February 8, 2008

            LANSING  - Attorney General Mike Cox and Treasurer Robert Kleine announced today that the State of Michigan has taken legal action against Tyco International, its auditors, and four of its former executives and directors in order to protect Michigan pensions. Cox filed a lawsuit in the Eastern District of Michigan accusing the defendants of participating in a massive corporate fraud scheme that depleted Michigan pension funds by millions of dollars.

            "Safeguarding pensions is a top priority of my office," said Cox. "We will do everything we can to ensure that employees aren't cheated out of the pensions that are rightfully theirs."

            Tyco manufactures a wide variety of products, from electric components to healthcare products. The conglomerate operates in over one hundred countries around the world and employs over 240,000 people. The complaint alleges that Tyco continually inflated its earnings and manipulated its books to hide excessive executive compensation. In addition, Tyco misled its investors by implementing improper accounting practices, which they internally referred to as "financial engineering."

            Tyco's former CEO, Dennis Kozlowski, and CFO, Mark Swartz, were convicted in New York of grand larceny, falsification of business records, and conspiracy, and are currently serving lengthy federal prison sentences. A former director pled guilty to securities fraud.

            Michigan pension funds ultimately paid a steep price for Tyco's fraud. In 2001, Tyco stock hit an all-time high, fueled by the defendants' misconduct. As the scheme unraveled, and a stream of financial disclosures shook the market for Tyco stock, the value of the Tyco stock held by the Michigan pension funds plummeted, which led to a loss of more than $50 million.

            "Nearly 600,000 participants and beneficiaries are depending on State Pension Funds to secure their retirement," said State Treasurer Robert J. Kleine. "We take our obligation to protect those funds very seriously."

            The State of Michigan Retirement Systems (SMRS), which invests on behalf of Michigan Public School Employees, State Employees, State Police, and Michigan Judges, hold combined assets of approximately $62 billion, making the SMRS one of the largest pension systems in the nation.

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