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Ex-Tyco Director to Pay $5.6 Million in Suit Tying N.J. Pension Losses to Fraud
New Jersey Law Journal
November 16, 2009
A federal judge has approved a settlement by which a former board member of Tyco International Ltd. will pay $5.6 million to settle claims that New Jersey pension funds lost more than $100 million because of securities fraud.
New Jersey charged that Frank Walsh Jr. took a $20 million payment from Tyco, without disclosure to shareholders or other board members, for helping arrange the Princeton corporation's 2001 purchase of The CIT Group.
The state Department of Treasury's Division of Investments filed suit in 2002 against Tyco, its auditors and several individuals, including Walsh, seeking to recover from fraud, insider trading and accounting improprieties at Tyco.
The complaint charged that state pension funds had suffered significant losses due to fraud, insider trading at Tyco, the failure to disclose millions of dollars in personal loan benefits and accounting improprieties.
New Jersey's suit was filed in Newark but was consolidated with other shareholder suits and removed to the U.S. District Court for New Hampshire. Tyco, incorporated in Switzerland, had its operations center in Exeter, N.H., at the time of the alleged improprieties, but moved it to Princeton in 2003.
U.S. District Judge Paul Barbadoro in New Hampshire approved the settlement Tuesday.
In paying the $5.6 million, Walsh made no admission of wrongdoing or liability, says Lee Moore, a spokesman for the Attorney General's Office. Walsh's lawyer, Laurence Greenwald of Stroock, Stroock & Lavan in New York, did not return a call.
The state estimates its losses from the Tyco fraud came to more than $100 million. The latest settlement brings the state's recovery from the Tyco litigation to $84.7 million.
Tyco settled with the state for $73.25 million in April 2008 and PricewaterhouseCoopers settled for $5.85 million in March of this year.
"These are significant recoveries for our state pension funds," Attorney General Anne Milgram said.
The state still has claims pending against former Tyco CEO L. Dennis Kozlowski and the company's former chief financial officer, Mark Swartz.
New Jersey was represented by Gerald Liloia and Michael O'Mullan of Riker, Danzig, Scherer, Hyland & Perretti in Morristown and James Bonner and Patrick Rocco of Shalov, Stone, Bonner & Rocco in New York. O'Mullan says outside counsel were not authorized to comment on the case. Assistant Attorney General Carol Jacobson and Deputy Attorney General Samuel Cornish of the Division of Law acted as liaison with outside counsel.
In December 2002, Walsh pleaded guilty to securities fraud charges in state court in New York but avoided jail by agreeing to make full restitution to Tyco and paying a $2.5 million fine.
