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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: afrayem onigwecher who wrote (10698)	11/6/2002 8:47:54 PM
From: StockDung	Respond to of 19428

Tyco faces legal battle with employees over stock By Tim McLaughlin CONCORD, N.H., Nov 6 (Reuters) - Employees at Tyco International Ltd., pointing to recent scandals that helped sink the conglomerate's stock price and clobber their retirement plans, are pursuing a federal class-action lawsuit to recover some of their losses. More than $80 billion in shareholder value has been erased at Tyco this year, hurting investors and battering the retirement accounts of thousands of Tyco employees. Chief Judge Paul Barbadoro of New Hampshire U.S. District Court is expected to hear arguments on Nov. 15 on whether employee claims should be separated from those filed by investors, said Edwin Mills, a lawyer for some Tyco employees. Tyco employs more than 250,000 people. Ultimately, most of them could seek damages if the employee lawsuits gain class-action status, lawyers said. Tyco said last month its pension plans were underfunded by about $1.7 billion, nearly double last year's $899 million deficit as Tyco shares plummeted and broader stock markets declined. Employees charge that Tyco's senior leadership violated their fiduciary duties to protect retirement plans that held company stock, according to legal papers. They allege Tyco violated the U.S. Employee Retirement Income Security Act. "Despite serious financial problems, on Jan. 1, 2002, (Tyco) increased from 15 percent to 25 percent the allocation of (retirement plans) to be invested in Tyco common stock," one complaint states. Tyco encouraged employees to invest in the Tyco Employee Stock Purchase plan by matching 9.9 percent of every dollar of stock purchased, according to court papers. Lawyers for the employees want Barbadoro to separate their claims from a fresh batch of securities fraud lawsuits being consolidated in Barbadoro's courtroom. "You're talking about employees, not your normal investor," said Eric Lee, a lawyer for some Tyco employees. "They have a much bigger tie to it because they're investing in themselves. "These were the people doing the work for them and (management) had a responsibility to them to let them know there were problems," Lee said. The Judicial Panel on Multidistrict Litigation in Washington D.C. has ruled that fraud claims being filed in U.S. federal courts will be heard in Barbadoro's courtroom. To date, more than 30 lawsuits have been filed on behalf of employees and investors. Barbadoro, who investigated the Iran-Contra scandal before becoming a federal judge, in February dismissed a class-action lawsuit filed on behalf of investors against Tyco. He said they failed to support their claims of fraud under U.S. securities laws. Tyco was accused of inflating revenue and hiding losses in 1998 and 1999. Lawsuits filed this year make similar, but broader, claims. But they now carry a degree of credibility and detail not available in the earlier case, said Fred Isquith, a lawyer for shareholders. "Now there's enormous amounts of new information that has come out against Tyco," Isquith said. "Part of that information is how pervasive the fraud was within the company and how dishonestly its most senior management behaved." "Our clients are not merely disappointed investors who are seeking a way of recovery when the market goes down or the stock goes down," he added. Lawyers for Tyco declined comment. But in some respects, the claims of investors and employees are bolstered by Tyco's own investigation into the regime of Dennis Kozlowski, Tyco's chairman for a decade. Kozlowski and Tyco's former finance chief Mark Swartz are charged with looting $170 million from the company and obtaining more than $430 million through securities fraud. Tyco's former general counsel Mark Belnick was charged with falsifying documents. Tyco also has sued those three executives, who have pleaded not guilty, and Frank Walsh, a 10-year veteran of the company's board. Walsh does not face criminal charges. Tyco's allegations mirror the criminal charges brought by the Manhattan District Attorney's Office in New York. Company insiders say Tyco's legal team is aware that plaintiffs' attorneys will use what Tyco says in its complaints against Kozlowski and the others to try to bolster their claims. For Tyco, the issue of materiality will be an important defense. Even though Tyco information may have been misleading or was not disclosed, plaintiffs' lawyers will have to prove those alleged failings were important enough to the financial markets to support fraud claims. Isquith said he does not believe Tyco the company will be able to separate itself so easily from the old regime of Tyco executives. He also said plaintiffs will have to go beyond the allegations made by investigators. "The case is going to end up being much more complicated," Isquith said. 11/06/02 18:42 ET