Judge Allows Class Action Against Tyco, Strikes Down Another Suit

A federal judge has allowed a shareholder class action lawsuit against Tyco International Ltd. to proceed, but he rejected a related shareholder lawsuit.

According to the Wall Street Journal, U.S. District


Click Here

Court Judge Paul Barbadoro in Concord, N.H. threw out a shareholder derivative lawsuit against most of Tyco's current directors and many former directors and officers, saying it was not allowed under Bermuda law. Tyco is registered in Bermuda and managed from West Windsor, N.J. The company headquarters was once located in New Hampshire.

Tyco is immersed in legal actions connected to the fraud scandal in which former Chief Executive Officer L. Dennis Kozlowski and ex-Chief Financial Officer Mark Swartz are accused of looting the company of about $600 million. They deny wrongdoing and are awaiting a retrial; the first trial ended in a hung jury. Tyco has admitted to a number of accounting tricks that allowed it to inflate income by $1.15 billion from 1998 to 2001.

The class action, which was allowed to go forward mostly unchanged, seeks damages from Tyco, Kozlowski, Swartz, two former directors, one former officer and auditor PricewaterhouseCoopers LLP. The lawsuit claims securities laws violations and looting by Kozlowski and Swartz. Barbadoro did, however, throw out several claims against former Tyco director Michael Ashcroft.

In a statement, the company said it was pleased about the dismissal of the derivative suit, adding that "this is a situation where the reputation of a strong company was temporarily undermined by the misbehavior of a few of its former top executives."

Tyco spokesman David Polk said of the shareholder class action that it was "important to note that the court's ruling in the remaining case is a preliminary ruling that addresses only certain legal issues. The facts and merits of the case have yet to be examined. … We believe we have a very strong case, and we are prepared to defend it vigorously."

Jay Eisenhofer, a plaintiff attorney in the class-action case, told the Journal that the decision is "a big shareholder win and a major step forward in the case." He added: "Tyco's attempt to shirk responsibility for the looting and fraud that was the company's standard operating procedure throughout Dennis Kozlowski's reign was completely rejected by the court."

You may like these other stories...

Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.