Tyco filed a lawsuit in federal court accusing its indicted former chief executive and chief financial officers of pocketing $40m in profits from illegal trades in its securities.
The US conglomerate filed the lawsuit against Dennis Kozlowski, former chief executive, and Mark Swartz, former chief financial officer, asking for reimbursement of the profits from “short-swing” trades.
The suit alleges that the two men bought and sold, or sold and then bought back, hundreds of thousands of common shares or stock options within six-month periods, violating insider provisions in US securities law.
Although small in contrast with their other problems, the illegal trading accusations add to the already thick docket of charges brought upon Messrs Kozlowski and Swartz.
The two men have been released on bail awaiting trial after being accused of stealing or fraudulently obtaining nearly $600m from the company. They have pleaded not guilty.
In September, Robert Morgenthau, the Manhattan district attorney, indicted them on allegations of “enterprise corruption”.
Mr Kozlowski and Mr Swartz who, when at Tyco, were one of the most aggressive and respected deal- making teams in corporate America could face up to 30 years in jail and fines.
In June, Mr Kozlowski resigned from Tyco before he was indicted on New York state sales tax evasion. He allegedly sold paintings and manoeuvred to dodge $1m in sales taxes.
Mr Swartz left Tyco in September before his indictment. The company is in arbitration trying to recover more than $45m from him. His severance included a $9m lump sum and about $35m in additional benefits.
Tyco filed the latest suit in US District Court in New York City on Friday. Lawyers for Mr Kozlowski and Mr Swartz were not available for comment.
The latest action says the two men violated section 16 (b) of the Securities Exchange Act, which covers insider trading. The law says a company is entitled to the profits of sale and purchase of its securities within a six-month period. The suit details more than 30 trades by each man between August 2000 and April this year in which they allegedly made round-trip trades of stock or stock options.
Tyco seeks a jury trial to determine short-swing trading profits to be returned to it.