ADT 2008 Annual Report Download - page 131

Opt-Out Claims
As of the opt-out deadline for the securities class-action settlement described above, Tyco had
received opt-out notices from individuals and entities totaling approximately 4% of the shares owned by
the class members subject to the settlement. A number of these individuals and entities have filed
claims separately against Tyco, and as of September 26, 2008, lawsuits had been filed against Tyco by
the following opt-out claimants: Franklin Mutual Advisers, LLC; the Teachers Retirement System of
Texas, et al.; Blackrock Global Allocation Fund, Inc., et al.; Nuveen Balanced Municipal and Stock
Fund, et al.; Federated American Leaders Fund, Inc. et al.; and the State Treasurer of the State of
Michigan, as custodian of the Michigan Public School Employees Retirement System, State Employees’
Retirement System, Michigan State Police Retirement System and Michigan Judges Retirement System.
Any judgments resulting from such claims or from claims that are filed in the future would not reduce
the $2.975 billion settlement amount described above. Generally, the claims asserted by these plaintiffs
include claims similar to those asserted by the settling defendants; namely, violations of the disclosure
provisions of federal securities laws. Tyco intends to vigorously defend the litigation resulting from
opt-out claims.
Tyco Litigation Against Former Senior Management
Tyco International Ltd. v. L. Dennis Kozlowski and Tyco International Ltd. v. Mark H. Swartz. As
previously reported in our periodic filings, we filed civil complaints against both Dennis Kozlowski, our
former Chairman and Chief Executive Officer, and Mark H. Swartz, our former Chief Financial
Officer, for breach of fiduciary duty and other conduct, and of all remuneration, including restricted
and unrestricted shares and options, obtained by them during the course of this conduct. Discovery in
these cases is proceeding. In connection with our civil complaints against Mr. Kozlowski, Mr. Swartz,
and Scott Stevenson, our former Chief Tax Officer, each of these individuals has made claims against
the Company seeking amounts allegedly due in connection with the former executives’ compensation
and retention arrangements and under ERISA. Tyco intends to vigorously defend these actions and
does not believe that the ultimate outcome of these matters will have a material adverse affect on its
financial position, results of operations or cash flows.
In connection with the criminal trials for Mr. Kozlowski and Mr. Swartz, they were ordered to pay
restitution, jointly and severally, to Tyco of $134 million. On January 2, 2007, the New York County
District Attorney’s office released to Tyco, on behalf of Mr. Kozlowski, $98 million in restitution and on
October 27, 2007, Mr. Swartz paid restitution to the Company in the amount of $38 million. These
payments were made pending the outcome of the appeal of their criminal convictions, both of which
were denied by the appeals division of the New York State Supreme Court on November 15, 2007.
Their further appeal to the New York State Court of Appeals was denied in October 2008.
Tyco International Ltd. v. L. Dennis Kozlowski and Mark H. Swartz. 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. Discovery in this case is proceeding.
Tyco International Ltd. v. Frank E. Walsh, Jr. 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, as a result of a plea
bargain agreement with the New York County District Attorney. Mr. Walsh has made claims against
Tyco alleging that Tyco is required to indemnify him for his defense costs arising from his role as a
Tyco director. Our claims against Mr. Walsh and Mr. Walsh’s claims against Tyco are still pending.
Discovery in this case is proceeding.
28 2008 Financials