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Attorney General Cox, Treasurer Kleine Recover $24.5 Million for State Pension Fund

Contact:  John Sellek or Matt Frendewey 517-373-8060
Agency: Attorney General


May 20, 2009

 

           LANSING - 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 and AIG."

        The complaint 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."

        The 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.

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