Tyco Faces Follow-On Suit over Settlement
As part of their 2001 settlement with Tyco International Ltd., an investor group was given company shares. Now the group has filed suit again, claiming the company’s alleged financial misstatements cause the value of that stock to free fall less than a year after the settlement, Reuters reported.
Named in the lawsuit filed Thursday in Los Angeles include the company, its auditors PricewaterhouseCoopers, former Tyco chief executive Dennis Kozlowski, ex-finance chief Mark Swartz, other company officers and a Merrill Lynch analyst who it alleges was paid indirectly to issue favorable reports on the company, Reuters reported.
Representatives for Tyco and PricewaterhouseCoopers could not be reached by Reuters for comment.
Tyco was one of the world’s largest conglomerates, consisting of hundreds of companies that spanned a variety of industries—from diapers to medical supplies to electronics, Reuters reported.
Kozlowski and Swartz stood trial earlier this year on charges they looted the company of more than $600 million in one of this country’s biggest cases of corporate corruption. Their trial ended in mistrial in April.
The latest legal action against the company involves former shareholders of Progressive Angioplasty Systems Inc. (PAS), which along with its parent company U.S. Surgical Corp was bought by Tyco in 1998.
Reuters reported that in the sale to U.S. Surgical, the PAS shareholders received $75 million in cash and a promise of $75 million in deferred compensation if PAS met performance guidelines, the suit said.
But shortly after acquiring both companies, Tyco began dismantling PAS operations so that shareholders could not earn the deferred compensation, the lawsuit said.
They sued and settled in 2001 for $39 million and were convinced to take the settlement amount in Tyco common stock after being assured the stock would increase in value to $100 a share, the suit said. What actually happened was the opposite—the stock fell in value from $43 in April 2001 when the plaintiffs received the shares, to below $7 in August 2002 after fraud within Tyco was uncovered.