Regulators Press Tyco To SettleOct 17, 2002 | USA Today Tyco International is facing an ultimatum from New Hampshire regulators to reach a settlement for its responsibility in the beleaguered firm's own financial woes.
Tyco, which has its U.S. base in New Hampshire, has until Friday to agree to "certain facts" stemming from the alleged $600 million corruption and grand larceny scheme by former Tyco CEO Dennis Kozlowski and former CFO Mark Swartz, said Mark Connolly, the state's director of securities regulation.
While declining to discuss specifics of settlement talks with the firm, Connolly said the Tyco board "basically has been negligent in its oversight responsibility." Tyco as a company "bears responsibility for what happened," he added.
Absent a settlement by Friday, the state will likely take additional regulatory steps, Connolly said.
Law firms vying for appointment as lead counsel in a federal securities class-action lawsuit against Tyco said their case would almost certainly be strengthened by any admissions Tyco might make to state regulators. "It does take it to another level," said Paul Young of Milberg Weiss Bershad Hynes & Lerach.
A Tyco spokesman could not provide a response to the developments Wednesday.
The New Hampshire deadline signals the closing stages of its two-month investigation. The case is separate from the criminal investigation in New York that last month produced indictments against Kozlowski and Swartz. The Securities and Exchange Commission is also investigating.
Connolly said state regulators focused on Tyco's delay in alerting shareholders about alleged improper stock sales, bonuses and loans. New Hampshire's securities law states that it is unlawful for a person or stock issuer "to make any untrue statement of a material fact or to omit to state a material fact."
"How do you have a situation where hundreds of millions of dollars were taken and the board and the auditors seemingly didn't know?" Connolly asked.
State actions could be as severe as a "cease and desist order," an administrative procedure that would require the company to halt possible violations of state securities law. Such a move, relatively rare in cases against large, established firms, could further undermine investor confidence in Tyco.
New Hampshire's latest action follows Connolly's Sept. 25 call for resignation of the Tyco board.