ADT 2007 Annual Report Download - page 128

and severally with Mr. Swartz, to Tyco of $134 million within one year. On September 19, 2005,
Mr. Kozlowski filed a notice of appeal from his conviction and on October 3, 2006 filed a brief in
support of his appeal. On January 2, 2007, by order of the Supreme Court of the State of New York,
the New York County District Attorney’s office released to Tyco, on behalf of Mr. Kozlowski,
$98 million in restitution. The payment by Mr. Kozlowski was made pending the outcome of his appeal,
which was denied on November 15, 2007.
Tyco International Ltd. v. Mark H. Swartz, United States District Court, Southern District of New York,
No. 03-CV-2247 (TPG), filed April 1, 2003. As previously reported in our periodic filings, we filed an
arbitration claim against Mark H. Swartz, our former Chief Financial Officer and director, on
October 7, 2002. As a consequence of Mr. Swartz’s refusal to submit to the jurisdiction of the
American Arbitration Association, we filed a civil complaint against him on April 1, 2003, for breach of
fiduciary duty and other wrongful conduct. The action alleges that the defendant misappropriated
millions of dollars from our Key Employees Loan Program and relocation program; approved and
implemented awards of millions of dollars of unauthorized bonuses to himself and certain other Tyco
employees; awarded millions of dollars in unauthorized payments to himself; engaged in improper self
dealing real estate transactions involving our assets; and conspired with certain other former Tyco
employees in committing these acts. The complaint alleges causes of action for breach of fiduciary duty,
fraud, unjust enrichment, conversion, and constructive trust, and other wrongful conduct. The action
seeks recovery for all of the losses suffered by us as a result of the former Chief Financial Officer and
director’s conduct, and all remuneration, including restricted and unrestricted shares and options,
obtained by Mr. Swartz during the course of this conduct. The Judicial Panel on Multidistrict Litigation
transferred this action to the United States District Court for the District of New Hampshire.
Mr. Swartz moved to dismiss Tyco’s complaint and to compel arbitration of the parties’ respective
claims. The court denied Swartz’s motion and he has appealed the court’s decision to the United States
Court of Appeals for the First Circuit. His appeal was heard on December 8, 2004. The First Circuit
affirmed the District Court’s decision on September 7, 2005. Discovery in this and the other affirmative
cases is proceeding.
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, twenty-
three were against Mr. Swartz. 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 and Mr. Swartz was ordered
individually to pay damages to Tyco in the amount of $1 million. 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. The payment by Mr. Swartz was made pending the outcome of his appeal, which was
denied on November 15, 2007.
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 reported 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, the
36 2007 Financials