ADT 2010 Annual Report Download - page 105

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar anti-
bribery laws outside the United States.
The U.S. Foreign Corrupt Practices Act (the ‘‘FCPA’’) and similar anti-bribery laws in other
jurisdictions generally prohibit companies and their intermediaries from making improper payments to
government officials for the purpose of obtaining or retaining business. Recent years have seen a
substantial increase in FCPA enforcement activity, with more frequent and aggressive investigations and
enforcement proceedings by both the Department of Justice (‘‘DOJ’’) and the Securities and Exchange
Commission (‘‘SEC’’), increased enforcement activity by non-U.S. regulators, and increases in criminal
and civil proceedings brought against companies and individuals. Our policies mandate compliance with
these anti-bribery laws. We operate in many parts of the world that have experienced governmental and
commercial corruption to some degree and in certain circumstances, strict compliance with anti-bribery
laws may conflict with local customs and practices. We cannot assure you that our internal control
policies and procedures always will protect us from reckless or criminal acts committed by our
employees or agents. Furthermore, we are subject to investigations by the DOJ and the SEC related to
allegations that improper payments have been made by our subsidiaries and agents in recent years in
violation of the FCPA. We have continued to report to the DOJ and the SEC the remedial measures
that we have taken in response to the allegations and our own internal investigations. In 2005, we
informed the DOJ and the SEC that we had retained outside counsel to perform a Company-wide
baseline review of our policies, controls and practices with respect to the FCPA. The baseline review,
which has been completed, has revealed that some business practices may not comply with Tyco and
FCPA requirements. In February 2010, we initiated discussions with the DOJ and SEC aimed at
resolving these matters. Active discussions are ongoing; however, the timing for ultimately reaching
resolution as well as the outcome of this matter remains uncertain. In connection with the resolution of
these matters, it is possible that we will be required to pay material fines, consent to injunctions on
future conduct, consent to the imposition of a compliance monitor, or suffer other civil or criminal
penalties or adverse impacts, including being subject to lawsuits brought by private litigants or a general
loss of investor confidence, any one of which could adversely affect our financial position, results of
operations, cash flows, business prospects or the market value of our stock.
Our failure to satisfy international trade compliance regulations may adversely affect us.
Our global operations require importing and exporting goods and technology across international
borders on a regular basis. Certain of the products we manufacture are ‘‘dual use’’ products, which are
products that may have both civil and military applications, and are often subject to more stringent
export controls. From time to time, we obtain or receive information alleging improper activity in
connection with imports or exports. Our policy mandates strict compliance with U.S. and international
trade laws. When we receive information alleging improper activity, our policy is to investigate that
information and respond appropriately, including, if warranted, reporting our findings to relevant
governmental authorities. Nonetheless, we cannot provide assurance that our policies and procedures
will always protect us from actions that would violate U.S. and/or foreign laws. Such improper actions
could subject the Company to civil or criminal penalties, including material monetary fines, or other
adverse actions including denial of import or export privileges, and could damage our reputation and
our business prospects.
We continue to be responsible for a portion of our contingent and other corporate liabilities following the
Separation, primarily those relating to pre-Separation income tax liabilities.
Under the Separation and Distribution Agreement, the Tax Sharing Agreement and other
agreements entered in connection with the Separation, subject to certain exceptions contained in the
Tax Sharing Agreement, we, Covidien and Tyco Electronics have agreed to assume and be responsible
for 27%, 42% and 31%, respectively, of certain of our contingent and other corporate liabilities. All
2010 Financials 17