NEW YORK, Dec 19 (Reuters) - A federal judge on Wednesday approved settlements worth $3.2 billion for investors who sued Tyco International Ltd TYC.N following an accounting scandal that led to the imprisonment of ex-chief Dennis Kozlowski.
Also approved was about $464 million in legal fees and $28.9 million in expense reimbursement for the plaintiffs’ lawyers. It is believed to be the biggest-ever fee award for attorneys in a securities class-action settlement.
The lawyers’ payments, which when proposed had attracted criticism from some institutional investors as being too hefty, will be drawn from the settlement fund.
“In summary, I find that the settlement is fair, reasonable and adequate,” U.S. District Judge Paul Barbadoro wrote in the ruling.
Tyco agreed in May to pay $2.975 billion to settle several long-running class-action lawsuits. Another defendant, former Tyco auditor PricewaterhouseCoopers LLP, said in July it would pay $225 million to resolve the litigation.
Kozlowski and former Tyco finance chief Mark Swartz were found guilty in June 2005 of stealing millions from the conglomerate, a case that became infamous amid revelations that Kozlowski had used company funds to pay for a $15,000 umbrella stand and a $6,000 shower curtain.
Kozlowski and Swartz are now serving sentences of up to 25 years apiece in New York state prison.
Plaintiffs in the shareholder lawsuit contended that from December 1999 through June 2002, Tyco and others misrepresented the value of acquisitions and misled investors about Tyco’s financial health. The settlements were reached before the case ever went to trial.
The plaintiffs were represented by law firms Grant & Eisenhofer PA, Schiffrin Barroway Topaz & Kessler LLP and Milberg Weiss LLP. Milberg faces a criminal trial next year in federal court in Los Angeles on charges of paying illegal kickbacks to plaintiffs in various lawsuits. It has pleaded not guilty.
Judge Barbadoro said the fee award for the lawyers, which amounts to 14.5 percent of the settlement fund, was appropriate because they took big risks in bringing the case and spent millions of their own money working on it. The lawyers worked on contingency, meaning they would only be paid if damages were awarded at trial or a financial settlement was reached.
The judge said that over five years, the shareholders’ lawyers put in more than 488,000 billable hours at a market value of more than $172 million. The case was enormously complex and involved the review of 82.5 million pages of documents, dwarfing every other major securities class-action, the judge wrote.
“Co-lead counsel put massive resources and effort into the case for five long years ...,” the judge wrote. “But for co-lead counsel’s enormous expenditure of time, money and effort, they would not have been able to negotiate an end result so favorable for the class.”
The judge said that while the fee award on a percentage basis was larger than in some other big fraud cases, it would be against public policy for him to set an unreasonably low award “that would encourage future plaintiffs’ attorneys to settle too early and too low.”
Editing by Richard Chang