ADT 2009 Annual Report Download - page 118

operations or cash flows. While the final adjustments cannot be determined until the IRS review is
completed, the Company believes that any resulting adjustments will not have a material impact on its
financial condition, results of operations or cash flows. For a detailed discussion of income tax matters,
see Note 6 to the Consolidated Financial Statements.
Compliance Matters
As previously reported in our periodic filings, the Company has received and responded to various
allegations and other information that certain improper payments were made by our subsidiaries and
agents in recent years. For example, two subsidiaries in our Flow Control business in Italy have been
charged, along with numerous other parties, in connection with the Milan public prosecutor’s
investigation into allegedly improper payments made to certain Italian entities, and we have reported to
German authorities potentially improper conduct involving agents retained by our EMEA water
business. We have reported to the U.S. Department of Justice (‘‘DOJ’’) and the SEC the investigative
steps and remedial measures that we have taken in response to these allegations and its internal
investigations. We also informed the DOJ and the SEC that we retained outside counsel to perform a
Company-wide baseline review of our policies, controls and practices with respect to compliance with
the Foreign Corrupt Practices Act (‘‘FCPA’’), and that we would continue to make periodic progress
reports to these agencies. We have and will continue to communicate with the DOJ and SEC to
provide updates on the baseline review and follow-up investigations, including, as appropriate, briefings
concerning additional instances of potential improper payments identified by us in the course of our
ongoing compliance activities. The baseline review revealed that some business practices may not
comply with Tyco and FCPA requirements. At this time, we cannot predict the outcome of these
matters and other allegations 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 these matters. However, it is possible that we may be required to pay material fines,
consent to injunctions on future conduct, or suffer other criminal or civil penalties or adverse impacts,
each of which could have a material adverse effect on our financial position, results of operations or
cash flows.
Covidien and Tyco Electronics agreed, in connection with the Separation, to cooperate with the
Company in its response regarding these matters. Any judgment required to be paid or settlement or
other cost incurred by the Company in connection with the FCPA investigations would be subject to the
liability sharing provisions of the Separation and Distribution Agreement, which assigned liabilities
primarily related to the former Healthcare and Electronics businesses of Tyco to Covidien or Tyco
Electronics, respectively, and provides that Tyco will retain liabilities primarily related to its continuing
operations. Any liabilities not primarily related to a particular business will be shared equally among
Tyco, Covidien and Tyco Electronics.
The German Federal Cartel Office (‘‘FCO’’) charged in early 2007 that certain German
subsidiaries in the Company’s Flow Control business have engaged in anti-competitive practices, in
particular with regard to its hydrant, valve, street box and fittings business. The Company investigated
this matter and determined that the conduct may have violated German anti-trust law. The Company is
cooperating with the FCO in its investigation of this violation, which is ongoing. The Company cannot
estimate the range of potential loss that may result from this violation. It is possible that the Company
may be subject to civil or criminal proceedings and may be required to pay judgments, suffer penalties
or incur settlements in amounts that may have a material adverse effect on our financial position,
results of operations or cash flows.
ERISA Partial Withdrawal Liability Assessment and Demand
On June 8, 2007, SimplexGrinnell received a notice alleging that it had partially withdrawn from
the National Automatic Sprinkler Industry Pension Fund (the ‘‘Fund’’). Under Title IV of ERISA, if
26 2009 Financials