Litigation Release No. 21128 / July 14, 2009

Accounting and Auditing Enforcement Release No. 3009 / July 14, 2009

U.S. Securities and Exchange Commission v. Richard D. Power, Edward Federman, and Richard J. "Skip" Heger, 06-CV-15343 (RWS) (S.D.N.Y. filed Dec. 21, 2006)


On July 14, 2009, the Securities and Exchange Commission (the Commission) filed a settled Final Judgment against Richard D. Power, a former Tyco International Ltd. (Tyco) Vice President, in the Commission's action against Power arising from his involvement in fraudulent accounting practices at Tyco. The Final Judgment permanently enjoins Power from violating, or aiding and abetting violations of, the antifraud, periodic reporting, and books and records provisions of the federal securities laws, orders him to pay disgorgement of $425,000, and imposes a $100,000 civil penalty.

The Commission's complaint alleges that Power, at the time that Tyco merged with the electronic security services company ADT Limited in 1997, devised a sham transaction that fraudulently inflated Tyco's operating income. The sham transaction was utilized every time that Tyco purchased a new security monitoring account from its dealers. The complaint also alleges that Power further inflated Tyco's operating income by engaging in fraudulent acquisition accounting, primarily through directing the pre-acquisition reduction of asset valuations and overstatement of liabilities in connection with several of Tyco's most significant acquisitions.

Without admitting or denying the allegations in the Commission's complaint, Power consented to the entry of a Final Judgment that would permanently enjoin him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 10b-5 and 13b2-1, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13. The proposed Final Judgment would also order Power to pay disgorgement of $425,000 and a civil penalty in the amount of $100,000. Under the terms of the settlement, Power's disgorgement obligation would be deemed partially satisfied upon proof of Power's payment of $250,000 to Tyco pursuant to a settlement agreement between Power and the company. The proposed Final Judgment is subject to the approval of the United States District Court for the Southern District of New York.

For further information about the Commission's action in U.S. Securities and Exchange Commission v. Richard D. Power, Edward Federman, and Richard J. "Skip" Heger, see Litigation Release No. 19953 (Dec. 21, 2006) and Litigation Release No. 20096 (Apr. 30, 2007); see also Litigation Release No. 19657 (Apr. 17, 2006).