Fund Manager Decries Efforts to Get Tyco to Return to U.S.

Hedge fund manager Leon Cooperman on Tuesday blasted efforts by CalPERS and other investors to pressure Tyco International Ltd. into leaving Bermuda and returning its corporate address to the U.S.

Cooperman, chairman of Omega Advisors Inc., which owns more than 6 million Tyco shares, called the initiative “ill-advised” and “possibly ill-informed” in a letter to Fred Buenrostro, chief executive of the California Public Employees’ Retirement System, the nation’s largest pension fund.

Tyco’s accounting worries and scandals have hammered investors over the last 14 months, erasing some $90 billion in market value.

But Cooperman said a move by Tyco back to the U.S. could undermine the health of the company and erase the future tax savings it gets from having a Bermuda incorporation.

CalPERS issued a “shareowner alert” last week, asking Tyco shareholders to vote at the company’s March 6 annual meeting for a resolution urging Tyco to reestablish itself as a U.S.-based corporation. CalPERS and others say offshore incorporations weaken shareholder protections.

But Tyco’s address in Bermuda, a tax haven for corporations, has helped the company maintain an effective tax rate lower than those of other manufacturers based in the United States. If Tyco moved back to the United States, its taxes could rise and cut into profit.

Cooperman pointed out that his company owns more Tyco shares than does CalPERS, which holds about 1.5 million shares.

“Our loss as a result of [Tyco] management’s past shenanigans has had a far greater impact on our performance than on yours,” Cooperman said.

But with about $133 billion in assets, CalPERS has the ear of corporate America and Wall Street. They take notice of requests from CalPERS, a leading corporate governance activist.

In addition, another corporate governance heavyweight, Institutional Shareholder Services, has joined the fray, supporting Tyco’s re-incorporation in the United States.

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Fund Trade Group

Won’t Oppose SEC Rule

The mutual fund industry’s trade group, the Investment Company Institute, said Tuesday that it won’t oppose a proposal requiring more frequent disclosure of fund holdings.

The group asked for one change in the Securities and Exchange Commission proposal, which would require funds to disclose their full holdings four times a year instead of twice a year. Funds should be allowed to keep a previously undisclosed holding confidential if the investment is still being acquired or is being sold when a quarter ends, the ICI said.

The quarterly reports the SEC proposed in December would be posted on the Internet and sent to shareholders who asked for them. The SEC said greater disclosure would help shareholders be sure that funds were following their stated investment strategies.

Fidelity Investments, the largest mutual fund manager, also said it would not oppose the SEC’s plan. Vanguard Group, the second-largest fund company, said it supported the proposal in a letter to the SEC two weeks ago.

From Bloomberg News

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IPO Settlement Pegged

at $1 Billion to $3 Billion

Wall Street brokerages will pay $1 billion to $3 billion to settle investors’ allegations that the firms rigged hundreds of initial public offerings, a Prudential Securities analyst said Tuesday.

Disgruntled investors have filed a class-action suit against 55 investment banks, including Credit Suisse First Boston and Citigroup Inc.’s Salomon Smith Barney, charging there was industrywide misconduct to artificially boost demand and inflate the price of some 309 IPOs.

Prudential analyst David Trone said a likely settlement range would be $1 billion to $3 billion, even though the amount by which the IPO price may have been artificially inflated is impossible to estimate.

The $1-billion low end is in line with what a group of securities firms paid in the mid-1990s to settle NASD price-fixing charges, Trone said.

The $3-billion high end implies $15 billion in theoretical damages, based on a rate of 20 cents on the dollar, he said.

Last week, a federal judge rejected efforts by Salomon Smith Barney, Goldman Sachs Group Inc. and the other investment banks named in the suit to dismiss the IPO claims.

Melvyn Weiss, a partner in lead plaintiffs’ firm Milberg Weiss Bershad Hynes & Lerach, said last week that there have been no organized settlement talks with the banks but that the judge’s decision opened the door to future talks as banks try to curb the costs of litigation.

From Reuters