Tyco $3.2 billion shareholder settlement gets preliminary court approval

[JURIST] A federal judge has given preliminary approval to a $3.2 billion settlement agreement [JURIST report] between Tyco International [corporate website; JURIST news archive], Tyco's former auditor PricewaterhouseCoopers [corporate website], and investors who were harmed by fraudulent accounting practices orchestrated by Tyco's former top executives. Judge Paul Barbadoro, however, said Friday that he will scrutinize the allocation of the settlement funds based on "simple fairness." The settlement requires Tyco to establish a $2.975 billion cash fund to pay investor losses and also to give plaintiffs half of any recoveries made in Tyco's lawsuits against former CEO Dennis Kozlowski, former CFO Mark Swartz [JURIST news archive], and former board member Frank Walsh. It also includes a $225 million contribution from PricewaterhouseCoopers because the auditor failed discover the fraudulent accounting that inflated the companies' earnings.

The shareholders' class action lawsuit against Tyco was certified [order, PDF] last June. In 2005, Kozlowski and Swartz were found guilty [JURIST report] of looting the company and defrauding its shareholders out of more than $150 million in unauthorized personal compensation, and were sentenced [JURIST report] to prison for 8 to 25 years. Bloomberg has more.

 

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