The action alleges, among other things, that at the start of the class period, December 30, 2002, the defendants filed an 8-K reporting the conclusion of an investigation of Tyco's accounting and corporate governance. The defendants identified charges, reflecting accounting errors in fiscal year 2002, that totaled $382.2 million. When the defendants issued their financial statements, they assured the marketplace that there was no systemic or significant fraud related to the financial statement or of any clear accounting errors affecting the year 2003. Additionally, the defendants assured the market that this intensive review was to build Tyco's credibility, strengthen Tyco's accounting practices and fulfill its commitment to investors.

Allegedly, however, the defendants then embarked on a course of conduct to misrepresent the true current financial and operating condition of, and financial prospects for, Tyco and its ADT business segment by failing to disclose that there were additional material accounting adjustments that would be required to be made to Tyco's financial statements in order to properly present its financial condition, and that those adjustments would reduce Tyco's earnings materially below the levels the defendants had conditioned the market to expect in fiscal year 2003. On March 12, 2003, after the close of trading on the NYSE, the defendants stunned the market by announcing that in the quarter ending March 31, 2003, Tyco expected to take non-cash, pre-tax charges estimated to be between $265 million and $325 million for issues identified primarily in its ADT business. These charges were expected to lower earnings by $0.09 to $0.11 per share. In response to this announcement, the price of Tyco common stock fell from a close of $14.03 per share on March 12, 2003, to close at $12.18 per share the next day, on unusually large trading volume of 89,694,200 shares.