May 20, 2009
Attorney General Mike Cox and Treasurer Robert
Kleine today announced a $24.5 million settlement with Tyco International Ltd.,
Tyco Electronics Ltd., and Covidien Ltd. (Tyco) as a result of a securities
fraud case filed against Tyco in February 2008. The lawsuit alleged Tyco and
some of its former directors and officers, violated securities laws by
artificially inflating the price of its stock, which later caused Michigan's
pension funds to lose millions of dollars.
"Retirees deserve to
have their pensions protected," said Cox. "That is why we pursued this case, and
will continue fighting to recover funds from other bad actors, like Bear Sterns
alleged that Tyco continually inflated its earnings and manipulated its books to
hide excessive executive compensation. In addition, the complaint alleged that
Tyco misled its investors by implementing improper accounting practices, which
they internally referred to as "financial engineering." As the scheme
unraveled, a stream of financial disclosures shook the market and the value of
the Tyco stock held by the Michigan pension funds plummeted.
Cox and Kleine had
earlier rejected an offer to become part of a national class action against
Tyco, which, according to plaintiff's estimate, would have resulted in the state
pension fund receiving only approximately $1.6 million.
"This settlement is
a clear statement that as fiduciary of State of Michigan pension funds, I will
continue to take every step necessary to recover lost funds on behalf of the
state's participants and beneficiaries," said Kleine. "This settlement is
approximately 15 times what the funds were estimated to receive if a separate
legal action had not been filed."
settlement proceeds will go to the State of Michigan Retirement Systems (SMRS),
which invests on behalf of Michigan Public School Employees, State Employees,
State Police, and Michigan Judges. In 2006, Cox won a settlement against
HealthSouth for Michigan pension funds, and is currently pursing claims against
BearSterns and AIG. The state pension fund holds combined assets of
approximately $42.3 billion, making the SMRS one of the largest pension systems
in the nation.