Tyco Settles Suit For $5M Without Admitting GuiltOct 24, 2002 | AP
Tyco International will pay New Hampshire securities regulators more than $5 million to settle allegations of financial misconduct by former top officials and the company's board of directors.
The scandal-scarred conglomerate, which has its corporate offices in New Hampshire, specifically omitted any admission of wrongdoing.
Although both sides agreed the deal announced Wednesday could not serve as evidence in other proceedings, lawyers suing Tyco in a securities class-action lawsuit say it will help their case.
The settlement came as Tyco prepared for today's fourth-quarter earnings report, which some analysts say could be accompanied by plans for write-offs in the next fiscal year.
The settlement resolves state securities charges that former Tyco officials misused company funds and filed false and incomplete financial statements.
The allegations focused on loans and other payments to former Tyco CEO Dennis Kozlowski, former CFO Mark Swartz and former corporate counsel Mark Belnick. They have pleaded innocent to criminal indictments filed in New York.
The deal settled similar New Hampshire charges regarding:
$20 million in fees to ex-Tyco director Frank Walsh and a charity with which he was involved. He has said the fees were proper.
Tyco's delay in stemming the alleged abuses, which the state said showed that the board failed to exercise in its responsibilities.
The alleged misconduct constituted ''the highest form of corporate mistrust,'' said Mark Connolly, New Hampshire's securities chief. ''Shareholders suffered.''
Tyco CEO Edward Breen says the settlement shows Tyco's commitment ''to establishing and enforcing the highest standards of corporate behavior.''
Tyco will pay $5 million to fund investor-education and corporate-governance programs. Under the settlement, any funds Tyco recovers from former executives will be used to compensate shareholders.
Lawyers suing Tyco say the effort to limit the firm's liability is not unusual in such a settlement. ''It's not going to prevent us from using it,'' says Paul Young of Milberg Weiss Bershad Hynes & Lerach.
Breen, who is to address shareholders and analysts today, warned last month that earnings would fall as low as 30 cents a share, down from 45 cents estimated in July. He also said Tyco would take a $2.5 billion charge.