Industrial conglomerate Tyco International Ltd said on May 15 it agreed to pay three billion dollars to settle shareholder lawsuits on securities and accounting fraud by its former management.
The accord, struck after a five year legal battle, relates to the era of former Tyco chief executive Dennis Kozlowski who is serving a 25-year jail term for looting the company of hundreds of millions of dollars.
Tyco, which is headquartered in Bermuda, but has extensive operations in the United States, said it was setting up a 2.975-billion-dollar cash fund to compensate investors. Plaintiffs' lawyers said that sum will swell to over three billion dollars by the time the accord is approved in court.
Lawyers representing shareholders who claim they suffered heavy financial losses as a result of Tyco's past behaviour cheered the deal, saying it marked "the single largest payout from any corporate defendant in the history of securities class-action litigation."
The lawyers, who represented a host of investors including the Teachers Retirement System of Louisiana and the Plumbers and Pipefitters National Pension Fund, said they would continue to fight a separate claim against Tyco's former auditor Pricewaterhouse Coopers.
"This is a fantastic resolution and closes a chapter on one of the largest and most appalling examples of corporate fraud in US history," said Jay Eisenhofer, a managing partner at the Grant & Eisenhofer, one of several law firms that represented shareholders in the class action lawsuit.
The multi-billion-dollar fund will compensate investors who purchased Tyco stock between December 13, 1999 and June 7, 2002. "With this settlement we are taking an important step to resolve our most significant remaining legacy legal matter," said Tyco chairman and chief executive officer Ed Breen.
Breen said the conglomerate's restored balance sheet will enable it to "absorb" its legal costs as it seeks to put Kozlowski's marked tenure behind it. Tyco fired Kozlowski after being forced to restate its earnings to show a multibillion dollar loss. He was sentenced, along with the firm's former chief financial officer Mark Swartz, in September of 2005 for illegally raiding corporate coffers to fund a lavish lifestyle.
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