Richard Schiffrin, the Radnor lawyer who helped fashion yesterday's huge payment by Tyco International Ltd. to aggrieved shareholders, said the case might have been the most complex securities litigation ever.
Tyco provided 80 million e-mails, spreadsheets and other documents as part of discovery. Plaintiffs' attorneys employed data-mining techniques and conducted 200 depositions to sift for evidence showing that fraud had caused the value of Tyco's stock to drop precipitously.
"It was possibly the most complicated civil litigation anyone had ever been involved in," Schiffrin said.
On its face, the criminal case against former Tyco chief executive officer L. Dennis Kozlowski and other top officers convicted of looting the company was simple. Prosecutors had alleged that Kozlowski converted company assets to personal use and concealed his actions from the public.
But Schiffrin said that it was a far more difficult task to establish that the fraud had caused the company's stock to lose most of its value.
That's because, unlike in the case of Enron, the company did not collapse overnight - in fact it is still a going concern, and the stock has recovered much of the value it lost. An added difficulty, Schiffrin said, was that Tyco had made regular disclosures of its difficulties, permitting it to argue that other factors apart from abuses by top management figured into the decline of the stock.
To prove that actions by top management caused the losses, Schiffrin said plaintiffs' attorneys had to unravel layer after layer of corporate entanglements designed to conceal the company's true condition, and show that management had intended to keep the truth from investors.
The criminal trials of top Tyco managers provided a road map, Schiffrin said, but fell short of what plaintiffs' attorneys needed to make their case.
Schiffrin said he and other plaintiffs' attorneys focused much of their attention on Tyco's $5.8 billion earnings restatement, and its purchases of several hundred companies that never were disclosed to investors.
Schiffrin said that the attorneys planned to apply in federal district court in New Hampshire, which has jurisdiction, for their fees in the months ahead. He said the attorneys had not yet decided the amount of fees they would seek.
Attorneys' fees in big cases have been ranging from 15 percent to 20 percent of the settlement, but they could come in at less than that because of the size of the Tyco settlement, the largest payout by a company ever, Schiffrin said.
Schiffrin is the founding partner of Schiffrin Barroway Topaz & Kessler in Radnor, a 60-lawyer firm that focuses on securities-fraud, derivative and transactional litigation against public companies. Among other clients, the firm serves as co-lead counsel on behalf of New Jersey and its Division of Investment against Tenet Healthcare Corp., alleging that the company made misleading statements about its financial condition. The case resulted in a partial settlement of $216.5 million.
Overall, the law firm says it has recovered billions for institutional clients and individual investors.