ADT 2006 Annual Report Download - page 199

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Commitments and Contingencies (Continued)
reports to these agencies, and that it would present its factual findings upon conclusion of the baseline
review. The Company has and will continue to have communications with the DOJ and SEC to provide
updates on the baseline review being conducted by outside counsel, including, as appropriate, briefings
concerning additional instances of potential improper payments identified by the Company in the
course of its ongoing compliance activities. At this time, Tyco cannot predict the outcome of these
matters reported to regulatory and law enforcement authorities and therefore cannot estimate the
range of potential loss or extent of risk, if any, that may result from an adverse resolution of any or all
of these matters.
Other Matters
Earth Tech v. City of Phoenix is a contract dispute arising from Earth Tech’s contract with the City
of Phoenix, Arizona for expansion of the City’s 91st Avenue Waste Water Treatment Plant. On
December 21, 2005, Earth Tech filed a lawsuit against the City of Phoenix in the Maricopa County
Superior Court alleging $3 million in damages plus interest for the City’s failure to pay dewatering and
computer systems costs related to the 91st Avenue project. After the City rejected Earth Tech’s
administrative claim against the City, Earth Tech filed and served a First Amended Complaint upon the
City of Phoenix. In its First Amended Complaint, Earth Tech alleged eighteen causes of action and
requested the following: (i) a recovery of at least $73 million for the value of the services performed by
Earth Tech in connection with the contract; (ii) a rescission of the contract; (iii) an equitable
adjustment of the Contract price for additional dewatering services and the Computer Control System;
and (iv) costs for demobilization and termination of the contract. The City of Phoenix filed a Motion to
Dismiss rather than filing an answer to the First Amended Complaint on May 18, 2006. The Court
granted the City’s Motion to Dismiss without prejudice on September 19, 2006 allowing Earth Tech
30 days to file a Second Amended Complaint. Earth Tech filed its Second Amended Compliant against
the City of Phoenix on September 25, 2006.
On December 29, 2005, the City of Phoenix filed a lawsuit against Earth Tech, Inc., its surety,
Federal Insurance Company and other unnamed parties in the Maricopa County Superior Court, The
City of Phoenix v. Earth Tech, Inc., Federal Insurance Company and John Does 1-50. The lawsuit is in
connection with the City of Phoenix’s termination on August 12, 2005 of Earth Tech’s contract with the
City of Phoenix, Arizona for expansion of the City’s 91st Avenue Waste Water Treatment Plant. The
City alleges the following causes of action: (i) Earth Tech breached its Pre-Construction Services and
Construction Management at Risk Contracts; (ii) Earth Tech did not properly, reasonably or timely
manage, supervise or inspect the work under the Contracts; (iii) Federal Insurance breached the terms
and conditions of the performance bond; and (iv) Federal Insurance failed to investigate the City’s
Bond Claims. The City requested unspecified general, consequential, incidental, special and liquidated
damages plus interest as its relief. On February 8, 2006, Earth Tech filed a Motion to Dismiss the City’s
Complaint in which Federal Insurance Company joined. The Court denied Earth Tech’s Motion to
Dismiss on September 25, 2006. The City of Phoenix filed an Amended Complaint against Earth Tech
and Federal Insurance on September 25, 2006. In the Amended Complaint, the City of Phoenix alleged
damages of $128 million.
The Presiding Judge of Maricopa County Superior Court on July 11, 2006 consolidated all of the
pending lawsuits related to this dispute on the Court’s complex litigation docket. At this time, Tyco
cannot predict the outcome of this matter and therefore cannot estimate the range of potential loss or
extent of risk, if any, that may result from an adverse resolution of this matter.
2006 Financials 137