By Jef Feeley and Rachel Layne
May 15 (Bloomberg) -- Tyco International Ltd. agreed to pay $2.98 billion to settle investor lawsuits accusing the company of artificially inflating revenue, a move that helps clear the way for the firm to split into three companies.
Tyco, the world's biggest maker of electronic connectors and security systems, agreed today to resolve securities-fraud suits alleging the company overstated its income by $5.8 billion during the tenure of former Chief Executive Officer L. Dennis Kozlowski, according to a filing with the U.S. Securities and Exchange Commission.
The accord, the fourth-largest securities-fraud settlement in U.S. history according to Bloomberg data, comes as Pembroke, Bermuda-based Tyco prepares to dismantle the company built through acquisition by the now-jailed Kozlowski. Shareholder attorney Jay Eisenhofer said the agreement, which still requires court approval, is the largest settlement by a single defendant accused of defrauding investors.
The shareholders are handing over to Tyco their claims against Kozlowski and Swartz in exchange for 50 percent of whatever the company manages to recover from the former executives.
In addition to the cash settlement, Tyco agreed to give investors its right to sue the company's former auditor, PricewaterhouseCoopers, for failing to uncover the fraud, according to a statement issued by Eisenhofer and Richard Schiffrin, who also served as one of the shareholders' lead lawyers.