ADT 2011 Annual Report Download - page 292

TYCO INTERNATIONAL LTD.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011
(Continued)
3. GUARANTEES (Continued)
obligations were CHF 3,258,724 and CHF 3,678,153, which were primarily included in other non-
current liabilities on the balance sheet as of September 30, 2011 and September 24, 2010, respectively,
and were recorded with an offset to shareholders’ equity on the separation date.
As of September 30, 2011, the Company had three outstanding letters of credit totaling
CHF 17,549,482. As of September 24, 2010, the Company had two outstanding letters of credit totaling
CHF 3,954,860.
The Company is a member of a ‘‘Swiss VAT Group’’ (the ‘‘Group’’). All companies in the Group
maintain primary responsibility for their own Swiss VAT liabilities. However, in the event of non-
compliance by any company in the Group, all companies within the Group are jointly and severally
liable for any Swiss VAT liabilities.
4. COMMITMENTS AND CONTINGENCIES
In connection with the 2007 Separation, the Company entered into a liability sharing agreement
regarding certain legal actions that were pending against Tyco prior to the 2007 Separation. Under the
Separation and Distribution Agreement, the Company, Covidien and TE Connectivity are jointly and
severally liable for the full amount of any judgments resulting from the actions subject to the
agreement, which generally relate to legacy matters that are not specific to the business operations of
any of the companies. The Separation and Distribution Agreement also provides that the Company will
be responsible for 27%, Covidien 42% and TE Connectivity 31% of payments to resolve these matters,
with costs and expenses associated with the management of these contingencies being shared equally
among the parties. In addition, under the agreement, the Company will manage and control all the
legal matters related to assumed contingent liabilities as described in the Separation and Distribution
Agreement, including the defense or settlement thereof, subject to certain limitations.
During the year ended September 30, 2011, certain contingencies related to the previously
disclosed settlement of the Stumpf v. Tyco International Ltd. class action lawsuit elapsed. This matter,
which was subject to the liability sharing provisions of the Separation and Distribution Agreement with
Covidien and TE Connectivity, had previously received final court approval for its settlement. As a
result of the lapsing of time periods for certain class members to state a claim against the Company,
the Company adjusted its remaining reserve for this and other legacy securities matters. Since June
2007, the Company has resolved substantially all of the legacy claims related to securities fraud and
similar matters.
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 U.S. Department of Justice
(‘‘DOJ’’) and the Securities and Exchange Commission (‘‘SEC’’) the investigative steps and remedial
measures that it has taken in response to these and other allegations and its internal investigations. The
Company also 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 U.S.
Foreign Corrupt Practices Act (‘‘FCPA’’), and that it would continue to investigate and make periodic
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