ADT 2010 Annual Report Download - page 217

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Commitments and Contingencies (Continued)
significantly higher or lower than those recorded if assumptions used in the Company’s calculations
vary significantly from actual results.
Compliance Matters
As previously reported in the Company’s periodic filings, the Company has received and responded
to various allegations and other information that certain improper payments were made by the
Company’s subsidiaries and agents in recent years. For example, two subsidiaries in the Company’s
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 the Company has reported to German authorities potentially improper conduct
involving agents retained by the Company’s EMEA water business. The Company has since resolved
this matter with German authorities while the Italian matter remains outstanding. The Company
reported to the U.S. Department of Justice (‘‘DOJ’’) and the SEC the investigative steps and remedial
measures that it has taken in response to these and other allegations and its internal investigations. In
2005, the Company informed the DOJ and the SEC that it retained outside counsel to perform a
Company-wide baseline review of its policies, controls and practices with respect to compliance with the
Foreign Corrupt Practices Act (‘‘FCPA’’), and that it would continue to investigate and make periodic
progress reports to these agencies. The Company has 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 conduct identified by the
Company in the course of its ongoing compliance activities. The baseline review, which has been
completed, has revealed that some business practices may not comply with Tyco and FCPA
requirements, and in February 2010, the Company initiated discussions with the DOJ and SEC aimed
at resolving these matters. Active discussions remain ongoing, and the Company cannot predict the
timing of their resolution or their outcome and cannot estimate the range of potential loss or the form
of penalty that may result from an adverse resolution. It is possible that the Company may be required
to pay material fines, consent to injunctions on future conduct, consent to the imposition of a
compliance monitor, or suffer other criminal or civil penalties or adverse impacts, including being
subject to lawsuits brought by private litigants, each of which may have a material adverse effect on the
Company’s 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 responses regarding these matters. Any judgment required to be paid or settlement or
other cost incurred by the Company in connection with the FCPA investigations matters 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 the Company to
Covidien and Tyco Electronics, respectively, and provides that the Company will retain liabilities
primarily related to its continuing operations. Any liabilities not primarily related to a particular
segment will be shared equally among the Company, Covidien and Tyco Electronics.
As previously disclosed, in early 2007 certain former subsidiaries in the Company’s Flow Control
business were charged by the German Federal Cartel Office (‘‘FCO’’) with engaging 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 ongoing investigation of this violation. The Company
cannot estimate the range of potential loss that may result from this violation. It is possible that the
2010 Financials 129