Tyco Wins Bid to Exclude Some Evidence Against Ex-Director Walsh at Trial

Tyco International Ltd. won a bid to exclude some evidence in a lawsuit that centers on ex-director Frank E. Walsh Jr.’s $20 million “finder’s fee” related to the purchase of CIT Group Inc.

Walsh had asked U.S. District Judge Denise Cote in New York to bar Tyco from putting attorneys’ fees into evidence at trial. Tyco persuaded Cote that the fees were evidence of damages sustained by the company and that Walsh’s conduct triggered an internal investigation by the law firm of Boies, Schiller & Flexner LLP, which was hired to investigate the payment.

“Tyco has shown that the evidence is properly admitted at trial,” Cote said.

In a separate ruling, Cote denied a bid by Tyco to exclude the testimony of an expert witness Walsh wants at a trial about Bermuda law. Walsh said he relied upon the advice in connection with his receipt of the $20 million from Tyco.

Walsh, who was “lead director” and a member of the corporate governance committee, hid the payment from the board and later refused to return it, Tyco alleges in a suit filed in New York in 2002. Tyco alleges seven causes of action, including that Walsh breached his fiduciary duty when he accepted the payment. He denies allegations of any wrongdoing.

Other Directors

Tyco also sought to bar evidence about the compensation of directors other than Walsh in the trial. The company argued it would “burden the trial with mini-inquiries regarding these irrelevant events.”

Walsh argued the evidence about other directors should be allowed, because he said Tyco had a practice of paying its directors without board approval.

Cote conditionally granted Tyco’s motion in part, saying she will rule later if she will permit Tyco to seek punitive damages against Walsh.

“Should Tyco have a right to seek punitive damages, then evidence of its custom and practice with respect to extraordinary payments to directors other than Walsh may be admissible,” Cote said.

Mark Levine, a lawyer for Tyco, declined comment. Michele Pahmer, a lawyer for Walsh, didn’t immediately return a voice-mail message left at her office seeking comment.

The case is Tyco International Ltd. v. Frank Walsh Jr. 02- CV-04633, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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