According to the Complaint, TyCom became a public company on July 26, 2000 by the issuance of approximately 60 million shares of its common stock (equivalent to approximately 10% of TyCom's shares outstanding) in an initial public offering pursuant to a Registration Statement. Each of the individual defendants were signatories to that Registration Statement.
The Complaint alleges, among other things, that during the Class Period, defendants made materially false and misleading statements about the underlying purpose for TyCom's July 26, 2000 IPO and failed to disclose that the true purpose for the offering was to generate "bonuses" that would be used by Kozlowski and Swartz and approximately 40 other Tyco officers to repay approximately $100 million in undisclosed and unauthorized loans from Tyco. The Complaint further alleges that the Registration Statement misrepresented and failed to disclose in its summary compensation table, tens of millions of dollars of other unauthorized loans and payments from Tyco to the individual defendants.
On December 18, 2001, having realized their goals of generating bonuses to repay the outstanding loans, defendants caused Tyco to acquire the minority interest of TyCom at a price approximately 50% below the offering price of those shares in July 2000. Members of the plaintiff class who purchased shares of TyCom common stock pursuant to the Registration Statement suffered a decline in value of those shares of approximately one billion dollars.
On November 14, 2003, the Court entered the Order granting the motion to consolidate two actions, appointing lead plaintiff and approving their selection of lead counsel. By the Order from the Judicial Panel on Multidistrict Litigation, the case was transferred to the U.S. District Court for the District of New Hampshire, under case number, 03-CV-01352. The case is being handled under MDL, case number 1:02-md-01335-PB.
According to the Company’s FORM 10-K for the fiscal year ended September 30, 2005, on December 13, 2004, lead plaintiff filed a consolidated securities class action complaint purporting to represent a class of purchasers of TyCom securities between July 26, 2000 and December 17, 2001. Plaintiff names as defendants Tyco International Ltd., TyCom, Ltd., Goldman Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated and Citigroup Inc., along with certain former Tyco and TyCom executives. The complaint asserts causes of action under Sections 11 and 15 of the Securities Act of 1933 and under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against Tyco, TyCom, Goldman Sachs, Merrill Lynch, Citigroup and certain former Tyco and TyCom executives. The complaint alleges the TyCom registration statement and prospectus relating to the sale of TyCom securities were inaccurate, misleading and failed to disclose facts necessary to make the registration statement and prospectus not misleading. Further, the complaint alleges the defendants violated securities laws by making materially false and misleading statements and omissions concerning, among other things, executive compensation, Tyco's and TyCom's finances and TyCom's business prospects. On February 18, 2005, the Company moved to dismiss the consolidated securities class action complaint. On September 2, 2005, the United States District Court for the District of New Hampshire granted in part and denied in part the Company's motion to dismiss. The Court granted the Company's motion to dismiss allegations that the TyCom registration statement and prospectus were misleading to the extent that they failed to disclose alleged looting of Tyco by former senior executives, accounting fraud, analyst conflicts and the participation by James Brennan in the offering, because plaintiffs failed to plead that those alleged omissions were disclosed during the class period, with a resultant drop in the value of TyCom stock. However, the Court denied the Company's motion to dismiss with respect to other allegations.
According to a press release dated June 13, 2007, a judge has refused to dismiss lawsuits by three smaller groups of former Tyco International Ltd. shareholders, a month after the company agreed to settle most shareholder claims arising from mismanagement and looting by former top executives. On May 15, Tyco agreed to set up a $2.975 billion cash fund to settle most of the shareholder claims arising from actions by ex-Chief Executive L. Dennis Kozlowski and other top officers convicted of looting Tyco and inflating its value. Still alive are lawsuits by the state of New Jersey, former shareholders of AMP Inc. and former shareholders of a one-time Tyco subsidiary, TyCom Inc. U.S. District Judge Paul Barbadoro on Tuesday dismissed some counts and defendants, but kept alive most of their claims against Tyco, its former executives and directors and the company's former auditor, PricewaterhouseCoopers LLP. Barbardoro granted class action status to a lawsuit brought on behalf of shareholders who bought stock in TyCom Inc. in an initial public offering on July 26, 2000, or on the stock market before Dec. 17, 2001. The plaintiffs claim Tyco and three top executives fraudulently gained $200 million in cash through the spinoff.
According to an Order filed on November 17, 2008, the court recommends that the Judicial Panel on Multidistrict Litigation remand Rosemary Stumpf and Newby v. Neil R. Garvey, et al., 03-cv-1352-B, Ballard v. Tyco International, Ltd., et al., 04-cv-1336-B, Hall v. Tyco, et al., 05-cv-1336-B, and Jasin v. Tyco, et al., 05-cv-1337-B to the courts in which they were originally filed. On December 15, 2008, the Court entered the Conditional Remand Order and the case was remanded from the District Court of New Hampshire back to the District Court of New Jersey.
On April 21, 2009, the plaintiff filed a consent motion to certify the class. On January 12, 2009, the defendants filed several motions for summary judgment. The plaintiff also filed one motion for summary judgment that same day. The Court entered a settlement agreement before any ruling on the motions for summary judgment.
On April 13, 2010, the parties filed a Settlement Agreement. The settlement, in the proposed amount of $79,000,000 in cash, will settle claims against the company defendant, certain individual defendants, and the Underwriter Defendants. There are two non-settling individual defendants. On May 5, 2010, the settlement was preliminarily approved by Chief Judge Garrett E. Brown, Jr.
According to a press release dated June 10, 2010, a hearing will be held on August
25, 2010, at 1:00 p.m., before The Honorable Garrett E. Brown, Jr., at the
Clarkson S. Fisher Building & U.S. Courthouse, 402 East State Street,
Courtroom 4E, Trenton, New Jersey, for the purpose of determining (1) whether
the proposed settlement of the claims in the Action for the sum of $79,000,000
in cash should be approved by the Court as fair, reasonable and adequate to
Members of the Class; (2) whether, thereafter, this Action should be dismissed
with prejudice as to the Settling Defendants (who are all Defendants other
than L. Dennis Kozlowski and Mark H. Swartz) pursuant to the terms and
conditions set forth in the Settlement Agreement dated as of March 26, 2010;
(3) whether the proposed plan to distribute the settlement proceeds (the "Plan
of Allocation") is fair, reasonable and adequate and therefore should be
approved; and (4) whether the application of Lead Counsel for the payment of
attorneys' fees and expenses incurred in connection with this Action and
reimbursement of Lead Plaintiff's reasonable costs and expenses (including
lost wages) directly related to his representation of the Class should be
The settlement was approved and the Final Judgment and Order of Dismissal with Prejudice was entered on August 25, 2010.