/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000601.MBX C L A S S A C T I O N R E P O R T E R Thursday, June 1, 2000, Vol. 2, No. 106 Headlines BANK OF NY: Depositors Sue for Money Lost in Russian Inkombank Collapse BANK OF NY: Sued over Fiduciary Duty Breach in Russian Wire Transfer BREAST IMPLANT: Dow Corning’s Ch 11 Plan Confirmed; Issues Outstanding CHRISTIAN MEMORIAL: Cemetery to Give Refunds for Plastic Caskets COCA-COLA: Fed. Judge Makes Time for Talks over Employees' Racial Suit COCA-COLA: Judge Again Orders for Hiring Data CYBER-CARE INC: The Pomerantz Firm Announces Securities Suit in Florida CYBER-CARE, INC: Wolf Haldenstein Files Securities Suit in Florida FIRST SECURITY: Schiffrin & Barroway Files Securities Suit in Utah HMO: Lawsuit Says Cigna Shortchanges Doctors HMO: N.Y. Hospitals Sue Aetna Alleging Delay in Paying Claims MAGNA ENTERTAINMENT: Austrian Subsidiary Sued for Forced Labor in WWII PFIZER, INC: Milberg Weiss Announces Lawsuit by Cardura Users RACING CHAMPIONS: Milberg Weiss Announces Securities Suit in Illinois REPUBLIC NY: $123M Suit Re Promissory Notes Stayed Pending Jury Action SEROLOGICALS CORPORATION: Berman DeValerio Files Securities Suit in GA SEWER RATES: Westside Residents Fight Disparity from Indianapolis SOTHEBY'S: Taubman Accused of Refusing to Let Go Insider Board Control TOBACCO LITIGATION: Analysts Say Bonds Get a Boost from Litigation TOBACCO LITIGATION: Expert Challenges Industry Anti-Smoking Effect TOBACCO LITIGATION: Jury Can Hear about Industry's Borrowing Power ********* BANK OF NY: Depositors Sue for Money Lost in Russian Inkombank Collapse ----------------------------------------------------------------------- Additionally, on October 7, 1999, six alleged depositors of Joint Stock Bank Inkombank ("Inkombank"), a Russian Bank, filed a purported class action in the United States District Court for the Southern District of New York on behalf of all depositors of Inkombank who lost their deposits when that bank collapsed in 1998. The complaint, as subsequently amended, alleges that the Company and BNY and their senior officers knew about, and aided and abetted the looting of Inkombank by its principals. The amended complaint asserts causes of action for conversion and aiding and abetting conversion under New York law. In addition, the amended complaint states a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). It seeks an unspecified amount of damages believed to exceed $500 million, along with punitive damages of $500 million, interest, costs, attorneys' fees, expert fees, and other expenses. The amended compliant seeks a trebling of any RICO damages. The Company and BNY moved to dismiss the amended complaint, and the Court granted that motion with leave to replead. The Company and BNY believe that the allegations of the amended complaint are without merit and intend to defend the actions vigorously. BANK OF NY: Sued over Fiduciary Duty Breach in Russian Wire Transfer -------------------------------------------------------------------- The Company is cooperating with investigations being conducted by federal and state law enforcement and bank regulatory authorities focusing on funds transfer activities in certain accounts at BNY, principally involving wire transfers from Russian and other sources in Eastern Europe, as well as certain other matters involving BNY and its affiliates. The funds transfer investigations center around accounts controlled by Peter Berlin, his wife, Lucy Edwards (until discharged in September 1999, an officer of BNY), and companies and persons associated with them. Berlin and Edwards have pleaded guilty to various federal criminal charges. On February 8, 2000, BNY entered into a written agreement with both the Federal Reserve Bank of New York and the New York State Banking Department, which imposed a number of reporting requirements and controls. Substantial portions of these were in place on the date the agreement was signed. Four purported shareholder derivative actions have been filed in connection with these Russian related matters - - two in the United States District Court for the Southern District of New York and two in the New York Supreme Court, New York County - - against certain directors and officers of the Company and BNY alleging that the defendants have breached their fiduciary duties of due care and loyalty by aggressively pursuing business with Russian banks and entities without implementing sufficient safeguards and failing to supervise properly those responsible for that business. The actions seek, on behalf of the Company and BNY, monetary damages from the defendants, corrective action and attorneys' fees. BREAST IMPLANT: Dow Corning’s Ch 11 Plan Confirmed; Issues Outstanding ---------------------------------------------------------------------- The Company is separately named as a defendant in more than 14,000 breast implant product liability cases, of which approximately 4,000 state cases are the subject of summary judgments in favor of the Company. In these situations, plaintiffs have alleged that the Company should be liable for Dow Corning's alleged torts based on the Company's 50 percent stock ownership in Dow Corning and that the Company should be liable by virtue of alleged "direct participation" by the Company or its agents in Dow Corning's breast implant business. These latter, direct participation claims include counts sounding in strict liability, fraud, aiding and abetting, conspiracy, concert of action and negligence. Judge Pointer was appointed by the Federal Judicial Panel on Multidistrict Litigation to oversee all of the product liability cases involving silicone breast implants filed in the U.S. federal courts. Initially, in a ruling issued on December 1, 1993, Judge Pointer granted the Company's motion for summary judgment, finding that there was no basis on which a jury could conclude that the Company was liable for any claimed defects in the breast implants manufactured by Dow Corning. In an interlocutory opinion issued on April 25, 1995, Judge Pointer affirmed his earlier ruling as to plaintiffs' corporate control claims but vacated that ruling as to plaintiffs' direct participation claims. On July 7, 1998, Dow Corning, the Company and Corning Incorporated (Corning), on the one hand, and the Tort Claimants' Committee in Dow Corning's bankruptcy on the other, agreed on a binding Term Sheet to resolve all tort claims involving Dow Corning's silicone medical products, including the claims against Corning and the Company (collectively, the Shareholders). The agreement set forth in the Term Sheet was memorialized in a Joint Plan of Reorganization (the Joint Plan) filed by Dow Corning and the Tort Claimants' Committee (collectively, the Proponents) on November 9, 1998. On February 4, 1999, the Bankruptcy Court approved the disclosure statement describing the Joint Plan. Before the Joint Plan could become effective, however, it was subject to a vote by the claimants, a confirmation hearing and all relevant provisions of the Bankruptcy Code. Voting was completed on May 14, 1999 and the confirmation hearing concluded on July 30, 1999. On November 30, 1999, the Bankruptcy Court issued an Order confirming the Joint Plan, but then issued an Opinion on December 21, 1999 that, in the view of the Proponents and the Shareholders, improperly interpreted or attempted to modify certain provisions of the Joint Plan affecting the resolution of tort claims involving Dow Corning's silicone medical products against various entities, including the Shareholders. Many of the parties in interest, including the Shareholders, filed various motions and appeals seeking, among other things, a clarification of the December 21, 1999 Opinion. The effectiveness of the Joint Plan remains subject to the resolution of these motions and appeals, which were heard by U. S. District Court Judge Denise Page Hood on April 12 and 13, 2000, but upon which she has not yet ruled. Accordingly, there can be no assurance at this time that the Joint Plan will become effective. It is the opinion of the Company's management that the possibility is remote that plaintiffs will prevail on the theory that the Company should be liable in the breast implant litigation because of its shareholder relationship with Dow Corning. The Company's management believes that there is no merit to plaintiffs' claims that the Company is liable for alleged defects in Dow Corning's silicone products because of the Company's alleged direct participation in the development of those products, and the Company intends to contest those claims vigorously. Management believes that the possibility is remote that a resolution of plaintiffs' direct participation claims, including the vigorous defense against those claims, would have a material adverse impact on the Company's financial position or cash flows. Nevertheless, in light of Judge Pointer's April 25, 1995 ruling, it is possible that a resolution of plaintiffs' direct participation claims, including the vigorous defense against those claims, could have a material adverse impact on the Company's net income for a particular period, although it is impossible at this time to estimate the range or amount of any such impact. CHRISTIAN MEMORIAL: Cemetery to Give Refunds for Plastic Caskets ---------------------------------------------------------------- When a representative from Christian Memorial Cultural Center knocked on her door in 1994, Hazel and her husband agreed to pay $8,000 for plastic caskets and services they wouldn't need for decades. As many as 16,000 other customers who received similar sales pitches for more than 15 years can now get refunds on "Heritage Deluxe Caskets" purchased from the 110-acre cemetery in Rochester Hills. Customers have until July 19 to claim refunds on the $1,800 caskets, according to terms of a class-action lawsuit partially settled this month. The deal closes the chapter on one of three suits claiming former cemetery owner Bernard LePage bilked trust funds for graves, maintenance and burials. New owner, Hillcrest Memorial Co., is seeking up to $12 million, claiming LePage and others didn't fully disclose the cemetery's financial status when it was sold in 1998. That lawsuit in U.S. District Court in Detroit recently was joined with one by National Bank and Trust Association. The suits contend LePage squandered trusts on bad real estate deals. LePage's lawyer, John Alfs of Troy, said he knows nothing about the casket settlement. "People didn't do their homework before they bought it and now they're turning around and saying they paid too much for the cemetery and trying to renegotiate the deal," Alfs said. (The Detroit News, May 31, 2000) COCA-COLA: Fed. Judge Makes Time for Talks over Employees' Racial Suit ---------------------------------------------------------------------- Now that a federal judge has extended the deadline for plaintiffs' attorneys to formally seek class-action status in the racial discrimination lawsuit against Coca-Cola, settlement talks take center stage. With the help of a mediator, attorneys for both sides are attempting to resolve the case before the legal warfare intensifies. Settlement talks began in mid-April, but there still appears to be a significant gap that will need to be closed if an agreement is to be reached. "I don't think they're close at all on the money," Larry Jones, a former Coke manager who has called for a boycott of company products, said as his group of about a dozen people protested outside Coca-Cola headquarters. Jones was referring to a potential monetary settlement that would include not just four plaintiffs in the case but also a prospective class of 2,000 black current and former employees across the United States. Attorneys for both sides are prohibited from talking about the negotiations. In addition to money, however, another key issue concerns new diversity policies and practices that could be established to improve conditions in the future. Coke Chairman Doug Daft frequently has said he wants the company to be a corporate leader in diversity. Daft also has said that he wants a speedy and equitable resolution of the suit. The plaintiffs faced a deadline Tuesday to file a brief seeking class- action status for the case, but U.S. District Judge Richard Story postponed the filing date two weeks. Both sides agreed to the extension. "Because the mediation involves complex issues and is ongoing, the mediator has requested that plaintiffs be granted an extension ... until June 14, 2000, to file their motion," Story said in an order. A class certification brief would be one of the most important documents in the case. It would include a detailed argument of why the lawsuit should be expanded to include about 2,000 current and former employees. "The filing of the brief could be a watershed event," plaintiffs' attorney Cyrus Mehri said. In such a brief, the plaintiffs would use information and computer data obtained from the company and analyzed by a labor economist. The economist would give an expert opinion on whether Coca-Cola has systematically discriminated against African-Americans in pay, promotions and performance evaluations. The brief also would include affidavits from scores of current and former employees detailing their personal experiences at Coke. "The brief is like a fine wine," Mehri said. "It's only going to get better with a little bit more age." The brief could be a powerful legal weapon offsetting some of the recent efforts the company has made to improve its record on diversity. Among those efforts are $ 1 billion, five-year program to increase business opportunities for minorities and women, tying managment compensation to diversity and hiring a new diversity director. The company has strongly denied that it has systematically discriminated against black employees. It would have 75 days to file a response to the plaintiffs' class certification motion if one is filed. Jones predicted the plaintiffs will file the brief in two weeks because negotiators won't make enough progress to warrant another delay. The delay granted Tuesday, Jones said, "gives Coke more time to hoodwink the American people into thinking they want to settle the suit." Coca-Cola spokesman Ben Deutsch said the company is not trying to hoodwink anyone. "We continue to work towards an equitable and timely resolution of the lawsuit," Deutsch said. Settlement talks could continue even if the plaintiffs file a class certification brief in two weeks. But, some legal experts said, the negotiations could become considerably more difficult because one side or the other may dig in its heels. "If the plaintiffs, for example, put some damaging information in their certification brief, it could force the defendant into an entrenched position, " said Stephen Forte, a managing partner of Smith Gambrell & Russell who has extensive class-action experience. Part of the reason the defendant may want to settle the case, Forte said, is to prevent some of the information in the brief from becoming public. On the other hand, Forte added, Coca-Cola also could become more entrenched if the brief turns out to be weaker than it thought it would be. "If the certification motion is wanting, and the defendant doesn't think the plaintiffs can get the class certified, then the defendant could decide it should litigate," Forte said. (The Atlanta Journal and Constitution, May 31, 2000) COCA-COLA: Judge Again Orders for Hiring Data --------------------------------------------- Coca-Cola Co. must turn over key employment and hiring data to plaintiffs in a racial discrimination lawsuit, a federal judge has ordered for the second time. The world's largest soft drink company has not complied with a year-old court order to provide the data to plaintiffs, U.S. Magistrate Judge Clay Scofield found. The plaintiffs allege that Coca-Cola withheld pay raises and promotions of minority employees. The company now has until June 9 to comply with the order and may face penalties for the delay, Scofield ruled. Coca-Cola, which has fought the discovery process throughout the lawsuit, was ordered by Scofield on June 4, 1999, to furnish the plaintiffs with the human resources data by July 1, 1999. A federal judge also rejected the company's bid to halt discovery last year. In a separate ruling by another federal judge, Coca-Cola will get two more weeks to prepare for a motion by its adversaries asking the judge to expand the case to cover all former and current black employees. U.S. District Judge Richard Story granted a court-appointed mediator's request to extend until June 14 the deadline for plaintiffs to file their motion for class certification, plaintiffs' lawyer Jeff Bramlett said. Shares of Atlanta-based Coca-Cola fell 69 cents to close at $ 53.88 on the New York Stock Exchange. (Los Angeles Times, May 31, 2000) CYBER-CARE INC: The Pomerantz Firm Announces Securities Suit in Florida ----------------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP (http://www.pomerantzlaw.com) is filing a class action suit against Cyber-Care Inc (Nasdaq: CYBR) and two of the Company's senior executives. The case is being filed in the United States District Court for the Southern District of Florida on behalf of all those who purchased the common stock or other securities of Cyber-Care during the period between October 12, 1999 and May 12, 2000, inclusive (the "Class Period"). The Complaint charges that Cyber-Care and its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by allegedly issuing a series of false and misleading statements during the Class Period concerning contracts for its highly touted Internet-based product, "Electronic HouseCall System" ("EHS"), without disclosing that EHS had not received FDA approval, in violation of FDA rules. Cyber-Care allegedly manipulated its stock price by misrepresenting the EHS contracts as involving Internet technology, rather than disclosing that the contracts involved non-Internet systems which may not have required FDA approval. This was done to allegedly benefit from the market's strong reaction to all Internet related businesses, and resulted in artificially inflating the market price of the Company's common stock during the Class Period. It is further alleged that Cyber-Care misled the market by not disclosing that a purportedly independent analyst who issued two research reports with "strong buy" recommendations for Cyber-Care actually owned shares of the Company's stock and was employed by Cyber-Care's own marketing firm. As a result of Cyber-Care's materially false and misleading statements, the market price of the Company's common stock was artificially inflated during the Class Period. When the market finally learned of the Company's misrepresentations, the price of Cyber-Care's common stock fell dramatically. Contact: Andrew G. Tolan, Esq. of Pomerantz Haudek Block Grossman & Gross LLP, 888-476-6529 ((888) 4-POMLAW) or agtolan@pomlaw.com. CYBER-CARE, INC: Wolf Haldenstein Files Securities Suit in Florida ------------------------------------------------------------------ Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a securities class action lawsuit in the United States District Court for the Southern District of Florida on behalf of investors who bought Cyber-Care, Inc. (NASDAQ:CYBR) stock between December 10, 1999 and May 19, 2000 (the "Class Period"). The lawsuit charges Cyber-Care and certain officers of the Company, with violations of the securities laws and regulations of the United States. The lawsuit alleges that defendants issued a series of false and misleading statements during the Class Period concerning demand for the Company's products and the level of sales of its products. The complaint alleges that defendants' false and misleading statements artificially inflated the price of the Company's stock during the Class Period. Contact: Wolf Haldenstein Adler Freeman & Herz LLP, New York Michael Miske, George Peters, Gregory Nespole, Esq., Fred Taylor Isquith, Esq. or Shane T. Rowley, Esq. 800/575-0735 (www.whafh.com)(classmember@whafh.com) FIRST SECURITY: Schiffrin & Barroway Files Securities Suit in Utah ------------------------------------------------------------------ The law firm of Schiffrin & Barroway, LLP gives notice that a class action lawsuit was filed in the United States District Court for the District of Utah, Central Division, on behalf of all purchasers of the common stock of First Security Corporation (Nasdaq: FSCO) from October 18, 1999 through March 2, 2000 inclusive (the "Class Period"). The complaint charges First Security and certain of its officers and directors with issuing false and misleading statements concerning the Company's financial condition. Among other things, the Complaint alleges that the Company reported artificially inflated earnings for the fourth quarter of fiscal 1999. When the Company's true fourth quarter earnings were revealed, First Security common stock fell over 38%. Contact: Schiffrin & Barroway, LLP Marc A. Topaz, Esq. Robert B. Weiser, Esq. 888/299-7706 (toll free) or 610/667-7706 e-mail: info@sbclasslaw.com HMO: Lawsuit Says Cigna Shortchanges Doctors -------------------------------------------- A class-action suit filed in Madison County by an Alton physician and one from Texas accuses the CIGNA Corp. of using a computer program to shortchange its doctors nationwide. The case was filed Friday in circuit court in Edwardsville on behalf of all physicians who have contracts with CIGNA under managed health care plans known as preferred provider organizations, or PPO's. It was filed by Judy Cates, a lawyer based in Swansea who specializes in class-action suits. The lead plaintiffs are Dr. Timothy N. Kaiser, an ear, nose and throat specialist in Alton, and Dr. Suzanne LeBel Corrigan of Texas. Defendants are the CIGNA Corp., which operates nationwide, CIGNA HealthCare of St. Louis Inc. and Cigna HealthCare of Texas Inc. The suit says CIGNA illegally reduces payments it has agreed to make to its physicians through computer "downcoding" and "bundling." It says the computer "downcodes" medical services rendered by physicians, substituting a cheaper service instead. It says the computer "bundles" other services, paying for only one service when more were rendered. Wendell Potter, a spokesman at CIGNA's corporate headquarters in Philadelphia, said that the company prohibited any comment on matters in litigation, especially on a suit its officials had not yet seen. The suit says CIGNA uses the same physician agreement form in all 36 states where it offers PPO arrangements. The suit asks that the court certify the case as a class action on behalf of all physicians with PPO agreements with CIGNA because separate suits would not be practical. It requests unspecified money damages plus interest, costs of the suit and "reasonable attorney fees." It also asks that CIGNA be prohibited from " downcoding" and "bundling." No hearing date has been set. (St. Louis Post-Dispatch, May 31, 2000) HMO: N.Y. Hospitals Sue Aetna Alleging Delay in Paying Claims ------------------------------------------------------------- Two dozen New York hospitals have become the latest medical providers to sue Aetna U.S. Healthcare, accusing the nation's largest health insurer of dragging its feet on paying claims. The lawsuit, filed Tuesday in a New York state court, alleges Aetna violated a law requiring payment within 45 days. It also accuses the company of breaking the state's deceptive business practices laws. The suit from the New York area hospitals comes as Aetna is dealing with similar claims in other states, including Georgia and Texas. The suit seeks $45 million in compensatory damages and $50 million in punitive damages. All of the hospitals are located in a 60 mile swath between New York City and Poughkeepsie, N.Y. Aetna said it had not yet received the lawsuit and could not comment on it directly. But the company said it strongly denies allegations that it has been slow to make payments and is trying to work more closely with doctors and hospitals. Aetna recently promised to mend fences with doctors, who have long complained that the company is slow to pay but quick to reject claims. In February, three doctors in Georgia and the state's medical association filed a class-action lawsuit in state court against Aetna for failure to pay physicians in a timely way. The American Medical Association later joined the suit. Georgia requires insurers to pay uncontested claims within 15 days. Last year, the New York State Insurance Department fined Aetna more than $60,000 for repeated violations of the state's prompt payment law. (AP Online, May 31, 2000) MAGNA ENTERTAINMENT: Austrian Subsidiary Sued for Forced Labor in WWII ---------------------------------------------------------------------- One of the Austrian subsidiaries of Magna Entertainment Corp. has been named as a defendant in a class action brought in a United States District Court by Gutwillig et al. The plaintiffs in this class action claim unspecified compensatory and punitive damages, for restitution and disgorgement of profits, all in relation to slave or forced labor performed by the plaintiffs for that subsidiary and some other Austrian and German corporate defendants at their facilities in Europe during World War II. As a result of the transactions described under the heading "Reorganization" above, we acquired the stock of this subsidiary. Under Austrian law, this subsidiary would be jointly and severally liable for the damages awarded in respect of this class action claim. We cannot predict the final outcome of this class action suit, or establish a reasonable estimate of possible damages or a range of possible damages that could be awarded to the plaintiffs if their claims are successful. However, an Austrian subsidiary of Magna has agreed to indemnify that subsidiary for any damages or expenses associated with this claim. PFIZER, INC: Milberg Weiss Announces Lawsuit by Cardura Users ------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on May 30, 2000, against Pfizer, Inc. (NYSE: PFE news) on behalf of users of the drug Cardura for the treatment of hypertension. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at http://www.milberg.com/carduraThe action, numbered 00 CIV. 4042, is pending in the United States District Court, Southern District of New York. The complaint seeks, among other things, emergency notice to all class members to ensure notification to individuals taking Cardura of important new findings resulting from a nationwide study sponsored by the National Heart, Lung and Blood Institute (the "NHLBI") which showed that users of Cardura are twice as likely to experience potentially fatal congestive heart failure and have a higher chance of suffering from certain other serious cardiac events, including strokes, as compared with patients taking the more traditional and less costly diuretic drug, chlorthalidone, to treat hypertension. The complaint alleges that Pfizer has consistently marketed Cardura as a highly effective, "first-line" drug to treat hypertension as compared with more traditional and less costly diuretic drugs and that Pfizer has taken no affirmative steps to communicate the NHLBI's critical findings to class members. The complaint further alleges that given the NHLBI's findings, Cardura should no longer be used as a primary or "first-line" drug to treat hypertension and that notice to patients, as opposed to physicians, is required in order to ensure that persons taking the drug will receive this critical information and be able to make an informed choice regarding their treatment options. Contact: Milberg Weiss Bershad Hynes & Lerach LLP Steven G. Schulman or Salvatore J. Graziano 800/320-5081 RACING CHAMPIONS: Milberg Weiss Announces Securities Suit in Illinois --------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on May 30, 2000, on behalf of purchasers of the common stock of Racing Champions Corporation (NASDAQ: RACN) between February 1, 1999, and June 23, 1999, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/racingchampions/ The action, numbered 00C3267, is pending in the United States District Court for the Northern District of Illinois, Eastern Division, located at the Dirksen Bldg., 219 S. Dearborn Street, Chicago, IL, 60604, against defendants Racing Champions, Robert Dods (Chairman, Chief Executive Officer, and President,) Curtis Stoelting (Chief Financial Officer,) and Victor Shaffer (Director.) The Honorable Suzanne B. Conlon is the Judge presiding over the case. The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between February1, 1999, and June 23, 1999, thereby artificially inflating the price of Racing Champions common stock. For example, as alleged in the complaint, on February 23, 1999, the Company reported seemingly record earnings for its 1998 fiscal year, and represented that the Company would continue to experience growth in 1999. These statements were materially false and misleading when made because defendants did not disclose, and knew or recklessly disregarded, that the Company's sales were then being negatively impacted by the competition from Star Wars related merchandise and as a result, sales of the Company's products were declining significantly. When Racing Champions revealed, on June 23, 1999, that it was expecting a per share loss of $0.30 to $0.35 for its second fiscal quarter of 1999, Racing Champions common stock dropped by 60%. Defendants attributed the loss to poor sales, and the taking of a $6.4 million restructuring charge in connection with a corporate acquisition. Contact: Milberg Weiss Bershad Hynes & Lerach LLP Steven G. Schulman or Samuel H. Rudman Phone number: (800) 320-5081 Email: racingcase@milbergny.com Website: http://www.milberg.com REPUBLIC NY: $123M Suit Re Promissory Notes Stayed Pending Jury Action ---------------------------------------------------------------------- The parties in a $123 million Southern District of New York dispute over promissory notes linked to risky currency derivatives trading have agreed to stay proceedings pending the outcome of a related federal grand jury investigation. Amada v. Republic N.Y. Sec. Corp. P. 3. Japanese Company Files $15M Fraud, RICO Suit Against Republic N.Y. Nichimen Europe PLC has filed a $15 million fraud and RICO suit charging Republic New York Securities Corp. with concealing $500 million in derivatives trading losses sustained by Martin A. Armstrong and his two New Jersey companies, Princeton Economics International Ltd. and Princeton Global Management Ltd. Nichimen Europe v. Republic N.Y. Sec. Corp. P. 4. Korean Insurer Asks S.D.N.Y. to Deny Morgan Guaranty MotionSeoul-based Korea Life Insurance Co. is asking the Southern District of New York to deny Morgan Guaranty Trust Co.'s motion to dismiss a $250 million suit that the insurer filed following a soured swaps transaction. Korea Life Ins. Co. v. Morgan Guar. Trust Co. P. 5. Chase Manhattan Files Affirmative Defenses in $1.5 Billion Swaps CaseChase Manhattan bank lists 25 affirmative defenses in its answer to an amended complaint filed by Sumitomo Corp., which seeks $1.5 billion for copper swaps that allegedly concealed losses by Sumitomo rogue copper derivatives trader, Yasuo Hamanaka. Sumitomo v. Chase Manhattan Bank. P. 5. D. Md. Dismisses Consolidated D&O Suit Against CRIIMI MAEA Maryland federal judge has dismissed a consolidated class action suit against the directors and officers of CRIIMI MAE Inc., a company that securitized millions of dollars' worth of commercial mortgage-backed securities. In re CRIIMI MAE. P. 6. CFTC Files 10 Actions Against Derivatives Web SitesThe CFTC has filed administrative fraud actions against 10 companies and individuals for using false performance claims to sell computerized derivatives trading programs on the Internet. In re Oasis Publ'g Corp. P. 7. Federal Reserve Establishes Group to Study DisclosureA private-sector working group developed by the Federal Reserve Board will evaluate the use of enhanced public disclosure to improve transparency in the banking and securities markets, the Fed announced on April 27. P. 8. CFTC's Rainer Stresses Regulatory Flexibility At Senate HearingNoting the growth of foreign competition in the derivatives markets, Commodity Futures Trading Commission Chairman William J. Rainer testified at a U.S. Senate hearing that regulatory flexibility was need to allow for development of American markets. Maintaining Leadership. P. 8. Immunity for Mutual Fund Boards Declared UnconstitutionalThe Maryland Court of Appeals has declared a law classifying mutual fund directors as "independent" and protecting them from derivative shareholder suits as unconstitutional. The court found that the provision was tacked onto unrelated legislation in 1998 and violated the "one-subject" rule mandated by the state. Migdal v. Maryland P. 9. Chase Manhattan, Bank of America Sued For Alleged Wire Transfer Mix-UpNacional Financiera S.N.C. (NF), a bank organized under the laws of Mexico with a principal place of business in Mexico City, has filed suit in the Southern District of New York against Chase Manhattan Bank and Bank of America (BOA), asserting that it was damaged following an erroneous wire transfer of funds. Nacional Financiera S.N.C. v. Chase Manhattan Bank N.A. (Derivatives Litigation Reporter, May 15, 2000) SEROLOGICALS CORPORATION: Berman DeValerio Files Securities Suit in GA ---------------------------------------------------------------------- Berman, DeValerio & Pease LLP announced that a shareholder class action was filed against Serologicals Corporation (NasdaqNM:SERO) in the United States District Court for the District of Northern District of Georgia. The action seeks damages for violations of the federal securities laws on behalf of all investors who purchased Serologicals common stock between April 27, 1999 and April 10, 2000 (the Class Period"). The lawsuit charges Serologicals and certain of its directors and officers, with violations of the federal securities laws by issuing a series of false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings. On April 10, 2000, Serological shocked the investment community by announcing that it was restating its previously recorded revenues for the first three quarter of 1999, including a reversal of approximately$1.4 million in revenue. As a result of these false and misleading statements, the Company's stock traded at artificially inflated prices during the Class Period. Contact: Berman, DeValerio & Pease LLP Patrick T. Egan (800) 516-9926 bdplaw@bermanesq.com. SEWER RATES: Westside Residents Fight Disparity from Indianapolis ----------------------------------------------------------------- For about 40 years, some Westside and Far-Westside residents, businesses, schools and churches west of Speedway have paid 50 percent more for sanitary sewer service than those inside the town's boundaries. But they discovered the disparity only after the Speedway Town Council voted recently to raise the sewer user fee by 38 percent for everyone. Then they sued. "We were shocked" to learn of the differing charges, said Tammy Rabe, president of the Chapel Hill Association, which represents about 500 of 2,200 households in the lawsuit. Numerous businesses also are plaintiffs. "I asked residents who had been around 30 years. They said they knew their rates were higher than Indianapolis', but they didn't realize they were paying a premium to be connected to Speedway. "After the shock came frustration," Rabe said, because Speedway Town Council members have shown no interest in changing the rate structure. "The Town Council decided rates should be left the way they are. That's the way they voted," Town Council President Edward Frazier said. He said he and other town officials only know "by folklore" how the two-tier rate occurred. According to that lore, the developer of the Farley subdivision sought to connect to Indianapolis sewers in the 1950s. But this was a decade before the Indianapolis sanitary district extended that far. Bette Dodd, the attorney who filed the lawsuit on behalf of the homeowners and businesses, said the higher rate applies in all or part of these subdivisions: Chapel Hill, Chapelwood Creek, Farley, Mount Auburn, Parc Estates, Parc Estates North, Twin Oaks, Westmount single-family areas, Westmount Villa and Westridge. Farley, with 750 households involved, has the most. Chapel Hill has 500. (A later section of Chapel Hill did connect to Indianapolis sewers.) The smallest number is 12 in Mount Auburn, Dodd said. She said the base rate for the 3,181 residential sewer customers inside Speedway is $6.65 per month, and for the 2,238 customers outside, it's $9.98. The 38 percent increase, put on hold during the litigation, would boost the inside rate to $9.20, the outside rate to $13.80, Dodd said. "They're relying on the fact it has been this way since 1966," when the current rate ordinance was adopted, Dodd said. Judge Patrick L. McCarty of Marion Superior Court, Room 3, has ordered Dodd's clients to post a $75,000 bond before a June 8 hearing on the case. Speedway sought $200,000, arguing that was the potential revenue loss to the town during the litigation. Steven Rupenthal, a section leader in the Farley subdivision, said the lawsuit does not challenge the 38 percent rate hike, just the formula, because it widens the disparity in the amount of the sewer fee. "We understand they need an increase, but we want a fair and equitable rate across the board," Rupenthal said. What galls him is that in some areas, "you could literally walk across the street and pay 50 percent less to flush your toilet." (The Indianapolis Star, May 30, 2000) SOTHEBY'S: Taubman Accused of Refusing to Let Go Insider Board Control ---------------------------------------------------------------------- According to the New York Post, Sotheby's biggest stockholder, investor Ron Baron, made his public comments that when French tycoon Bernard Arnault offered $3 billion for Sotheby's (three times its current value), billionaire A. Alfred Taubman "rejected the proposal without presenting it to Sotheby's board." Taubman controls 63 percent of the voting stock and can elect 10 directors, leaving the other four seats to Baron and other shareholders. Baron controls 55.2 percent of the common stock, but doesn't have the voting power of Taubman's class-B stock, the New York Post reports. Taubman, 76, who was forced off the board five months ago when a federal price-fixing probe erupted, has nominated his son - Robert Taubman, 49 - to be his eyes and ears on the board, the report goes on. Baron says he's incensed by the move, according to the Post. Baron said Taubman should be separated completely from the company as it prepares a defense against the federal probe and the horde of class action lawsuits by investors and collectors. "Fortunately, Alfred Taubman is one of the wealthiest Americans ... he may be personally liable to both Sotheby's shareholders and the company for any resulting damages," Baron wrote in his latest Baron Asset Fund investment letter, as reported by the New York Post. We were clearly upset" to see the elder Taubman nominate his son for his board seat, Baron said. "If the father resigned to allow the investigation to proceed without interference from the company's controlling shareholder [Taubman], how could it be OK for his son to take his place?" He said others with "exceptionally close ties" to Taubman remain on the board and that the son's appointment to the board is "inappropriate." "We believe Robert Taubman will soon recognize the enormous conflicts of interest he will face." Baron had been working quietly with advisers from Wasserstein, Parella to settle the issue but apparently hasn't made much headway behind the scenes, says the New York Post. According to the Post, Boies Schiller & Flexner - the law firm representing the Justice Department in its antitrust suit against Microsoft Corp. - was named lead counsel in the class action against Sotheby's and Christie's International PLC over alleged price-fixing. (The New York Post, May 31, 2000) TOBACCO LITIGATION: Analysts Say Bonds Get a Boost from Litigation ------------------------------------------------------------------ Events that caused positive shareholder response to recent litigation in favor of tobacco companies may have had the same effects on bondholders, analysts say. Stock prices have crawled upwards on most tobacco companies this month, with monoliths such as Philip Morris Inc. picking up steam. Municipal bond prices don't mean as much, since the market has been trading too thinly overall to offer great comparisons, but here values have held, a trader at a large firm said. To date, three issuers in New York State have sold bonds totaling $1.1 billion backed by their portions of the national tobacco settlement. Salomon Smith Barney Inc. served as lead underwriter on all three transactions. New York City's Tobacco Settlement Asset Securitization Corp. sold $709 million of tobacco bonds in November, followed by Nassau County's $294 million sale later that month through its Tobacco Settlement Corp., and Westchester County's $103 million sale through its Tobacco Asset Securitization Corp. in December. The Internal Revenue Service is also reviewing the tobacco deals as part of its ongoing tax-exempt bond compliance program, which might affect bond prices in the opposite direction, analysts said. Nonetheless, a trader said that tobacco bonds have remained at more consistent levels recently than those from many other sectors of the high-yield market. Almost all that has been bought or sold on these bonds has done so at either the original spread or better, the trader said. Although the tobacco companies' current equity values still don't compare to what they were a year ago, analysts said the upward trend this spring probably results from two events that took place this May. The Florida Legislature passed a law preventing cigarette makers from having to post financially crippling bonds when appealing jury verdicts, and Maryland decertified a class action suit in Richardson v. Brown & Williamson Tobacco in which smokers claimed to have been injured by tobacco products. "These events indicate a more favorable litigation environment for tobacco companies, and that's favorable for both equity and bond investors," said Cadmus Hicks, a vice president with Nuveen Investments. As the courts deal with the obligations of tobacco companies toward injured smokers, the holders of bonds backed by the national tobacco settlement are watching the companies' fiscal health. If tobacco companies go bankrupt they could avoid making payments on the bonds backed by the settlement funds. "There's less likelihood that there'll be a catastrophic judgment in the Florida Engle case," said James Dearborn, an analyst at Liberty Funds Group. That could be positive not only for stockholders but also for bondholders, he added. The new attention that equity investors have been paying to old economy companies with "real earnings and yield" after the Nasdaq started slumping may also have had an effect on tobacco companies' stock prices, Dearborn said. Hicks said that this trend wouldn't have been able to help cigarette makers in the absence of this month's positive litigation events. Dearborn added that even with the current change in prices, it is not as if cigarette companies are "going gangbusters." The continued decrease in consumer consumption of tobacco products is "a positive for public health and a negative for tobacco bonds," Dearborn said. Nonetheless, the trader said that he's always been able to find buyers for sellers in the tobacco bond market. They remain less volatile than many other areas of the municipal market. "Even with good news there's been no significant tightening," the trader said. (The Bond Buyer, May 31, 2000) TOBACCO LITIGATION: Expert Challenges Industry Anti-Smoking Effect ------------------------------------------------------------------ A healthy, pink lung and a blackened lung removed from a smoker with emphysema; a woman taking a deep drag of a cigarette through the tracheotomy hole in her neck. Those images from a government-sponsored anti-smoking campaign were played on Tuesday to the jurors hearing the landmark statewide class action case against the tobacco industry. The commercials, many produced by the state of Massachusetts, exemplify an effective campaign to prevent youth smoking, said Dr. Michael Siegel, an epidemiologist from Boston University. But commercials urging teens to "Think; don't smoke," produced as part of tobacco giant Philip Morris' $ 74 million anti-youth smoking campaign are less effective, if not actually a recruitment tool to get new smokers, Siegel testified on Tuesday. "Sure, if you want to be thought of as a thinker, or a nerd like me, don't smoke," Siegel said interpreting the commercial for the jurors. What it really says to teens, said Siegel, is, "if you want to avoid that kind of ridicule, man, take up a cigarette and be cool." "I don't think the company is spending a penny in a true effort to try to get youth to stop smoking. It's either ineffective or it's actually going to programs or to advertising that's actually going to make smoking more appealing to youth." And that, said Stanley Rosenblatt, the lawyer representing 300,000 to 500,000 sick or dead Florida smokers in this case, is contrary to tobacco lawyers' repeated claims that they are dedicated to preventing young people from smoking. In this third phase of the trial, the six jurors must determine how much tobacco should pay as punishment for manufacturing a product that they have already determined causes lung cancer, emphysema and more than 20 other diseases. Although Rosenblatt has not told the jury he is looking for a specific amount from the industry, the original lawsuit filed in 1994 asks for $ 100 billion. Tobacco lawyers have said they feared punitive verdicts as high as $ 300 billion, which they said could cripple the industry. Tobacco lawyers have argued that under legal settlements they have reached with all 50 states, they will pay the states more than $ 254 billion over the next 25 years. The companies also agreed to pull all cigarette advertising off billboards and at sporting venues because they reach too many young eyes. But studies show the money spent on that type of cigarette advertising and promotions was simply shifted to print ads and other promotional campaigns, Siegel said. In 1997, the most recent year for which statistics are available, the Federal Trade Commission estimates the tobacco industry spent $ 6 billion on advertising and promotions, he said. The rise in adolescent smoking rates coincides with the increase in money spent on advertising cigarettes, he said. In one of the commercials Siegel called effective, the brother of a former model who portrayed the Marlboro man in advertisements talked about how he used to love the commercials for those cigarettes. The horses and the cowboy symbolized independence, he said. Then he looked into the camera and recalled his brother's death from lung disease. "Lying there with all those tubes in you, how independent can you be?" The somber looks on the jurors faces lifted, at least briefly, when they saw a more light-hearted commercial in which two teenage boys sat on steps talking about the keen intelligence of dogs. One of the teens is smoking. Between drags on the cigarette, a white trail of smoke rises up from the butt and into the face of the dog sitting next to him. The jurors laughed when the dog lifted its leg and urinated on the lit cigarette. Even Miami-Dade Circuit Judge Robert Kaye joined in. The commercials designed to appeal to people's emotions, according to one tobacco attorney, also seemed to ignite emotions -- more specifically the ire -- of the lawyers on both sides of this two-year court battle between sick Florida smokers and the country's top cigarette companies. While cross-examining Siegel on Tuesday, Brown & Williamson lawyer Gordon Smith appeared to become frustrated when the doctor would not agree that any measures undertaken by the cigarette maker were legitimate and effective. Several times Smith interrupted Siegel as he was speaking, prompting Rosenblatt to stand and object. As the judge admonished both lawyers, Smith stood directly in front of Rosenblatt's table, staring at him. When the jury was ordered out of the courtroom and the judge, angered, took a break and stepped out of the courtroom, Rosenblatt exploded. "He's a bully and he's an intimidator," Rosenblatt yelled, referring to Smith. Lead tobacco attorney Dan Webb, who is representing Philip Morris, urged Rosenblatt to calm down. "You can be calm because you're billing by the hour," Rosenblatt said. Webb responded: "You should be calm, you got $ 49 million," referring to the fee and costs Rosenblatt collected after successfully representing flight attendants who sued the industry for being sickened by second-hand smoke. More than a dozen lawyers affiliated with tobacco and sitting in the courtroom laughed at Webb's retort. (Sun-Sentinel (Fort Lauderdale, FL), May 31, 2000) TOBACCO LITIGATION: Jury Can Hear about Industry's Borrowing Power ------------------------------------------------------------------ In a setback for the tobacco industry, a judge ruled Wednesday that the jury considering punitive damages for sick Florida smokers can hear evidence about the industry's borrowing power. "Among the assets is its ability to borrow money," Circuit Judge Robert Kaye said. "I don't know why you can't talk about that." The nation's five biggest cigarette makers didn't want the jury to consider anything beyond their present value because of the potential for inflating a multibillion-dollar damage award. The jury already has ruled against the industry and awarded $12.7 million in compensatory damages to three smokers representing the state's 300,000 to 500,000 smokers. The two sides are far apart on the industry's ability to pay. The industry is asking for no award at all, but plaintiffs contend cigarette makers can raise money to pay an award by raising prices. With the jury out of the courtroom, a Philip Morris attorney said industry assets are less than $20 billion, the first time a number has been offered by the industry. David Adelman, a tobacco analyst with Morgan Stanley Dean Witter, said he doesn't think the stock market is "going to be very excited or agitated" about Kaye's decision or any others in the case because he is convinced the case will be overturned on appeal. It is the nation's first class-action by smokers to go to trial. The defendants are Philip Morris, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Liggett and the industry's defunct Council for Tobacco Research and Tobacco Institute. On the Net: Tobacco links: http://www.umich.edu/(tilde)umtrn/websites.html(The Associated Press, May 31, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *