss, or range of possible loss, if any, that might result from an adverse
resolution of these matters.
On April 17, 2006, the Company reached a settlement that closes the SEC Enforcement Division’s
investigation of the Company regarding certain accounting practices and other actions by former Tyco
officers. On April 25, 2006, the United States District Court for the Southern District of New York
entered a final judgment in which the Company was ordered to pay $1 in disgorgement and a fine of
$50 million. During the third quarter of 2006, the Company satisfied the judgment which was accrued
in 2005.
Intellectual Property and Antitrust Litigation
The Company is party to a number of patent infringement and antitrust actions that may require
the Company to pay damage awards. Tyco has assessed the status of these matters and has recorded
liabilities related to certain of these matters where appropriate. For a detailed discussion of
contingencies related to Tyco’s intellectual property and antitrust litigation, see Item 3. Legal
Proceedings—Intellectual Property and Antitrust Litigation.
Environmental Matters
For a detailed discussion of contingencies related to Tyco’s environmental matters, see Item 1.
Business—Environmental Matters.
Asbestos Matters
Tyco and some of its subsidiaries are named as defendants in personal injury lawsuits based on
alleged exposure to asbestos-containing materials. Consistent with the national trend of increased
asbestos-related litigation, the Company has observed an increase in the number of these lawsuits in
the past several years. The majority of these cases have been filed against subsidiaries in Healthcare
and Engineered Products and Services. A limited number of the cases allege premises liability, based
on claims that individuals were exposed to asbestos while on a subsidiary’s property. A majority of the
cases involve product liability claims, based principally on allegations of past distribution of
heat-resistant industrial products incorporating asbestos or the past distribution of industrial valves that
incorporated asbestos-containing gaskets or packing. Each case typically names between dozens to
hundreds of corporate defendants.
Tyco’s involvement in asbestos cases has been limited because its subsidiaries did not mine or
produce asbestos. Furthermore, in the Company’s experience, a large percentage of these claims were
never substantiated and have been dismissed by the courts. The Company will continue to vigorously
defend these lawsuits and the Company has not suffered an adverse verdict in a trial court proceeding
related to asbestos claims.
When appropriate, the Company settles claims; however, the total amount paid in any year to
settle and defend all asbestos claims has been immaterial. As of September 29, 2006, there were
approximately 15,500 asbestos liability cases pending against the Company and its subsidiaries.
The Company estimates its pending asbestos claims that were incurred but not reported, as well as
related insurance and indemnification recoveries. The Company’s estimate of the liability for pending
and future claims is based on claim experience over the past five years and covers claims expected to
be filed over the next seven years. The Company believes that it has adequate amounts recorded
related to these matters. While it is not possible at this time to determine with certainty the ultimate
outcome of these asbestos-related proceedings, the Company believes that the final outcome of all
2006 Financials 63