The Tyco securities class action has been dismissed. Well, no, not that one. No, not that one either. This "action differs from the others in that it involves a later class period and targets Tyco's current CEO and CFO, Breen and FitzPatrick, rather than the former officers and directors who allegedly looted the company and oversaw the accounting fraud schemes that began the cascade of lawsuits." Basically, it all came down to scienter. You see, "according to plaintiffs, Breen and FitzPatrick had a motive to make the misstatements because they both stood to receive substantial salaries, bonuses, stock options, and other employee benefits so long as Tyco remained solvent." You know where this is headed already, don't you? (Sorry, don't mean to ruin it for you). Added to which, plaintiffs argued, "defendants made a massive re-restatement in March 2003, only two months after the December 30, 2002 disclosure." Judge Paul Barbadoro (D. N.H.) summed it all up with a quick "I disagree," finding that these "catch-all allegations that Breen's and FitzPatrick's personal and professional fortunes were personally tied to the fortunes of Tyco and that they therefore had the motive to commit fraud" have "been rejected by prior courts, and I see no reason to depart from their sound reasoning."
You can read Ezra Charitable Trust v. Tyco, issued September 1, 2005, at 2005 U.S. Dist. LEXIS 19110.
Nugget: "What plaintiffs are left with is a claim that Breen and FitzPatrick must have known about Tyco's misstatements in December 2002, because that information became available in March 2003. This type of claim, referred to by other courts as a 'fraud by hindsight' claim, has been deemed insufficient to meet the PSLRA's heightened pleading standards."