ADT 2007 Annual Report Download - page 129

District Court for 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. Discovery in this and
the other affirmative cases is proceeding.
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 Frank E. Walsh, Jr., a former director, for breach of fiduciary duty and related
wrongful conduct involving receipt by Mr. Walsh of a $20 million payment in connection with our 2001
acquisition of the CIT Group, Inc. 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.
Subpoenas and Document Requests From Governmental Entities
As previously reported in our periodic filings, we and others have received various subpoenas and
requests from the SEC, the U.S. Department of Labor, state departments 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 of our current and former employees received subpoenas from the SEC’s Division of
Enforcement seeking testimony related to past accounting practices for the ADT dealer connect fees.
The investigation, which began in June 2002, related to accounting practices employed by our former
management. As previously reported in our periodic filings, these practices have been discontinued.
As previously reported in our periodic filings, 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 and November 8, 2005, we responded
to the order and provided information concerning transactions under the United Nations Oil for Food
Program. On January 31, 2006, we received a subpoena from the SEC to produce additional documents
and information related to the participation of three of our businesses in the United Nations Oil for
Food Program. The SEC notified us on June 7, 2006 that it was not recommending any enforcement
action against Tyco in connection with its investigation of the United Nations Oil for Food Program.
Recently, we have discovered additional product sales that may be responsive to the SEC’s order and
have notified the SEC staff that we intend to investigate these transactions. While it is not possible at
this time to predict the final outcome of this matter, we do not believe this discovery will have a
material adverse effect on the Company’s financial position, results of operations or cash flows.
The U.S. Department of Labor served document subpoenas on Tyco and Fidelity Management
Trust Company for documents concerning the administration of our 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.
2007 Financials 37