ADT 2006 Annual Report Download - page 91

Mr. Swartz was tried on criminal charges in New York County. The first criminal trial resulted in a
mistrial declared on April 2, 2004. The retrial of Mr. Swartz began on January 18, 2005 and concluded
on June 17, 2005, when the jury returned verdicts. Of the thirty-one counts submitted to it, which were
similar to certain of the claims alleged in the Company’s affirmative action described above, the jury
found Mr. Swartz guilty on all charges of grand larceny, conspiracy and securities fraud, and all but one
count of falsification of business records. On September 19, 2005, Mr. Swartz was sentenced to a term
of imprisonment of eight and one-third years to twenty-five years, and ordered to pay an individual fine
of $35 million and restitution, jointly and severally with Mr. Kozlowski, to Tyco of $134 million within
one year. On September 19, 2005, Mr. Swartz filed a notice of appeal from his conviction and on
October 3, 2006 filed a brief in support of his appeal. On October 27, 2006, Mr. Swartz paid restitution
to the Company in the amount of $38 million.
Tyco International, Ltd. v. L. Dennis Kozlowski and Mark H. Swartz, United States District Court
Southern District of New York, No. 02-CV-9705, filed December 6, 2002. As previously disclosed in our
periodic filings, we filed a civil complaint against our former Chairman and Chief Executive Officer and
former Chief Financial Officer and Director pursuant to Section 16(b) of the Securities and Exchange
Act of 1934 for disgorgement of short-swing profits from prohibited transactions in our common shares
believed to exceed $40 million. The action seeks disgorgement of profits, interest, attorney’s fees and
costs. The Judicial Panel on Multidistrict Litigation has transferred this action to the United States
District Court for the District of New Hampshire. On October 6, 2003, Messrs. Kozlowski and Swartz
moved to dismiss the claims against them based upon the statute of limitations. On March 16, 2004,
Judge Barbadoro in the District of New Hampshire granted the defendants’ motion to dismiss in part
with leave for Tyco to file an amended complaint. Tyco filed an amended complaint on May 14, 2004.
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. The
Judicial Panel on Multidistrict Litigation transferred this action to the United States District Court for
the District of New Hampshire. Discovery in this and the other affirmative cases is proceeding.
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.
Tyco International Ltd. v. AIG Life of Bermuda Ltd. (formerly known as American General Life of
Bermuda Ltd.); L. Dennis Kozlowski; and Butterfield Trust (Bermuda) Limited, Index No. 2006: No. 82,
filed on March 6, 2006 (amended April 6, 2006). We filed a civil complaint in the Supreme Court of
Bermuda against our former Chief Executive Officer and others with respect to an insurance policy on
the life of the former Chief Executive Officer issued by AIG Life of Bermuda Ltd. and held in trust by
Butterfield Trust (Bermuda) Limited, seeking declarations that Tyco was entitled to the premiums,
proceeds and value of the policy. On September 27, 2006, Tyco, Mr. Kozlowski and the other parties
entered into a confidential settlement that resolved the claims in this action, with a portion of the
disputed funds placed in escrow pending the resolution of the additional claims including those in the
Multidistrict Litigation actions currently pending before the District Court for the District of New
Hampshire.
2006 Financials 29