/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/001218.MBX C L A S S A C T I O N R E P O R T E R Monday, December 18, 2000, Vol. 2, No. 244 Headlines 3COM CORP: Agrees to $259M Second-Largest Securities Fraud Suit Pact AMERICAN FREIGHTWAYS: Shareholder Quits Challenging Sale to FedEx AOL: FTC Approves $111 Billion Time Warner Merger AT&T: Wechsler Harwood Highlights Shorter Period in Securities Suit AUTO FINANCE: Black Customers Accuse Chrysler Financial of Race Bias BENGALS, HAMILTON: Court Orders to Stop Seat Swap Until Suit Is Settled COMCAST CORP: DOJ Probes on Antitrust in Pending Home Team Acquisition EQUITABLE LIFE, FSA: Policyholders Target FSA for Damages of Crisis FIRST SECURITY: Judge refuses to dismiss suit over Wells Fargo merger GENERAL ELECTRIC: DOJ Will Scrutinize Planned $45 Bil Honeywell Purchase GEORGIA POWER: Announces Steps to Foster Diversity in Face of Bias Suit GOODYEAR TIRE: Another Lawsuit Filed Alleging Faulty Tires HOLOCAUST VICTIMS: Swiss Fund Approves Last Payments; Overall at $172M HOLOCAUST VICTIMS: US Court Examines Suit Against The Polish Government INTERMEDIA COMMUNICATIONS: Jeffrey S. Abraham Files Securities Suit MAXIM PHARMACEUTICALS: Milberg Weiss Files Securities Suit in California MICROSTRATEGY INC: Saylor, Top Executives Settle SEC Fraud Charges PASMINCO: Victorian Supreme court dismisses Cockle Creek Smelter Suit SOTHEBY'S HOLDINGS: Berger & Montague Announces Proposed $70M Settlement SPRINT CORP: Target of Lawsuit over Proposed Worldcom Merger U-M: Legal Process for Rejected Applicants Comes to a Standstill VERIZON: N.Y. Ct Dismisses Customer's Antitrust Suit Absent Direct Link WORLDCOM INC: Delaware Court OKs Intermedia Deal But Warns of Penalties WORLD FUEL: Announces Dismissal of Shareholders’ Suit in Florida ********* 3COM CORP: Agrees to $259M Second-Largest Securities Fraud Suit Pact -------------------------------------------------------------------- In the second-largest securities class-action settlement in history, computer communications company 3Com Corp. has agreed to pay $259 million in cash to shareholders who claimed that its officers and directors used deceptive accounting to hide a $160 million loss at 3Com's newly acquired modem maker, U.S. Robotics Corp. In re 3Com Corp. et al., No. 97-21083, settlement announced (N.D. Cal., Nov. 3, 2000). Although a stipulation of settlement has not yet been presented to the federal judge in San Francisco who is overseeing the consolidated action, the parties formally announced the agreement as the suit was about to enter an intensive period of discovery. The case had survived a motion to dismiss under the heightened pleading standards of the Private Securities Litigation Reform Act of 1995. The plaintiffs, led by several state and municipal pension funds, had the advantage of using ammunition gained from discovery in a related securities suit in California state court to amend their federal complaint after many of the individual defendants were initially dismissed. In 1997, after an investigation by the Securities and Exchange Commission, 3Com restated its financial statements to include $160 million in losses at U.S. Robotics that had been shoehorned into the two months immediately preceding their merger. The company's stock price plunged. Numerous shareholders charged in their suit that 3Com's directors and officers hid the U.S. Robotics loss and the dramatic drop in new orders for its own modems, and also recognized revenue improperly. They claimed that just before the bad news came out, certain executives unloaded large amounts of their stock at inflated prices for a total profit of more than $200 million. Even though discovery in the federal suit was stayed until all motions for dismissal had been resolved, as provided under the PSLRA, the plaintiffs were able to take discovery in the state action which was used to support the allegations of the federal suit. As a result, an amended complaint against all the defendants in federal court later survived a motion to dismiss. The above state court suit was filed before the enactment of the Securities Litigation Uniform Standards Act in 1998. This statute required all nationwide class actions alleging securities fraud to be brought in federal court, where the heightened pleading standards and discovery stays of the PSLRA would govern. Plaintiffs' attorney Robert Kaplan, a partner of co-lead firm Kaplan, Kilsheimer & Fox in New York, noted, "In repleading in federal court, plaintiffs were able to use the discovery obtained in the state court action to include more specific allegations in the final complaint in federal court." Once the federal complaint survived the threshold motion to dismiss as to all the defendants, the door was opened to discovery of nearly 500,000 pages of documents -- and to settlement talks and mediation efforts last summer. "The action had risks for both sides; the 'hidden period' issue with the $160 million 'hidden loss,' the alleged improper revenue recognition and the huge insider selling were issues that plaintiffs believed would have resonated with a court and jury," Kaplan said in explaining what kept the two sides at the bargaining table. "Defendants faced a huge risk of adverse rulings and a verdict, although defendants made arguments that SEC rules permitted them to combine 3Com's and U.S. Robotics' financials in a fashion which excluded USR's April and May 1997 results." The defendants might also have convinced a jury that it was not the alleged misrepresentations that made 3Com's stock price go up and/or that the drop was not because of the litigation, he added. "This settlement represents a substantial recovery for persons who bought 3Com stock during the class period," Kaplan said. The settlement was the largest in the history of California and trailed only the mammoth Cendant settlement earlier this year. In re Cendant Corp. Litig., No. 98-1664 (D.N.J., Aug. 16, 2000). Beside the Kaplan firm, plaintiffs are represented by Alan Schulman, William Lerach and Spencer Burkholtz pf Milberg Weiss Bershad Hynes & Lerach in San Diego; Reed Kathrein of that firm's San Francisco office; Daniel Berger, Douglas McKeige and Steven Singer of Bernstein Litowitz Berger & Grossman; and Edward Gergosian and Matthew Montgomery of San Diego. (Corporate Risk Spectrum, November 2000) AMERICAN FREIGHTWAYS: Shareholder Quits Challenging Sale to FedEx ----------------------------------------------------------------- A class-action lawsuit challenging the proposed sale of American Freightways to FedEx Corp. was dismissed at the plaintiff's request before being served against American Freightways and its board. Jonathon Lovejoy sued as a shareholder of American Freightways, alleging that board members breached their responsibility to investors by failing to disclose important material about the deal. The deal was announced Nov. 13. Lovejoy also claimed in his Nov. 15 lawsuit that American Freghtways had stopped or deterred higher offers from others who might be interested in acquiring the Harrison-based company. The suit asked the court to decide if defendants used the sale to benefit themselves at the expense of shareholders or discouraged other offers for the company. But Lovejoy's lawyers went back to court last week, and Boone County Chancellor Gary Isbell granted their request that the lawsuit be dismissed. Under the terms of the announced deal, FedEx will pay $950 million in cash and stock for American Freightways and assume about $250 million in debt. (he Associated Press State & Local Wire, December 15, 2000) AOL: FTC Approves $111 Billion Time Warner Merger ------------------------------------------------- Federal antitrust regulators approved the $111 billion merger of America Online and Time Warner, the largest media deal in U.S. history. It would bring CNN, HBO, Time Magazine, and Warner Bros. together with the online service used by 26 million consumers. The Federal Trade Commission voted 5-0 to approve the deal, but also required concessions to prevent the merger from thwarting competitors. Approval from the Federal Communications Commission is expected. (Washington (AP)) AT&T: Wechsler Harwood Highlights Shorter Period in Securities Suit ------------------------------------------------------------------- The following is an announcement by the law firm of Wechsler Harwood Halebian & Feffer LLP: The law firm of Wechsler Harwood Halebian & Feffer LLP has commenced a class action lawsuit on behalf of all purchasers of AT&T Corporation (NYSE: T) common stock or call options, or sellers of put options during the period April 24, 2000 through May 1, 2000 (the "Class Period"). On April 26, 2000, AT&T completed one of the largest initial public offerings in United States history, raising $ 10.6 billion from selling 360 million tracking shares for AT&T Wireless. On April 24, 2000, several days before the IPO, AT&T pre-released the first quarter results for its wireless division showing strong growth in its wireless operations. On May 2, 2000, several days after the IPO and with the $10.6 billion safely in its coffers, AT&T released the rest of its first quarter results. These results were substantially lower than expected. AT&T's common stock dropped substantially in value, and has continued to decline. Certain other law firms have filed suits against AT&T alleging claims with a class period commencing on or about October 25,1999, and running through May 1, 2000. It is believed that the allegations made in these suits for the period prior to April 24, 2000 are unrelated to the allegations of this suit. It is also believed that the attempt to include claims from periods prior to April 24, 2000 is not in the best interests of those who bought or sold in the April 24, 2000-May 1, 2000 period and will likely reduce the recovery of those purchasers in the shorter class period. Plaintiff intends to move the Court to designate the class period April 24, 2000-May 1, 2000 as a separate class or subclass, with counsel different from that representing the pre-April 24, 2000 class members. This is appropriate since it is believed that this suit sets forth the far stronger claims. If you wish to discuss this action, or have any questions concerning this notice or your rights, please contact: Wechsler Harwood Halebian & Feffer LLP, New York 488 Madison Avenue New York, New York 10022 Toll free 877-935-7400 or by contacting: Ramon Pinon IV, Shareholder Relations: rpinoniv@whhf.com John Halebian, Esq.: jhalebian@whhf.com AUTO FINANCE: Black Customers Accuse Chrysler Financial of Race Bias -------------------------------------------------------------------- Chrysler Financial accused of race bias Newark, N.J. --- Chrysler Financial has been sued by three black customers who accuse the DaimlerChrysler AG financing unit of discriminating against them in issuing car loans. The lawsuit, which seeks class-action status, alleges that Chrysler Financial provided objective credit analysis of potential borrowers, but allowed its dealers to ''mark up'' loans in a subjective way that hurt blacks. By allowing subjective mark-ups, ''the potential for race bias becomes inherent in the transaction'' and black customers pay disparately more than similarly situated whites, said the lawsuit, filed in U.S. District Court in Newark. (The Atlanta Journal and Constitution, December 15, 2000) BENGALS, HAMILTON: Court Orders to Stop Seat Swap Until Suit Is Settled ----------------------------------------------------------------------- An appellate court stopped the Cincinnati Bengals from beginning a voluntary ticket relocation program for season-ticket holders. The Ohio First District Court of Appeals granted an injunction Thursday that prohibits the team from allowing seat license holders to change their seats at Paul Brown Stadium after this season. The court ordered the Bengals to suspend the program until a lawsuit against the team and Hamilton County can be settled. The class action lawsuit filed in September in Hamilton County Common Pleas Court alleges deception and breach of contract. It asks the court to award unspecified damages and to order either refunds to season-ticket holders or reassignment of seat locations. The lawsuit alleges that the team and the county failed to give long-time Bengals season-ticket holders promised priority in obtaining the best seats. It also alleges that the Bengals and the county oversold choice seats, charged customers full price for inferior seats and refused to either make amends or refund the money. The ticket holders are seeking damages of $300 to $500 per seat license - a total of several millions of dollars. The Bengals sent season-ticket holders a letter last month offering to relocate seating assignments after the season for those who wanted to change. Those interested were asked to fill out a form specifying areas in the stadium where they would like to relocate. The Bengals said in a statement released Thursday night that the team respects the court order and will not reassign seats while it remains in effect. About 60,000 personal seat licenses were sold for the stadium, which opened this season. (The Associated Press State & Local Wire, December 15, 2000) COMCAST CORP: DOJ Probes on Antitrust in Pending Home Team Acquisition ---------------------------------------------------------------------- MEDIA: Comcast subject of antitrust probe New York --- Comcast Corp. the third-largest U.S. cable television provider, is the subject of an antitrust investigation by the Justice Department, which is looking into a proposed acquisition, according to court records filed by rival Cablevision Systems Corp. Cablevision, the New York area's top cable TV provider, said in court papers that the department's antitrust division has requested any documents it has that could shed light on Comcast's pending acquisition of the Home Team Sports regional programming service from Viacom Inc. HTS serves the Baltimore-Washington area. (The Atlanta Journal and Constitution, December 15, 2000) EQUITABLE LIFE, FSA: Policyholders Target FSA for Damages of Crisis ------------------------------------------------------------------- According to The Independent (London), Sir Howard Davies, chairman of the Financial Services Authority, has been quick to distance the regulator from responsibility for the crisis that has engulfed Equitable Life. Although the FSA cannot legally be held liable for negligence, the best chance policyholders have of getting redress is to find enough evidence that regulators failed in their duty to shame the Government into paying compensation. That was what happened in the Barlow Clowes affair, which ended in 1989 with the Department of Trade and Industry forking out pounds 153m in compensation after an inquiry found the DTI failed to "demonstrate ... the characteristics of a competent regulatory authority". The Independent reports that equitable policyholders include barristers, high court judges and senior executives with a clutch of FTSE 100 companies, who are now asking why regulators did not step in earlier to deal with a problem that everyone knew about before it spiralled out of control. They are angry at having to pick up the tab for a black hole, nearly five times the size of the one that brought down Barings, the investment bank, in 1995, a hole that Equitable Life's board, with the full support of the FSA, claimed repeatedly did not exist. For years, rivals pressed regulators to do something about the fact that by industry standards, Equitable was hugely underprovisioned. They claimed that had it accounted for its liabilities to pensioners with guaranteed annuity policies in the same way as other life offices, it would have been technically insolvent. But the FSA and the DTI apparently believed that Equitable was different from the rest of the industry and could operate under different rules. Other life companies held back some of the investment profits earned during the bull market to create billions of pounds of reserves. But Equitable boasted that every penny earned went to policyholders in bonuses. The result: while other life companies now have inherited estates to cushion other policyholders from the guaranteed annuity hit, following a landmark House of Lord's decision in July, Equitable was forced to put itself up for sale. After the last bidder, the Prudential, pulled out of talks, Alan Nash, the managing director, quit and the firm closed to new business. It is an astonishing fall from grace for a firm that, until earlier this year, could do no wrong. The guaranteed annuity options gave pensioners the right to insist on a minimum return on their pension pot, irrespective of market annuity rates. In the 1970s and 1980s when these were widely sold, inflation and long-term interest rates were so high, that no-one could imagine that these guarantees would ever be needed. In fact, the industry was writing unhedged interest rate options on a scale would have bankrupted a small investment bank. Equitable's guaranteed annuity policies went further than most and allowed policyholders to continue to top up the guaranteed element of the policies. That meant that Equitable's options were not just unhedged; they are also unlimited. No-one can tell how much more money holders will put into their policies. As a result, the black hole could be even bigger than the pounds 1.5bn Equitable has provisioned. The inability to quantify the problem convinced the Pru to walk away, even though at least one of the senior directors was himself an Equitable policyholder. A party to those negotiations summed it up: "It is toxic waste." In the 1990s, when inflation came down with a bump, these guarantees became more attractive and honouring them more expensive. The prudent thing would have been to start to set aside precautionary reserves. But that would have restricted the firm's ability to write new business. It would also have had to adopt a drastically more conservative investment policy that would have hit investment performance. Instead, Alan Nash came up with a cunning plan. In 1994, Equitable cut the terminal bonuses to pensioners who insisted on exercising their guaranteed annuity option, thereby leaving them no better off than policyholders without these options. The effect was to make the guarantees worthless and few were subsequently taken up. In 1998, the Government Actuary decided action was needed to defuse this actuarial timebomb. He insisted that life offices make provision on the assumption that 80 per cent of holders of these options would now exercise them. Virtually every life office complied. But Equitable argued that since only 2 per cent of holders had taken up their rights, it did not need to reserve. When that failed to convince, Equitable Life tried another tack. They took a pounds 1.5bn provision. But it then entered into a reinsurance deal with Employers Re, which allowed it to write back pounds 700m to boost reserves. The reinsurance allowed it to assume that only 25 per cent of holders would insist on taking the guarantee. Some of its future profits were also added in. Hey presto: with some accounting magic, the hole had shrunk from pounds 1.5bn to pounds 250m. Meanwhile, in an attempt to settle the issue once and for all, Mr Nash sponsored a class action on behalf of Stuart Bayliss, a guaranteed annuity holder. The FSA knew that the reinsurance would not protect the firm against a court ruling that it should retrospectively compensate policyholders who had lost out under its policy. But legal advice was that this was unlikely. Unfortunately, that advice was wrong. One cannot avoid feeling some sympathy for Mr Nash. By the time it was obvious Equitable had a problem, he had little choice but to try and finesse his way out of the problem. But the DTI could have insisted much earlier that Equitable adopt a more conservative policy on reserves. Even in 1998, when the Government Actuary sounded the alarm, the regulator could have insisted that Mr Nash agree to talk to the Pru and Axa who at the time were willing to pay pounds 2.5bn to buy the business as a going concern. (The Independent (London), December 15, 2000) FIRST SECURITY: Judge refuses to dismiss suit over Wells Fargo merger --------------------------------------------------------------------- Dateline: Salt Lake City A judge has refused to dismiss a shareholder lawsuit that alleges First Security Corp. board members did not act in the best interest of stockholders when they agreed to the company being purchased by Wells Fargo & Co. "There are many questions to be pursued and answered before the court can dismiss this case," 3rd District Judge Homer Wilkinson said Thursday. Leland Stenovich of Elko, Nev., filed the proposed class-action suit before Wells Fargo completed its acquisition of First Security on Oct. 26. Former First Security board chairman Spencer Eccles and other directors failed to get the best deal they could for shareholders, the suit contends. First Security attorneys argued that Eccles and other board members did not have a legal obligation to get the highest price for First Security. Eccles agreed to sell First Security to Wells Fargo in April, just days after shareholders of Zions Bancorporation rejected their company's proposed acquisition of his company. Zions shareholders voted down the deal after First Security announced it would have a disappointing first quarter and its stock price plummeted by a third. The First Security board quickly approved the sale to Wells Fargo "not because it was in the best interest of First Security shareholders but because Eccles was personally angry and humiliated and wanted to punish Zions and its management because Zions shareholders had voted down a proposed merger of Zions and First Security," the lawsuit alleges. Eccles will serve as a Wells Fargo board member and as chairman of banking activities for Wells Fargo's Intermountain Region until he retires in 2004 at age 70. Until then, he will earn nearly $1 million a year in salary and bonuses. After he retires, he will be paid $1 million a year in addition to a one-time $1.5 million bonus and other benefits. (The Associated Press State & Local Wire, December 15, 2000) GENERAL ELECTRIC: DOJ Will Scrutinize Planned $45 Bil Honeywell Purchase ------------------------------------------------------------------------ GE-Honeywell deal faces antitrust scrutiny Fairfield, Conn. --- The Justice Department will scrutinize the planned $ 45 billion purchase of Honeywell International Inc. by General Electric Co. The Wall Street Journal reported Thursday that antitrust officials will likely file a ''second request'' for information, a signal that the deal could face a tough review. But the newspaper quoted sources close to the review as saying an initial evaluation by a Defense Department task force did not identify any major competitive issues. The Justice Department is expected to focus on a handful of narrow markets for parts such as auxiliary power units and jet-engine controls, the newspaper reported. Investigators also want assurances that the companies won't ''bundle'' their products --- requiring GE jet engine customers to buy Honeywell avionics, for example. (The Atlanta Journal and Constitution, December 15, 2000) GEORGIA POWER: Announces Steps to Foster Diversity in Face of Bias Suit ----------------------------------------------------------------------- Prompted by a racial discrimination lawsuit, Georgia Power Co. announced last Thursday December 14 a series of steps to foster diversity in its work force, including a wide-reaching pay review, better access to job postings and diversity training for all employees. The steps were outlined by David Ratcliffe, president of the utility, in an in-house televised address to employees. Ratcliffe said he believes the steps "will improve the quality of our work environment for all employees." He did not mention the July lawsuit filed in federal court by seven African- American employees. Ratcliffe said the steps are being taken because "it's the right thing to do.'' Ratcliffe also said that starting next year, the company's job postings will be available 24 hours a day, seven days a week. These listings will be clearer and more specific and will allow employees to provide more information about their qualifications. All employees, he said, will have computer access to these job notices on the Internet. The president described a confidential pay review of 4,998 employees not covered by collective bargaining agreements. "Salary adjustments will be made as necessary," he said. Other recommendations include diversity training for all 8,795 employees, refresher training for supervisors in performance management and leadership development programs. Ratcliffe said the internal review found no deficiencies in the company's so-called Southern Style code of conduct that covers leadership, teamwork and ethical behavior. But he said there will be better accountability to make sure the code is followed. The steps were part of 33 initiatives posed by a Diversity Action Council, appointed by company officials in July just as the utility and its parent, Southern Co., were sued for an alleged "pattern of discriminating" against African-American employees. The suit also charged company officials with showing "reckless indifference" to racial hostility in the workplace. In addition, the lawsuit seeks class-action status to represent 2,100 African-American workers. Georgia Power had denied any illegal discrimination. Steven Rosenwasser, an attorney for the seven employees who sued the company, said the steps fall short. "We are pleased that Southern Co. is admitting problems exist in its employment practices and is taking steps to remedy these problems," he said. " However, the steps announced on December 15 are inadequate because they lack external oversight and fail to provide African-Americans with compensation for years of discrimination." In a $ 192.5 million settlement of a similar lawsuit last month, Coca-Cola Co. agreed to a wholesale review of its employment practices to be overseen by an outside group with enforcement powers. But Laura Gillig of Georgia Power said the "differences are vast" between the two cases. "These are not things that were forced upon us by a court," she said. "This is something we want to do for ourselves." (The Atlanta Journal and Constitution, December 15, 2000) GOODYEAR TIRE: Another Lawsuit Filed Alleging Faulty Tires ---------------------------------------------------------- The CAR reported in November a lawsuit filed against Goodyear Tire over defective tires. According to the Associated Press, December 15, 2000, a class-action lawsuit filed in federal court earlier this month alleging that the Goodyear Tire & Rubber Co. knowingly sold defective tires that resulted in 15 deaths. Milwaukee attorney John Cabaniss filed the lawsuit on behalf of Ronald Reusch of New Berlin and all other owners of the allegedly faulty light truck tires. The lawsuit requires certification as a class action before it can move forward. The lawsuit is seeking monetary damages and a court-supervised recall and repair or replacement. The lawsuit, filed in Wisconsin's Eastern District, claims the company knew as early as 1995 of "numerous complaints of tread separation failures causing serious accidents." While the company changed its manufacturing method, millions of tires made the old way remained on the road, the lawsuit said. Goodyear officials deny its tires were defective. John Polhemus, Goodyear North American Tire's president, said his company is being "unjustly attacked by lawyers who expect to receive 30 percent of every dollar given to plaintiffs in these cases." The alleged problems with Goodyear's tires are not directly related to the Ford Motor Co.'s highly publicized recall of Firestone tires earlier this year. The National Highway Traffic Safety Administration has received 37 complaints about tread separations on Goodyear's Load Range E tires. Those include 31 collisions that ended in 15 deaths and 129 injuries. The NHTSA opened a preliminary investigation into the Goodyear tires last month. Load Range E tires are large tires made primarily for commercial trucks, vans and trailers. The lawsuit also names as a defendant Kelly-Springfield Tire Co., a Goodyear subsidiary. The lawsuit claims the faulty tires include Goodyear Wrangler AT, Goodyear Wrangler HT, Goodyear Wrangler RT/S, Goodyear All Season Workhorse, Kelly-Springfield Power King, Kelly-Springfield Trailbuster, Goodyear Marathon and other Goodyear/Kelly-Springfield Load Range E, Load Range D, light truck and recreational tires. (The Associated Press State & Local Wire, December 15, 2000) HOLOCAUST VICTIMS: Swiss Fund Approves Last Payments; Overall at $172M ---------------------------------------------------------------------- The Swiss Holocaust memorial fund, set up to aid needy victims of the Nazis, has approved the last applications for payments. The final awards will boost its overall payout to 295m Swiss francs (172m dollars). The 3.39m Swiss francs (1.97m dollars) award to 4,671 Holocaust survivors brings to and end the processing of claims to the fund. In a statement, the fund's executive board said the money contributed by Swiss companies, commercial banks and the central bank had been awarded so far to some 307,000 people. The latest allocations will bring the total, by next year, to 316,000 "persons who suffered the unimaginable during the Holocaust and are needy today". The memorial fund was launched in 1997, as Switzerland faced mounting criticism that it had profited from the Second World War. The Swiss National Bank, which has admitted buying tonnes of gold from Nazi Germany, also contributed to the fund, as did private businesses. The fund is separate from the 1.25bn dollars that Switzerland's largest banks, UBS and Credit Suisse, paid to settle United States class-action lawsuits that alleged that they had profited from the wealth of Holocaust victims. (BC Worldwide Monitoring, cember 15, 2000) HOLOCAUST VICTIMS: US Court Examines Suit Against The Polish Government ----------------------------------------------------------------------- A plaintiff in a class action lawsuit against the Polish government seeking to win back property seized by the Nazis during World War II and being held by Warsaw said last Friday December 15 he was confident the trial would go forward. "We're confident that a trial will go forward," said Theo Garb, the lawsuit's original plaintiff. "We felt our arguments were good, and we're hoping that it will work, that it will go to trial." A Brooklyn federal court judge is weighing the case, but is not expected to make a ruling on the motion for seven to eight weeks, court sources said. The suit was filed in June 1999 by Polish Jews who returned to their homeland after World War II only to face a fresh round of violence under the then-communist regime in that country, which froze an estimated 100,000 seized parcels of land. Only ten percent of Poland's 3.3 million Jews survived the war. Their assets were seized when the Nazis invaded. Since Poland's communist government fell from power in 1989, the current government has begun selling off the properties to ease difficult economic conditions there. "We feel it's outright thievery what Poland is doing now," Garb said. "They want people to invest there, but if they're not doing that are moral then what should people think?" "Look at what's going on with Germany, with France, with Switzwerland and Austria. They are all paying big money to the victims (of the Holocaust). Whay should Poland get away with it?" For more than two hours, lawyers for the survivors and the Polish government argued heatedly before US District Judge Edward Korman over whether a US court has the jurisdiction to sit in judgment of a sovereign nation. Polish government lawyer Owen Pell argued that Korman's court did not have the jurisdiction to rule on an internal matter in a sovereign nation. Plaintiff attorney Stephen Winston countered the Polish government "is not entitled to sovereign immunity because it engaged in gross violations of human rights and organized the expulsion of Jews" in the 1940s. Dozens of Polish Jews gathered on the steps of Brooklyn Borough Hall to call for the Polish government to settle the case and begin negotiations. New York City comptroller Alan Hevesi and state comptroller Carl McCall -- who played vital roles in coaxing Swiss banks into a settlement with Holocaust survivors who hid assets from the Nazis in the Swiss banks and never saw them again -- echoed the calls for a settlement. "We're calling for the Polish government to negotiate this out, as other governments have done," said Hevesi. "Each of these (European) governments, including the Dutch, the Austrians and the French, has created an historical commission to confront the history many of them have ignored." A Long Island resident, Garb, 69, returned to Poland a few years ago to reclaim a now-lucrative property owned by his family -- killed in a Warsaw ghetto -- which is now under the control of the government. "I have documentation right here that my family owned this building before it was taken by the Nazis," Garb said, pulling out pictures of his family and pictures of the building in question. "This is all that's left of my family," he said. Survivors, most of them elderly, fear they will die before the Polish government's program to trace Holocaust-era assets returns the property to them. (Agence France Presse, December 15, 2000) INTERMEDIA COMMUNICATIONS: Jeffrey S. Abraham Files Securities Suit ------------------------------------------------------------------- The Law Offices of Jeffrey S. Abraham has filed a lawsuit in the United States District Court for the Southern District of Mississippi, on behalf of a class (the "Class") consisting of all purchasers of Intermedia Communications, Inc. (NASDAQ: ICIX-news) common stock during the period between September 5, 2000 and November 1, 2000, inclusive. The defendants are WorldCom, Inc., Bernard Ebbers and Scott Sullivan, respectively, WorldCom's Chief Executive Officer and Chief Financial Officer. The claims arise under Sections 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and Rul 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC"). The complaint alleges that defendants made a series of materially false and misleading statements in press releases and SEC filings concerning: the effect of the failure of WorldCom's proposed merger with Sprint, particularly with regard to the impact of lost cost savings and revenues, the difficulties experienced in relation to WorldCom's acquisition of MCI; WorldCom's decreasing growth rates; and WorldCom's growing uncollectable receivables, which were not accurately reflected in its financial statements. The complaint further alleges that these material misstatements of fact enabled WorldCom,on September 5, 2000, to enter into an agreement to acquire Intermedia, for WorldCom stock, the price of which was artificially inflated at that time, and causing Intermedia's stock to be pegged to the market price of WorldCom shares. Plaintiff and other similarly situated purchasers of Intermedia Communications stock have been damaged by purchasing their stock at inflated prices. The stock dropped significantly as the true facts concerning WorldCom's business affairs began to be revealed on November 1, 2000. This action was filed by the Law Offices of Jeffrey S. Abraham which has significant experience successfully prosecuting class actions on behalf of defrauded investors. Contact: Law Offices of Jeffrey S. Abraham Jeffrey S. Abraham, Gil Deutsch 212/692-0555 or 800-938-0015 Jabrahamlaw@aol.com MAXIM PHARMACEUTICALS: Milberg Weiss Files Securities Suit in California ------------------------------------------------------------------------ Milberg Weiss (http://www.milberg.com/maxim/)announced on December 14 that a class action has been commenced in the United States District Court for the Southern District of California on behalf of purchasers of Maxim Pharmaceuticals, Inc. ("Maxim") (NASDAQ:MAXM) common stock during the period between January 5, 2000 and December 13. 2000 (the "Class Period"). The complaint charges Maxim and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Maxim develops drugs, therapies and vaccines for cancer and infectious diseases. The complaint alleges that during the Class Period, the Company's leading drug candidate was Maxamine, a drug to facilitate an immune system mechanism to achieve full anti-tumor and anti-infection potential. Subject to FDA approval, this drug was set to launch in early 2001. Defendants' alleged false and misleading statements about the effectiveness of its Maxamine drug and the Company's adherence to FDA protocol allowed Maxim to complete a follow-on public offering on February 28, 2000 at $ 55 and artificially inflate its stock to a Class Period high of $79.50 on March 1, 2000. Maxim sold 3.2 million shares of its stock at as high as $55 for $165 million in proceeds so as to provide it with ample monies to make a large acquisition and fund its operations. On December 12, 2000, just months after Maxim's stock hit its Class Period high, information regarding Maxim's testing began to become public, including that Maxim had been concealing a materially negative communication from the FDA suggesting that FDA approval of Maxamine would be impossible. Based on this disclosure, Maxim's stock price dropped to as low as$9-1/4. Public investors who invested based on Maxim's representations about its compliance with FDA regulations and the effectiveness of its drug Maxamine, and thus paid as high as $79.50 per share for Maxim's stock during the Class Period, have suffered millions in damages. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com MICROSTRATEGY INC: Saylor, Top Executives Settle SEC Fraud Charges ------------------------------------------------------------------ MicroStrategy Inc. Chairman Michael J. Saylor and two other top executives agreed to pay fines of $ 350,000 each to settle Securities and Exchange Commission charges that they committed civil accounting fraud by overstating the Vienna software company's revenue and earnings. Saylor, Chief Operating Officer Sanju Bansal and former chief financial officer Mark Lynch did not admit or deny wrongdoing in agreeing to pay the fines, which SEC officials said are the largest penalties the agency has meted out in a case that did not involve insider trading. The executives also agreed to disgorge a combined $ 10 million of what SEC officials called "ill-gotten gains"--$ 8,280,000 by Saylor, $ 1,630,000 by Bansal and $ 138,000 by Lynch. The $ 10 million from the three men's stock holdings was previously announced as part of MicroStrategy's settlement of private lawsuits. Lynch, who is now vice president of business affairs, was barred from practicing accounting before the SEC for at least three years. That prohibits him from serving as chief financial officer of a publicly traded company or preparing its financial statements. The company itself was charged with lesser bookkeeping violations, which it settled by agreeing to strengthen its management and controls. Richard H. Walker, the SEC's director of enforcement, said in a statement that the case "demonstrates our commitment to use all necessary enforcement resources to respond quickly and decisively to future public company accounting failures that harm investors." MicroStrategy said the settlement concluded the SEC's investigation of the company and its personnel. "Given our desire to put the restatement behind us and move forward in our business, this is a welcome outcome," Saylor said in a statement. "We have worked hard to put in place numerous organizational and business measures to safeguard the integrity of our finances." The company's fast-rising revenue in recent years had helped make it a symbol of high-tech success in the Washington area -- until MicroStrategy corrected the numbers in March and its stock, which traded as high as $ 333, cratered. Saylor has been one of the most visible of Washington's high-tech leaders, known for his grandiose vision of his company's future and grand gestures, such as renting out the Redskins football stadium for a corporate Super Bowl bash and pledging $ 100 million to create an online university. The company, which makes data-mining software, has struggled in the aftermath of the restatement and stock crash. It cut costs by such measures as rescinding job offers to new hires, laying off 10 percent of its workforce of 2,300. In working to rebuild MicroStrategy's reputation, Saylor has recruited prominent local businessmen John Sidgmore of WorldCom Inc. and David Oros of Aether Systems Inc. to join the board of his Strategy.com subsidiary. The SEC charges provide the most detailed account yet of how executives at the rapidly growing software company produced misleading financial statements that turned losses into profits. MicroStrategy improperly timed the booking of contracts "to achieve the desired quarterly financial results," the SEC complaint alleged. It said Saylor, 35, co-founder Bansal, 35, and Lynch, 37, were responsible for the accuracy of the company's financial statements: "Each knew or was reckless in not knowing that MicroStrategy's financial statements were materially misleading." At the end of each fiscal quarter and the beginning of the next, "Saylor, Bansal and Lynch discussed, within a range, the financial results they would like to report in the just-ended quarter and whether to forestall recognizing some revenue," the SEC said. "Only after Saylor, Bansal and Lynch discussed the desired financial results were the unsigned contracts apportioned, between the just-ended quarter and the then-current quarter, and signed by either Bansal or Lynch and given an 'effective date.' " In other cases, MicroStrategy's top executives knowingly booked revenue from deals before they were signed, in violation of accounting principles, the SEC said. The agency's complaint gave these examples: Before midnight on Dec. 31, 1999, as the world was celebrating the end of the millennium, MicroStrategy's negotiations with a financial information company called Primark broke down. Though neither Saylor nor Primark signed the final contract until the week of Jan. 3, MicroStrategy booked $ 5 million from the deal during the quarter that ended Dec. 31. On Sept. 30, 1999, the last day of a fiscal quarter, MicroStrategy's negotiations with NCR continued past midnight, and Saylor signed a contract in the early hours of Oct. 1. "Although Lynch and Saylor both knew that contract had not been signed by the end of the quarter," MicroStrategy booked $ 17.5 million of revenue from the transaction in the quarter that ended Sept. 30, 1999. On April 5, 1999, the salesperson responsible for a deal with Choicepoint Inc. "advised Saylor, Bansal and Lynch that the contract had been signed on April 2, 1999, but dated March 31, 1999." MicroStrategy booked $ 956,000 of revenue in the quarter that ended March 31, 1999. In an interview with the Washington Post long before MicroStrategy's accounting irregularities were disclosed, Saylor volunteered his understanding of the rules. He brought up the subject of revenue timing and described the dilemmas he faced "every quarter." "In the public world there's a difference between 11:59 and 12:01 the last day of March. There's a tangible difference," Saylor said. "One of them is, you go to jail if the thing gets signed at 12:01 [and you book it the day before]. One of them is, the stock is up $ 500 million. And the other one is, you've just torched the life and livelihood of a thousand families. . . ." "Would you sacrifice a thousand people's lives for one minute of integrity, or would you, like, put the clock back?" The bulk of MicroStrategy's accounting errors involved booking revenue immediately when it should have been spread over the full term of software and service contracts, the SEC said. MicroStrategy lawyer Ralph C. Ferrara denied that company executives participated in a deliberate fraud. "The company's dramatic growth simply outstripped its ability or outpaced its ability to comply with the applicable accounting regulations for recognizing revenue" on software deals, he said. The executives' conduct was not egregious enough to warrant a more severe penalty available to the SEC--barring someone from being an officer or director of a public company, said Greg Bruch, an SEC assistant director of enforcement. The $ 10 million that the three executives agreed to "disgorge" represented the ill-gotten portion of their gains from selling stock while the share price was artificially inflated, Bruch said. During October 1999, the three sold part of their holdings for a total of more than $ 70 million. Saylor's personal stake in the company, once valued on paper at $ 14.5 billion, was down to $ 667.6 million at the close of trading last Thursday December 14. Under the settlement, MicroStrategy agreed to add an experienced outsider to the audit committee of its board of directors--something it previously said it would do. The audit committee now consists of Ralph S. Terkowitz, a vice president for technology at The Washington Post Co., and chairman Frank A. Ingari, founder of Wheelhouse Corp., which last December entered a business alliance with MicroStrategy. The SEC said the investigation is continuing "as to other parties." One unanswered question is how the accounting errors got past MicroStrategy's auditor, PricewaterhouseCoopers. The accounting firm, which declined to comment, is still fighting the shareholder class-action suit that MicroStrategy tentatively settled in October. (The Washington Post, December 15, 2000) PASMINCO: Victorian Supreme court dismisses Cockle Creek Smelter Suit --------------------------------------------------------------------- The Victorian Supreme Court has ruled in favour of an application by Pasminco Ltd to dismiss a class action against it, the company said. The class action related to claims of pollution, nuisance and negligence allegely caused by its lead and zinc smelters at Cockle Creek in New South Wales and Port Pirie in South Australia. Justice Hedigan announced his ruling on December 15 saying that while the matter was dimissed he granted the plaintiffs leave to bring fresh group proceedings by separate actions. "While individual applicants to the class action remain free to consider alternative legal action following today's decision, I hope they will choose to approach the company directly," Pasminco managing director and chief executive David Stewart. Pasminco has owned the companies that operate the Port Pirie and Cockle Creek smelters since its formation in 1988. The sites have produced lead and zinc for more than 100 years. "Pasminco accepts it has an obligation to address the legacies of the past - even though much of the lead contamination occurred before Pasminco's inception," Mr Stewart said. The matter was heard in the Victorian Supremem Court during early November. The company said that its December half profit would fall short of its targets and that it would report a net loss in the first half of 2001. (AAP Newsfeed, December 15, 2000) SOTHEBY'S HOLDINGS: Berger & Montague Announces Proposed $70M Settlement ------------------------------------------------------------------------ The following was released on December 14 by Berger & Montague, P.C. (http://www.investorprotect.com): TO: All Persons and Entities Who Purchased Class A Limited Voting Common Stock of Sotheby's Holdings, Inc. (NYSE:BID) During the Period February 11, 1997 through February 18, 2000, and Sustained a Loss Thereby (the "Class"). YOU ARE HEREBY NOTIFIED that a hearing shall be held before the Hon. Denise Cote, on February 16, 2001, at 2:00 pm in Courtroom 11B of the United States District Court for the Southern District of New York, 500 Pearl Street, New York, New York 10007, to determine whether an order should be entered (i) finally approving the proposed $70 million settlement of the claims asserted by plaintiffs in this consolidated action (the "Action"), against defendants Sotheby's Holdings, Inc. and Sotheby's, Inc. (collectively, "Sotheby's") and defendants William S. Sheridan, Joseph A. Domonkos, Patricia A. Carberry, Cyndee L. Grillo and A. Alfred Taubman (collectively with Sotheby's, the "Settling Defendants") on the terms set forth in the Amended Stipulation and Agreement of Settlement dated as of November 15, 2000 (the "Settlement"); (ii) dismissing the Action with prejudice as to the Settling Defendants and as to defendant Diana D. Brooks; (iii) finding that any shares of Sotheby's Class A Limited Voting Common Stock to be issued in connection with the Settlement are exempted securities under the Securities Act of 1933; (iv) approving the Plan of Allocation of the Net Settlement Fund; and (v) awarding counsel fees and reimbursement of expenses to counsel for Plaintiffs and the Class. This Action was filed after reports in the press beginning on January 29, 2000 that Sotheby's and its principal competitor, Christie's, Inc., participated in an agreement regarding the amounts charged for commissions in connection with auctions. This Action was filed to address claims under federal securities laws stemming from declines in the market price of Sotheby's Stock following those reports. A more complete description of the Action, the proposed Settlement and the steps Class Members must take in order to share in the proposed Settlement, request exclusion from the Class or object to the Settlement and any application for attorneys' fees and expenses appears in the Notice of Proposed Settlement of Class Action, Settlement Fairness Hearing and Right to Share in Settlement Fund (the "Notice"). The Notice also sets forth the deadlines for exercising each of these options, including the March 10, 2001 deadline for mailing Proofs of Claim and the February 2, 2001 deadline for requesting exclusion from the Class or filing any objections to the proposed Settlement or any application for attorneys' fees and expenses. If you have not yet received the Notice, which more completely describes the terms of the proposed Settlement, your rights thereunder, and the steps which must be taken before each applicable deadline, you may obtain a copy by contacting: In re Sotheby's Holdings, Inc. Securities Litigation, c/o Heffler, Radetich & Saitta, L.L.P., P. O. Box 160, Philadelphia, PA 19105-0160, 215/665-1124 or 800/528-7199. If you have any questions regarding this Action, you may contact Plaintiffs' Lead Counsel: Sherrie R. Savett, Esquire, Gary E. Cantor, Esquire, Berger & Montague, P.C. (http://www.investorprotect.com),1622 Locust Street, Philadelphia, PA 19103, 215/875-3000. Please do not contact the Court or the Clerk's Office for information. Contact: Berger & Montague, P.C. Sherrie R. Savett, Esquire Gary E. Cantor, Esquire 215/875-3000 SPRINT CORP: Target of Lawsuit over Proposed Worldcom Merger ------------------------------------------------------------ According to the Kansas City Star, the law firm behind Amalgamated Bank of New York's shareholder lawsuit against Sprint Corp. executives and directors is one of the nation's most successful - and controversial - securities litigation outfits. New York-based Milberg Weiss Bershad Hynes & Lerach has won some of the biggest securities fraud awards ever, including $1.75 billion stemming from the 1989 collapse of Lincoln Savings & Loan and $800 million in a case involving former junk bond king Michael Milken. But the law firm was also socked with a $45 million jury verdict last year on allegations that it abused the legal system. The firm agreed to pay $50 million to settle the case, avoiding a possible punitive damage award by the jury. Last Wednesday December 13, Milberg Weiss took aim at its latest corporate target: Sprint, Kansas City's biggest private-sector employer. The complaint, filed in Jackson County Circuit Court, alleges that top Sprint executives, knowing that a proposed merger with WorldCom would probably fail, accelerated their stock options and enriched themselves at the expense of shareholders. Sprint officials have denied the allegation. Sprint isn't the only area company sued by Milberg Weiss. The firm sued Kansas City Life Insurance Co. a couple of years ago, alleging its vanishing-premium policies defrauded policyholders. A federal judge refused to certify the case as a class action, but the case remains on the docket. "They (Milberg Weiss) come in with the assumption that, 'We know you're guilty, and you're going to have to prove yourself innocent,' " said local lawyer David Oliver, who represents Kansas City Life. "What they do is they hope you'll slip up in your response to discovery (requests), and then they make it look like you're hiding something. They have a very standardized approach to these things." It's an allegation frequently made by defense attorneys, to which Milberg Weiss partner Bill Lerach responded: "The reason we're hated is because we're so successful." Lerach, the lead attorney in the Sprint case, was the subject of a lengthy cover story 10 weeks ago in Fortune magazine that bore the headline: "The King of Pain is Hurting: Loathed because he's so mean, feared because he's so powerful, Bill Lerach is the lawyer everyone in Silicon Valley hates." The Fortune article described the 54-year-old Lerach as the "king of the shareholder class-action suit - the kind of suit that is routinely filed when a company announces bad news and its stock plunges." "Not surprisingly," the magazine wrote of Lerach, "(Silicon) Valley executives tend to view him as 'lower than pond scum' - as Cypress Semiconductor CEO T.J. Rodgers once memorably put it. Yet time and again, those same CEOs have chosen to settle Lerach's suits for millions. "They do this because of a business calculation he has shrewdly exploited: that it's cheaper and safer to pay him off than to go to trial. John Doerr, Silicon Valley's most prominent venture capitalist, has called Lerach a 'cunning economic terrorist.' " Lerach's rejoinder: "My comment on the Fortune article is that it was a hit piece engineered by a disgruntled former partner and put into publication by a pro-business magazine." In April 1999, The National Law Journal reported that Milberg Weiss had reaped nearly $700 million in profits since 1988 and that Lerach and his partner, Melvyn Weiss, each pulled down about $12 million a year. So powerful is Milberg Weiss that it is widely thought to have spurred Congress to enact the Private Securities Litigation Reform Act of 1995, which took direct aim at firms such as Milberg Weiss by putting limits on securities class actions. Far from reducing such actions, however, the law, with its convoluted rules, led to their proliferation. And Milberg Weiss, which had appeared in nearly a third of such cases before the law was passed, appeared as counsel in 59 percent of them afterward, The National Law Journal reported. Name a headline-grabbing securities fraud action and chances are very good Milberg Weiss is involved as lead or co-lead counsel. Deutsche Telekom, Gateway Inc., AT&T, PacifiCare Health Systems Inc., DaimlerChrysler AG: Those are the defendants in lawsuits the firm has filed in the past three weeks alone. The firm says it has recovered about $20 billion on behalf of shareholders in the securities arena and $30 billion altogether. Securities fraud is Milberg Weiss' main claim to fame, but the 160-lawyer firm also represents consumers in insurance, health care and environmental matters, and government bodies in tobacco-related actions. It also has taken up human rights cases. Earlier this year, Milberg Weiss filed two class-action lawsuits in California on behalf of former U.S. prisoners of war and Chinese civilians allegedly exploited as slave laborers during World War II by the Mitsubishi and Mitsui corporations. And it played a role in recent settlements with Swiss banks and German companies on behalf of Holocaust survivors. Two months ago, the firm joined forces with Leeds Morelli & Brown, a Long Island, N.Y.-based law firm that specializes in discrimination cases. With characteristic bravado, Milberg Weiss issued a news release on the alliance that began: "U.S. corporations were put on notice today that employees faced with workplace discrimination have a powerful new ally." But the firm's tactics have gotten it in hot water. Last year, Milberg Weiss and Lerach were hauled into court on allegations of misconduct. In 1990, Milberg Weiss had named economics consulting firm Lexecon Inc. and its principal, Daniel Fischel, as defendants in its racketeering suit on behalf of Lincoln Savings & Loan investors. Lexecon had written several favorable reports on Lincoln's financial condition before the savings and loan failed. But Fischel, now dean of the University of Chicago Law School, alleged that Milberg Weiss had sued Lexecon only because it had successfully testified for the defense in a 1988 suit brought by Milberg Weiss over the failure of an energy company called Nucorp. So Lexecon turned the tables and sued Milberg Weiss, accusing the firm of abuse of legal process. And in one of the biggest verdicts ever against a law firm, a jury in April 1999 awarded $45 million to Lexecon and Fischel, agreeing that Milberg Weiss had sued Lexecon to discredit it as an expert in subsequent lawsuits. Just before the jury was to consider punitive damages, Milberg Weiss agreed to pay $50 million to settle the allegations. The firm's partners are thought to have paid most of the money out of their own pockets. Lerach shrugged off the case: "We got sued, we had a prejudiced judge, we tried to defend ourselves, and we stepped up to the plate and paid. "The fact is, we have a law firm comprised of extremely skilled and practiced lawyers, including former assistant U.S. attorneys, and we conduct ourselves in a highly ethical manner." (The Kansas City Star, December 15, 2000) U-M: Legal Process for Rejected Applicants Comes to a Standstill ---------------------------------------------------------------- It will take a long time -- if ever -- for two rejected University of Michigan applicants to receive compensation for winning their part of an affirmative action lawsuit, legal experts said Thursday. Jennifer Gratz and Patrick Hamacher were not admitted while U-M used an unconstitutional admissions system between 1995-98, U.S. District Judge Patrick Duggan ruled last Wednesday December 13. He also found that the current U-M system, which still considers race but doesn't set aside spots for minorities, is lawful. Duggan's decision gave college officials a confidence boost as they prepare for the upcoming and similar case against the law school. It left the plaintiffs vowing to more vigorously show the next judge that attaining diversity is not a strong enough justification for using affirmative action. "We have not had the last word on the undergraduate case," said Terry Pell, executive director of the law firm Center for Individual Rights, which represents the plaintiffs in the dual lawsuits against the undergraduate and law schools. Furthermore, he said, "the degree of race preferences given in the law school is even greater." The decision will have a far-reaching and ongoing impact -- from rejected white students between 1995-98 who may now seek damages, to the law school case that begins in January, to the national legal debate that's storming toward a likely U.S. Supreme Court showdown. But as these philosophical arguments continue, the legal process is at a standstill for the two plaintiffs in the class-action lawsuit. Four rejected applicants in a similar Texas case received $1 after a judge denied their request for more than $5 million in damages. The award came four years after the federal court decision. U-M's undergraduate case will almost certainly continue before a three-member panel of the U.S. 6th Circuit of Appeals in Cincinnati, a group of 12 judges -- seven appointed by Presidents Clinton and Carter and five appointed by Presidents Reagan and Bush. The law school case is scheduled for trial Jan. 16 before U.S. District Judge Bernard Friedman in Detroit. Since Duggan upheld U-M's current admissions policies, U-M attorney Liz Barry said Thursday she is "fully confident the judge in the law school case will do the same." Law student Luttrell Levingston said he thinks U-M has a stronger defense for the law school policies, which evaluate applicants more individually. "If the undergraduate program passes constitutional muster, it would suggest that ours will," said Levingston, a second-year law student from Indianapolis. "It is certainly nice to know there are people in the judicial system who seem to value diversity." But while Duggan's ruling embraced U-M's argument that diversity enhances a student's educational experience, opponents said they would more forcefully argue against that point in the law school trial. "We are looking forward to cross-examining the experts that the university is going to put forward to show that engineering a racial mix has educational value," Pell said. Meanwhile, lawyers said they were unsure when hearings on possible compensation for the undergraduate plaintiffs would occur. U-M attorneys claim that awarding damages will be unlikely: Rejected applicants would have to prove they would have been admitted under the current system, a process that still considers race. "If you were wrongfully denied admissions to the university, you should be entitled to some sort of damage award," said Barbara Lambert, a U-M senior and member of the College Republicans. "Everyone should have an equal opportunity to attend the University of Michigan." The plaintiffs' attorney said they expect some students will be compensated. "It is inconceivable that they can prove that nobody who was illegally excluded under the illegal system would have gotten in under a legal system," Pell said. "Somebody would have gotten in." But what makes that argument more confusing is that while Duggan found legal differences between the old and new policies, U-M has asserted that the policies are essentially the same. "It was racially disciminatory in earlier years and it is racially discriminatory now," said U-M philosophy professor Carl Cohen, who uncovered the old admissions policies in 1997, which essentially started the ball rolling on the lawsuits. Cohen said he hopes the higher courts will see that the two systems are the same -- and find they are both unconstitutional. "The blanket preference by race, which is so strongly objectionable, is there somewhat more hidden, somewhat more obscure, but just as much there," Cohen said. "It will not be hidden from justices in the appellate court." (The Detroit News, December 15, 2000) VERIZON: N.Y. Ct Dismisses Customer's Antitrust Suit Absent Direct Link ----------------------------------------------------------------------- U.S. Dist. Court in N.Y.C. dismissed civil antitrust suit filed by local attorney upset by what he claimed were chronic and repeated Verizon service problems. The Court last Wednesday December 13 tossed out claim for civil damages and plea for class action certification filed in March by attorney Curtis Timko in case involving alleged problems with office phone provided Verizon and its predecessor Bell Atlantic. Timko said he switched his local service to AT&T but alleged he continued to have problems because of Verizon's failure to cooperate with AT&T. Timko filed suit day after Bell Atlantic/Verizon agreed to pay $3 million penalty to FCC and improve wholesale services to CLECs. The Court rejected Timko's argument that Verizon's alleged failure to cooperate with CLECs was violation of Sherman Antitrust Act. It also tossed out Timko's allegation of Telecom Act violations in Verizon's relationship with AT&T on ground that injured party in alleged violations would be AT&T, not AT&T's local service customers. However, the court gave Timko until Dec. 26 to file new pleadings on Telecom Act claims if he could show direct cause-and-effect link between Verizon and his poor local service. (Communications Daily, December 15, 2000) WORLD FUEL: Announces Dismissal of Shareholders’ Suit in Florida ---------------------------------------------------------------- World Fuel Services Corporation (NYSE:INT) (PCX:INT) announced on December 15 that the U.S. District Court for the Southern District of Florida has dismissed the shareholders' class-action lawsuit filed against the Company in February 2000. WORLDCOM INC: Delaware Court OKs Intermedia Deal But Warns of Penalties ----------------------------------------------------------------------- Investors drove down Intermedia Communications' stock by almost 43 percent last Thursday December 14 on the expectation that a Delaware judge's decision will force WorldCom Inc. to terminate or renegotiate its proposed acquisition of the Tampa telecommunications company. In an 88-page decision, Delaware Chancery Court Judge William B. Chandler said the deal could go forward, but he left it under a $ 2.5-billion cloud. Chandler warned that WorldCom and Intermedia could face penalties in a class-action suit charging that aspects of the deal were not negotiated in good faith by Intermedia directors. The plaintiffs are seeking $ 2.5-billion. The class-action lawsuit was filed by shareholders of Intermedia's rapidly growing subsidiary Digex Inc., a Beltsville, Md., company that manages Web sites for Fortune 2,000 companies. WorldCom purchased Intermedia for the express purpose of gaining control of Digex. But Digex shareholders complained that the deal ran roughshod over their interests, and they asked the court to put a stop to it. Given the risks raised by Judge Chandler, WorldCom must now decide whether it wants to proceed with the acquisition as it stands. "We have no official comment yet," WorldCom spokeswoman Julie Moore said. "We're still evaluating the judge's decision." Intermedia spokesman Alan Hill said his company is pleased the Delaware court did not block the merger. He added that his company, too, is reviewing the decision before saying more. Whatever happens, as far as Wall Street is concerned, Intermedia is not likely to benefit. That's why the company's stock dropped from $ 12.25 to $ 7 Thursday, while WorldCom's stock closed at $ 17.81, down only 38 cents. Intermedia will be in serious trouble if the deal collapses. The company, which provides Internet and telecommunications services to business customers, is running out of money. It had $ 323.8-million left as of Sept. 30, and that was not expected to last through March. If WorldCom goes ahead with the acquisition, though, it will be under great pressure to settle with Digex shareholders out of court. "Any offer made to Digex shareholders will come out of Intermedia's hide,"said Linda Varoli, an analyst with Merger Insight, a New York investment research firm. She predicted WorldCom would insist on renegotiating the deal on terms less favorable to Intermedia shareholders. The deal's appeal for investors in Intermedia already has lessened. When it was first announced in September, it was expected that WorldCom would pay $ 39 a share for Intermedia's stock and assume $ 2.9-billion in debt and preferred shares. But both companies' stocks have fallen dramatically since then, triggering a new payment formula. As it stands now, WorldCom will trade 1.18 of its shares for every share of Intermedia. That makes Intermedia's shares worth $ 1.1-billion at current prices, about $ 1-billion less than originally anticipated. Digex shareholders immediately cried foul over the deal, arguing they would have gained far more in a direct sale of their company. Judge Chandler agreed that Intermedia directors acted in bad faith when they waived a section in Digex's rules of governance that protected shareholders from a hostile takeover. Chandler said Intermedia directors who also serve on the Digex board - David Ruberg, Philip Campbell, John Baker and Robert Manning - acted unfairly in waiving the section. As a result, he concluded that shareholders would have grounds to proceed with their suit and would probably be granted monetary damages. Megan McIntyre, an attorney with the firm of Grant & Eisenhofer who is representing Digex shareholders, said her clients are asking for $ 2.5-billion, which represents the amount they would have received for their shares if WorldCom had purchased Digex. (St. Petersburg Times, December 15, 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. 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