The settlement compensates investors defrauded by Tyco by instructing the company to establish a $2.98 billion cash fund to pay their losses. However, US District Court Judge Paul Barbadoro in Concord, New Hampshire said that he will continue to scrutinize the settlement to ensure that the cash is distributed to investors fairly.

The settlement also requires Tyco to give plaintiffs half of any future settlements arising out of the company's lawsuits against disgraced former CEO Dennis Kozlowski, former CFO Mark Swartz and former board member Frank Walsh.

PricewaterhouseCoopers was also instructed to make a $225 million contribution towards the settlement for failing to spot inaccuracies in Tyco's accounts which led to the massive overstatement of the firm's income.

The settlement resolves the securities fraud suits which alleged that Tyco overstated its earnings by $5 billion.

In June 2005, Kozlowski and Swartz were found guilty on 22 of 23 counts, including grand larceny, conspiracy, securities fraud and falsifying business records.

The two were said to have received more than $150 million in unauthorized loans and bonuses from Bermuda-based Tyco. Both are now serving maximum prison terms of 25 years.

Kozlowski has also owned up to charges of tax evasion, and in May 2006, he agreed to pay more than $21 million to settle tax evasion charges on purchases of fine art.