ADT 2011 Annual Report Download - page 238

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Commitments and Contingencies (Continued)
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. During the fourth quarter of 2011, the Company’s subsidiaries were acquitted of these
charges. The Company reported to the 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 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, which remain ongoing.
Although the Company has recorded its best estimate of potential loss related to this matter, it is
possible that this estimate may differ from the ultimate loss determined in connection with the
resolution of this matter, as 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 TE Connectivity agreed, in connection with the 2007 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 investigation 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 TE Connectivity, 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 TE Connectivity.
As previously disclosed, in early 2007 certain former subsidiaries in the Company’s Flow Control
business were charged, prior to their divestiture, 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 competition law. The Company is cooperating with the FCO in its ongoing
investigation of this violation. Following settlement discussions with the FCO, the Company has
recorded its best estimate of potential loss related to this matter. However, it is possible that this
estimate may differ from the ultimate loss determined in connection with the resolution of this matter,
as the Company may be required to pay material fines, suffer penalties or incur settlements in amounts
that may have a material adverse effect on its financial position, results of operations or cash flows.
2011 Financials 135