Class action lawsuit against ADT moved to federal court

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Thursday, April 3, 2003

April 3, 2003

BOCA RATON, Fla. - A lawsuit filed late last year by a New Jersey dealer claiming that ADT breached the terms of the dealer contract has been moved to federal court and amended to include racketeering charges against Tyco International, ADT’s parent company.

The complaint by New Jersey-based Spectracom, Inc., which was filed on Dec. 23, 2002, alleges that dealers lost hundreds of thousands of dollars when ADT reduced the number of qualified accounts it would purchase by approximately 40 percent.

Stephen DeNittis, an attorney representing Spectracom, said that he was unaware of why ADT and Tyco sought to move the case to federal court, but he said the plaintiffs had no objection to the change of venue.

According to Joe Osefchen, an attorney from the law firm of Philip Stephen Fuoco, which is also representing Spectracom in this matter, said that the amended complaint, filed late last month, now includes charges that Tyco executives allegedly violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO).

“ Beginning in or prior to June 1997 Tyco, through its CEO (Dennis Kozlowski), its CFO (Mark H. Swartz), its Chief Corporate Counsel (Mark A. Belnick), and other employees engaged in a pattern of racketeering activity which culminated in harm to plaintiff,” reads the complaint. “As part of the defendants’ racketeering scheme, the CEO, CFO and Chief Corporate Counsel and others embezzled millions of dollars through false loans, unauthorized bonuses, and various accounting practices designed to conceal their actions.”

ADT officials did not return messages seeking comment for this story by press time. However, in an earlier interview, Jay Stuck, ADT vice president of marketing and corporate communications, said it was not the company’s custom to make any comment regarding pending litigation.

According to the complaint, it was the alleged problems within Tyco that spurred ADT’s 40 percent reduction in the number of qualified accounts the company would purchase from its authorized dealers.

At the core of the lawsuit is a directive from ADT dated Aug. 23, 2002 sent to ADT dealers which said “effective immediately, ADT will begin limiting the number of qualified accounts that it will purchase from the dealer network.”

The plaintiffs claim this was in violation of ADT’s contract with the dealers that specified that ADT needed to give 30 days notice before making any changes to the program.

While the case has been brought forward as a class action lawsuit, Osefchen said that the class has not yet been certified.

DeNittis added that since the case has been filed, several companies have contacted him, but “we have our class representative already, so we didn’t ask anyone else to sign on.”

Both DeNittis and Osefchen said that the case is currently in the discovery phase and no court dates have been scheduled.