ADT 2009 Annual Report Download - page 228

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Commitments and Contingencies (Continued)
managed by the counsel of the certified class and Tyco is not subject to any further liability related to
the class action settlement. As a result, Tyco has extinguished the class action liability and no longer
has claim to the escrow account. The escrow accounts earned interest that was payable to the class. As
a result, interest was also accrued on the class action settlement liability. On February 21, 2008, the
class action liability and escrow account balances including interest were each $3.02 billion.
Based on the Separation and Distribution Agreement, Tyco had a receivable from Covidien and
Tyco Electronics for their portion of the liability of $1,257 million and $927 million, respectively as of
September 28, 2007 and corresponding payables to Covidien and Tyco Electronics for their interest in
the escrow accounts. Receivables and payables that pertain to the class action settlement and related
escrow accounts with the same counterparty were presented net in the Consolidated Balance Sheets.
Tyco’s portion of the liability was $808 million as of September 28, 2007. These amounts were
extinguished during the second quarter of 2008.
The June 2007 class action settlement did not purport to resolve all legacy securities cases, and
several remain outstanding, the most significant of which is Stumpf v. Tyco International Ltd., which is a
class action lawsuit in which the plaintiffs allege that Tyco, among others, violated the disclosure
provisions of the federal securities laws. The matter arises from Tyco’s July 2000 initial public offering
of common stock of TyCom Inc., and alleges that the TyCom registration statement and prospectus
relating to the sale of common stock were inaccurate, misleading and failed to disclose facts necessary
to make the registration statement and prospectus not misleading. The complaint further alleges the
defendants violated securities laws by making materially false and misleading statements and omissions
concerning, among other things, executive compensation, TyCom’s business prospects and Tyco’s and
TyCom’s finances. The matter is currently in the pre-trial stages of litigation. As discussed below the
Company reserved its best estimate of probable loss related to this matter in the second quarter of
2009.
In addition to the Stumpf matter, Tyco is a party to several lawsuits based on alleged violations of
federal securities laws, fraud and negligence committed by former management. These matters consist
of Jasin v. Tyco International Ltd., et al., an action brought by a pro se plaintiff, Hall v. Kozlowski, et al,
an action brought by a pro se plaintiff relating to the plaintiff’s employment, 401(k), pension plans and
ownership of Tyco common stock, and several affirmative actions brought by Tyco against
Messrs. Kozlowski, Swartz and Walsh, former executives and a director of Tyco. In connection with our
affirmative actions, Messrs. Kozlowski and Swartz have made counterclaims seeking amounts allegedly
due in connection with the former executives’ compensation and retention arrangements and under
ERISA, and Mr. Walsh has made claims alleging that Tyco is required to indemnify him for his defense
costs arising from his role as a Tyco director. Tyco intends to vigorously defend each of these actions
and does not believe that the ultimate outcome of any of these matters will have a material adverse
affect on its financial position, results of operations or cash flows.
The Company settled a number of legacy securities lawsuits in 2008. In connection with these
settlements, the Company made total payments of $109.25 million. Pursuant to the Separation and
Distribution Agreement, the Company’s share of these settlement amounts was approximately
$30 million, with Covidien and Tyco Electronics responsible for approximately $45 million and
$34 million, respectively. The Company recorded the settlement and related receivables from each of
Covidien and Tyco Electronics for their respective shares of the settlement amount resulting in a net
136 2009 Financials