CONCORD, N.H. – Tyco International Ltd. (TYC) said Tuesday it has agreed to pay about $3 billion to settle shareholder claims that arose after former Chief Executive Officer Dennis Kozlowski and other top officers were charged with looting the company and inflating its value.
Tyco said it would set up a $2.975 billion cash fund to pay claims filed by former shareholders and turn over half of any money it recovers from ongoing lawsuits against Kozlowski, former Chief Operating Officer Mark Swartz and former board member Frank Walsh.
"With this settlement we are taking an important step to resolve our most significant remaining legacy legal matter," Chairman and Chief Executive Ed Breen said in a statement. "Our balance sheet and cash flow remain strong and will allow us to readily absorb these costs while removing much of the uncertainty around legacy legal matters."
Investors including union and state pension funds were given the green light to proceed with a class-action lawsuit in U.S. District Court in New Hampshire in June 2006, and several lawsuits were consolidated.
Lawyers for the shareholders said it was the largest settlement ever by a single corporate defendant in a class action suit.
"This is a fantastic resolution and closes a chapter on one of the largest and most appalling examples of corporate fraud in U.S. history," said Jay Eisenhofer, managing partner at Grant & Eisenhofer.
"This is a settlement of historic proportions for the investors who suffered significant financial losses and it also sends a strong message to those who would engage in this type of misconduct in the future," said Richard Schiffrin, of Schiffrin Barroway.
Shareholder claims against the company's former auditor, PriceWaterhouseCoopers, are still pending, the lawyers said.