Tyco Workers To Sue Over Retirement PlansNov 7, 2002 | The Boston Globe
Employees at Tyco International Ltd., pointing to recent scandals that helped sink the conglomerate's stock price and clobber their retirement plans, are pursuing a federal class-action lawsuit to recover some of their losses.
More than $80 billion in shareholder value has been erased at Tyco this year, bruising investors and battering the retirement accounts of Tyco employees.
Chief Judge Paul Barbadoro of New Hampshire US District Court is expected to hear arguments on Nov. 15 on whether employee claims should be separated from those filed by investors, said Edwin Mills, a lawyer for some Tyco employees.
Tyco employs more than 250,000 people. Ultimately, most of them could seek damages if the employee lawsuits gain class-action status, lawyers said.
Tyco said last month its pension plans were underfunded by about $1.7 billion, nearly double last year's $899 million deficit as Tyco shares plummeted and broader stock markets declined.
Employees charge that Tyco's senior leadership violated fiduciary duties to protect retirement plans that held company stock, according to legal papers. They allege Tyco violated the US Employee Retirement Income Security Act.
''Despite serious financial problems, on Jan. 1, 2002, [Tyco] increased from 15 percent to 25 percent the allocation of [retirement plans] to be invested in Tyco common stock,'' one complaint states.
Lawyers for the employees want Barbadoro to separate their claims from a fresh batch of securities fraud lawsuits being consolidated in Barbadoro's courtroom.
''You're talking about employees, not your normal investor,'' said Eric Lee, a lawyer for some Tyco employees. ''They have a much bigger tie to it because they're investing in themselves.
Also yesterday, a Tyco official said the company could keep two of its current board members, despite an earlier vote that all directors who served with L. Dennis Kozlowski, the indicted former CEO, would resign.
Outside directors Richard Bodman and Michael Ashcroft could keep their jobs under the proposal, director Wendy Lane said.
''There's a balance between a need for a majority of new directors responding to the shareholders and a need for corporate memory and institutional memory going forward,'' Lane said.