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/raid1/www/Hosts/bankrupt/CAR_Public/010312.MBX C L A S S A C T I O N R E P O R T E R Monday, March 12, 2001, Vol. 3, No. 49 Headlines AMERITECH CORP: Suit over Sales Taxes on Tel Services Survives Dismissal BARR LABORATORIES: Settlement of Patent Issues Leads to Antitrust Suits BROADCOM CORP: Abbey Gardy Files Securities Suit in California BROADCOM CORP: Barrack Rodos Files Securities Suit in California BROADCOM CORP: Cauley Geller Expands Period for Securities Suit in CA BROADCOM CORP: Milberg Weiss Expands Period for Securities Suit in CA BROADCOM CORP: Shareholder Lawsuit Filed in CA by Weiss & Yourman CREDIT CARDS: Attorneys' Exchange May Be Rehearsal for Antitrust Suit CREDIT CARDS: Customers Can Sue Chevy Chase Bank Over Rate Hike FORD MOTOR: Lawyers Ask $3 Bil for Damages Due to Fauty Ignition Part HIP IMPLANT: CEO Says Sulzer Sufficiently Insured to Cover All Claims Kerr-Mcgee: Sued in Mississippi for Creosote Syndrome NIKE JORDAN: Lawyer Alleges Design of Sports Shoes Is Too Cutting Edge NORTEL NETWORKS: Burt & Pucillo Announces Securities Lawsuit Filed in NY PACIFIC LUMBER: To Pay Millions In 1996-97 Humboldt Landslide Suit PARTY CITY: Faces 12 Securities Suits in N.J. at Early Stage SMART WORLD: Bragar Wexler Announces Commencement of Securities Lawsuit TOBACCO LITIGATION: 70-Year-Old Ex-Smoker First To Receive Compensation UNITED-US: Air Deal Stuck with Fed Regulators, May Need Changes WILLIAM GOREN: Sentence Due for Securities Fraud; Millions Are Missing * Census Data for N.J., WI and MS Finds Diversity Spreading to Suburbs * Japan Needs More Lawyers, L.A. Times Presents a Changing Situation ********* AMERITECH CORP: Suit over Sales Taxes on Tel Services Survives Dismissal ------------------------------------------------------------------------ A judge refused to dismiss a lawsuit against Ameritech Corp. that alleges thousands of Wisconsin customers were illegally charged sales taxes on certain telephone services. The class-action lawsuit, filed on behalf of three Milwaukee residents, alleges millions of dollars in sales taxes were illegally collected on certain phone services for more than nine years. Ameritech, the largest telephone company in the state, had requested the lawsuit dismissed. Dane County Circuit Judge Richard Callaway rejected the request last Tuesday March 6. The state Department of Revenue also is named in the suit. The dispute is over whether sales taxes can be imposed on items such as the local line charge, wiring maintenance plans, fees for a non-published number and services such as caller ID. Ameritech has said it is simply a billing agent for sales taxes imposed by the state. On the Net: Ameritech Corp.: http://www.ameritech.com/ Wisconsin Department of Revenue: http://www.dor.state.wi.us/ (The Associated Press State & Local Wire, March 9, 2001) BARR LABORATORIES: Settlement of Patent Issues Leads to Antitrust Suits ----------------------------------------------------------------------- Ciprofloxacin (Cipro) Class Action Suits Barr Laboratories Inc. has been named as a defendant in several actions related to its settlement of the Cipro patent challenge. The following complaints represent indirect purchaser class-action complaints alleging violation of federal antitrust laws and/or state antitrust and consumer protection laws on the grounds that the 1997 Bayer-Barr settlement agreement was allegedly anti-competitive. Plaintiffs seek to recover overcharges paid as a result of the allegedly anti-competitive activities and, where appropriate, treble damages. The following plaintiffs have filed, on the dates indicated, class-action complaints against Bayer and Barr in state court: Patricia Nelson et al filed in Minn. District Ct. (11/15/00); Maurice Stewart et al filed in the District of Columbia Superior Ct. (12/18/00). The following actions have been removed to or have been filed in U.S. District Courts: Mark Aston (C.D. Cal. 10/10/00); Donna Franck et al (M.D. Fla. 10/13/00); John Coleman (S.D. Cal. 10/16/00); David Green (E.D.N.Y. 10/16/00); Adele Brody (S.D.N.Y. 10/18/00); Ellen Relles et al (C.D. Cal. 10/24/00); Greg Amluxen (E.D. Penn. 10/24/00); Rebecca Sandhaus (D. Kan. 10/26/00); Charles McKenzie (D. Arizona 10/27/00); For Love & Money Inc. d/b/a RX Jennifers Pharmacy (S.D. Ill. 10/27/00); Shosana Samole (N.D. Cal. 10/31/00); Barbara Meyers (E.D. Wis. 11/6/00); Barry Garber (N.D. Cal. 11/7/00); John Irons (C.D. Cal. 11/10/00); Caroline M. Loesch et al (S.D. Fla. 11/13/00); Peggy Lee (N.D. Cal. 11/14/00); Mary Ann Scott (N.D. Cal. 11/22/00); Kimberly McCullar (N.D. Cal. 12/12/00); Madeline Eisenhauer et al (E.D.N.Y. 12/15/00). The following complaints represent direct purchaser class action complaints alleging violation of federal antitrust laws on the grounds that the 1997 Bayer-Barr settlement agreement was allegedly anti-competitive. Plaintiffs seek to recover overcharges paid as a result of the allegedly anti-competitive activities and, where appropriate, treble damages. The following plaintiffs have filed class-action complaints against Bayer and Barr, which have been removed to or filed in U.S. District Court: CVS Meridian, Inc. et al (S.D.N.Y. 10/18/00); Arthur's Drug Store, Inc. (S.D.N.Y. 12/4/00). Tamoxifen Citrate Class Action Suits The following complaints represent putative consumer class action complaints, brought under federal and nineteen state anti-trust statutes, arising out of Zeneca's and Barr's 1993 settlement of a patent infringement action. The complaints allege that the 1993 settlement insulates Zeneca and the Company from generic competition and enables Zeneca and Barr to charge artificially inflated prices for Tamoxifen citrate. Plaintiffs seek to recover both Barr's and Zeneca's profits and treble damages for the alleged anti-trust violations. The following are the plaintiffs that have filed actions in state court: Koonan filed in Calif. State Ct. (12/8/00). The following are plaintiffs that have filed in U. S. District Court: Joblove (E.D.N.Y. 10/6/00); Knee (E.D.N.Y. 11/8/00); Bennish (E.D. Mich. 11/9/00). The following complaints represent putative third-party payor class action complaints, brought under federal and nineteen state anti-trust statutes, arising out of Zeneca's and Barr's 1993 settlement of a patent infringement action. The complaints allege that the 1993 settlement insulates Zeneca and the Company from generic competition and enables Zeneca and Barr to charge artificially inflated prices for Tamoxifen citrate. Plaintiffs seek to recover both Barr's and Zeneca's profits and treble damages for the alleged anti-trust violations. The following are plaintiffs that have filed in U. S. District Court: Allied Services Division Welfare Fund (E.D.N.Y. 11/1/00); DeJesus as Trustee for Local 485 Health & Welfare Fund (E.D.N.Y. 12/13/00). Ciprofloxacin (Cipro) Class Action Suits BROADCOM CORP: Abbey Gardy Files Securities Suit in California -------------------------------------------------------------- Abbey Gardy, LLP announced on March 9 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of Broadcom Corp. (Nasdaq: BRCM) common stock during the period between July 31, 2000 through March 6, 2001 (the "Class Period"). The complaint charges Broadcom and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Broadcom is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. The complaint alleges that during the Class Period, defendants made positive but false statements about Broadcom's results and business, while concealing material adverse information about agreements with certain companies it acquired, which essentially resulted in Broadcom buying its own revenues. As a result, Broadcom's stock traded at artificially inflated levels, permitting the three individual defendants to sell more than $45.8 million worth of their Broadcom stock. Then, on 2/27/01, The Wall Street Journal published an article on Broadcom questioning the company's accounting treatment for its revenue and warrant arrangements. Broadcom's stock immediately dropped, falling 16% to $53, before closing at $53.625 on 2/27/01, and falling to $49.25 on 2/28/01. Contact: Courtney Lynch, clynch@abbeygardy.com, or Stephanie Amin, samin@abbeygardy.com, of Abbey Gardy, LLP, 800-889-3700 BROADCOM CORP: Barrack Rodos Files Securities Suit in California ----------------------------------------------------------------- Counsel for Class Plaintiff, Barrack, Rodos & Bacine, on March 9 issued the following: Barrack, Rodos & Bacine announced that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of Broadcom Corporation ("Broadcom") (Nasdaq: BRCM) common stock during the period between July 31, 2000 and March 6, 2001 (the "Class Period"). The complaint charges Broadcom and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Broadcom is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. The complaint alleges that during the Class Period defendants made positive but false statements about Broadcom's results and business, while concealing material adverse information about agreements with certain companies it acquired, which essentially resulted in Broadcom buying its own revenues with warrants. As a result, Broadcom's stock traded at artificially inflated levels, permitting the three individual defendants to sell $45.8 million worth of their Broadcom stock. Then, on 2/27/01, The Wall Street Journal published an article on Broadcom entitled "Warrant Deals Raise Concerns on Broadcom," in which analysts and accounting experts questioned the "legitimacy" of the transactions and termed the agreements "troubling." Broadcom's stock immediately dropped, falling 16% to $53, before closing at $53.625 on 2/27/01, and falling to $49.25 on 2/28/01. Then, on 3/6/01, Broadcom updated its outlook for 2001, indicating that 1stQ 01 revenues would be only $315-$325 million and $.08-$.09, respectively, and also revealed that it may change its accounting for warrants issued in connection with acquisitions. On this news, Broadcom's stock dropped to as low as $39-7/8. Contact: Counsel for Class Plaintiffs, Barrack, Rodos & Bacine, Shareholder Relations Manager, 800-417-7305 or 215-963-0600, or fax, 888-417-7306 or 215-963-0838, or mgoldman@barrack.com BROADCOM CORP: Cauley Geller Expands Period for Securities Suit in CA --------------------------------------------------------------------- The Law Firm of Cauley Geller Bowman & Coates, LLP announced that it had filed a class action in the United States District court for the Central District of California on behalf of all individuals and institutional investors that purchased the common stock of Broadcom Corporation (Nasdaq: BRCM) between October 18, 2000 and February 26, 2001, inclusive (the "Class Period"). The Class Period is being expanded to include purchases between July 31, 2000 and March 6, 2001, inclusive. The complaint charges that the company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's business and financial condition, and as a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the Class Period. Specifically the complaint alleges that during the Class Period, defendants made positive but false statements about Broadcom's results and business, which essentially resulted in Broadcom buying its own revenues. As a result, Broadcom's stock traded at artificially inflated levels, permitting the three individual defendants to sell $45.8 million worth of their Broadcom stock. Then, on 2/27/01, The Wall Street Journal published an article on Broadcom entitled "Warrant Deals Raise Concerns on Broadcom," in which analysts and accounting experts questioned the "legitimacy" of the transactions and termed the agreements "troubling." Broadcom's stock immediately dropped, falling 16% to %54, before closing at $53.625 on 2/27/01, and falling to $49.25 on 2/28/01. Cauley Geller Bowman & Coates, LLP has substantial experience representing investors in securities fraud class action lawsuits such as this. The firm has offices in Florida, Arkansas and California, but represents shareholders from throughout the nation. If you have any questions about how you may be able to recover for your losses, or if you would like to consider serving as one of the lead plaintiffs in this lawsuit, you must meet certain requirements and take appropriate action by May 4, 2001. You are encouraged to call or e-mail the Firm or visit the Firm's website at www.classlawyer.com. Contact: Sue Null or Charlie Gastineau, both of the Law Firm of Cauley Geller Bowman & Coates, LLP, 888-551-9944 BROADCOM CORP: Milberg Weiss Expands Period for Securities Suit in CA --------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/broadcom/)announced on March 8 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of Broadcom Corporation ("Broadcom") (Nasdaq: BRCM) common stock during the period between July 31, 2000 and March 6, 2001 (the "Class Period"). The complaint charges Broadcom and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Broadcom is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. The complaint alleges that during the Class Period, defendants made positive but false statements about Broadcom's results and business, while concealing material adverse information about agreements with certain companies it acquired, which essentially resulted in Broadcom buying its own revenues. As a result, Broadcom's stock traded at artificially inflated levels, permitting the three individual defendants to sell $45.8 million worth of their Broadcom stock. Then, on 2/27/01, The Wall Street Journal published an article on Broadcom entitled "Warrant Deals Raise Concerns on Broadcom," in which analysts and accounting experts questioned the "legitimacy" of the transactions and termed the agreements "troubling." Broadcom's stock immediately dropped, falling 16% to $53, before closing at $53.625 on 2/27/01, and falling to $49.25 on 2/28/01. Then, on 3/6/01, Broadcom updated its outlook for 2001, indicating that 1stQ 01 revenues would be only $315-$325 million and $.08-$.09, respectively, and also revealed that it may change its accounting for warrants issued in connection with acquisitions. On this news, Broadcom's stock dropped to as low as $39-7/8. Contact: William Lerach or Darren Robbins of Milberg Weiss Bershad Hynes & Lerach LLP, 800-449-4900, wsl@milberg.com BROADCOM CORP: Shareholder Lawsuit Filed in CA by Weiss & Yourman ----------------------------------------------------------------- A class action lawsuit has been filed against Broadcom Corp. (Nasdaq: BRCM) and certain officers in United States District Court for the Central District of California on behalf of shareholders of Broadcom who acquired their shares between July 31, 2000 and March 6, 2001. According to the complaint, the Company's reported revenue growth of 129% and 132% for the third and fourth quarter of fiscal 2000, respectively, over the prior year, as well as sequential quarterly revenue growth of 30% and 18%, were materially false and misleading because defendants overstated the Company's true revenues, growth rates and other financial performance by failing to properly disclose and account for the fact that the Company had purchased part of its revenues by giving customers millions of dollars worth of warrants for Broadcom stock in return for their orders. Specifically, the complaint alleges that, during its acquisitions of other companies, Broadcom had these companies go to their customers and get agreements for future product orders in return for warrants for the stock in the companies, which Broadcom agreed to and did convert to warrants for its own stock as part of the acquisitions. Furthermore, Broadcom would not account for these customer warrant transactions in accordance with Generally Accepted Accounting Principals ("GAAP"). Contact: Weiss & Yourman (Los Angeles), 800-437-7918, info@wyca.com CREDIT CARDS: Attorneys' Exchange May Be Rehearsal for Antitrust Suit ---------------------------------------------------------------------- The class action suit against Visa and MasterCard by a group of merchants led by Wal-Mart may still lack an opening date, but rehearsals have begun in earnest. A dry run of sorts took place last Wednesday March 7. While far from the courtroom, the exchange -- which took place under the protective auspices of the American Bar Association's antitrust section -- offered a window into the arguments likely to emerge in the battle over the associations' merchant interchange fees. Participants included Stephen V. Bomse, an outside counsel for Visa U.S.A. who helped defend the association in last summer's antitrust trial brought by the Justice Department. He also represents Visa in the as-yet-unscheduled Wal-Mart civil trial. On the other side were Alan S. Frankel, an economist who directs the Law and Economics Consulting Group in Evanston, Ill., and David A. Balto, the Federal Trade Commission's assistant director of the office of policy and evaluation. The arguments Mr. Balto and Mr. Frankel made against interchange may well recur in the retailers' lawsuit, which was first brought by Wal-Mart but has attained class action status. Visa and MasterCard have appealed that status. Visa U.S.A. and MasterCard set the rates of interchange -- a fee, based on a percentage of the transaction cost, that a merchant's acquiring bank must pay to the customer's card-issuing bank -- and the retailers contend that the rates they set for signature-based debit cards are unfairly high. Mr. Balto said that interchange was created to help card-issuing banks recover costs they incurred through losses, float, and fraud, but that historical justifications are irrelevant now that transactions have migrated from paper to electronics. Interchange rates are no longer "a neutral transfer" of money between issuers' banks and merchants' banks, he said. "Visa had a really good story in the 1970s, when most transactions were on paper, but now the risks of loss are negligible," Mr. Balto said. Mr. Bomse, a partner at the San Francisco firm Heller Ehrman White & McAuliffe LLP, called interchange a necessary "mechanism" underpinning the card-based payments system. He argued that the payments system is a "two-sided market" consisting of merchants and cardholders, and said, "Interchange fees are simply a matter of an interdependent payments system." "Look," Mr. Bomse said. "Visa and MasterCard are great deals. They are amazing products that confer enormous benefits to both cardholders and merchants. Maybe we ought to be awarding medals rather than threatening treble damages," which is what the retailers' lawsuit seeks. Mr. Balto was the official moderator of the American Bar Association forum, which was held at the Washington law offices of Arnold & Porter and transmitted by video to law firms in other cities, and Mr. Bomse and Mr. Frankel were the official guest speakers. But arguments were made by all three, before an audience that included Melvin A Schwarz, lead prosecutor in the Justice Department's unresolved antitrust case against Visa and MasterCard; Marcy Wilkov, in-house counsel for American Express; and Brian P. Brosnahan, another Heller Ehrman lawyer who represents Visa. Mr. Frankel, an economics consultant who has worked extensively with the banking and credit card industries and the Justice Department, argued that interchange gives the card associations a license to collect taxes. "The issuing banks are collecting a monopoly tax from the entire retail economy, in essence for doing nothing," he said. "And they get revenue and kickbacks for credit card users." Mr. Frankel said bank card issuers earn a reputed $14 billion in profits annually from interchange fees. "It's a brilliant scheme," he said. "This makes the Microsoft case look small in comparison." Furthermore, Mr. Frankel charged, because merchants pass the cost of interchange back to their customers, people who pay by cash and check effectively subsidize credit card users. "And who's paying cash?" he asked. "The poorest people in our economy are paying Visa's interchange fee. You don't hear Visa talking about this unless David (Balto) or I bring it up." Mr. Bomse -- who has handled cases for Visa since 1980 and quipped, "Representing Visa means always having to say you're sorry" -- rebutted Mr. Frankel's accusation that interchange was "wasteful, rent-seeking behavior." The real question, Mr. Bomse said, is why proprietary networks such as the one run by American Express can also set interchange rates without being sued. American Express' rates are higher than those of Visa or MasterCard. "Is American Express subject to these kinds of damages for behaving in the same way? If not, why is Visa?" Mr. Bomse asked. Mr. Frankel responded, "Saying, 'We should be able to act like American Express' isn't much of a defense." He said that since Visa wields more market power than American Express, the situations are different. Moreover, American Express does not issue debit cards, which are at the heart of the retailers' lawsuit. The merchants are challenging Visa and MasterCard rules that require them to accept those brands of debit cards as a condition of accepting those brands of credit cards. They say these rules violate an antitrust law that forbids companies to tie one product to another. The merchants would prefer to accept PIN-based debit transactions which carry fees of around 10 to 12 cents per transaction. The fee for the signature-based Visa check card is about 1.25% of the transaction cost plus 10 cents, and MasterCard's signature-based debit product charges about 1.36% of the transaction cost plus 10 cents. The prices vary on the basis of merchant volume and other factors. Retailers often try to coax customers at the point of sale to use the PIN-based products. This practice is called "steering," which Mr. Bomse said is permitted under Visa rules. But opponents of the associations have said that before the Federal Trade Commission and others began looking into the retailers' claims, Visa's rules prohibited steering. Mr. Frankel said that though retailers may steer consumers toward using the less expensive products, the banks and associations are doing the opposite. He said he recently got a mail offer from Bank One Corp. that entered cardholders in a sweepstakes only when they used their signature-based debit cards. "Consumers are rewarded for using the most expensive, and not the least expensive, system," Mr. Frankel said. (The American Banker, March 9, 2001) CREDIT CARDS: Customers Can Sue Chevy Chase Bank Over Rate Hike --------------------------------------------------------------- Maryland's highest court ruled unanimously on March 8 that a group of credit card customers could sue Chevy Chase Bank over its 1996 decision to increase its interest rates above 24 percent after it promised it wouldn't. The decision by the Court of Appeals of Maryland centered on an arbitration issue. It said consumers did not waive their right to a trial when the bank sent out a "change of terms" notice to cardholders saying all disputes would be resolved through arbitration instead of the courts. The consumers allege that the bank breached its promise that interest rates "will never exceed 24 percent" -- the maximum rate permissible under Maryland law. In January 1996, the bank relocated its home office to Virginia, where there are no state limits on interest rates. It soon began raising its rates, charging some consumers 27 percent or 28 percent, even on balances accrued before the company moved to McLean, the suit said. The bank tried to block the suit, citing the arbitration clause, and a local judge in Baltimore agreed. But the high court struck down the provision because the arbitration clause said the process would be started "at the request and expense of the claiming party" -- something the cardholders didn't seek. The case will now go back to a lower court, which will hear the breach of contract dispute on the credit card interest rate. The high court's narrowly crafted opinion affects only Maryland consumers and companies. But lawyers on both sides of the issue said that they expect it to be cited in dozens of other cases around the country. Consumer advocates are challenging the mandatory arbitration provisions now being written into many consumer contracts by banks, auto dealers and retailers. Businesses argue that arbitration provisions limiting a consumer's ability to file suit help resolve disagreements faster and less expensively than the courts. Consumer advocates say arbitration can cost consumers thousands of dollars and limit the gathering of evidence that could give consumers a better chance of winning a case. Court opinions have varied widely on these provisions. Lawyers predict that consumer advocates will cite the Maryland ruling because the court said federal arbitration law does not preempt Maryland law. Under federal law, consumers usually cannot appeal a court arbitration order until a final decision is issued in the case. But the Maryland court ruled that consumers can immediately appeal a Maryland court order requiring arbitration -- as was done in the Chevy Chase case -- even before the arbitration process has begun. Paul Bland, an attorney for Trial Lawyers for Public Justice, which filed the case on behalf of the Chevy Chase cardholders, hailed the decision as a "real victory for cardholders who will now have their day in court instead of in an arbitration process they never agreed to." Bland estimated that several hundred thousand cardholders will be eligible to be part of a class-action suit. Leslie A. Nicholson, executive vice president and general counsel for Chevy Chase Bank, said that while the bank "respectfully disagrees with the court's narrow reading of the arbitration clause, the bank continues to believe this matter will be concluded in the bank's favor when the case returns to the trial court. The bank complied with applicable federal and state laws in amending its cardholder agreements in early 1996 and these amendments were not even challenged by the plaintiffs until 1999." Alan Kaplinsky, a attorney in Philadelphia who represents several financial institutions, said he was "disquieted" by the court's finding that the federal arbitration provisions do not apply to appeals of state court arbitration rulings. But he said he thought the ruling was a "nonevent" because its key argument in striking down the arbitration provision would not apply to most such clauses. Chevy Chase Bank had sold its credit card assets to First USA by the time the cardholder suit was filed in 1999. But it contended that the dispute had to be resolved through mandatory arbitration, as required by the agreement it sent to cardholders in early 1996. The Circuit Court of Baltimore agreed, with Judge Joseph H. Kaplan ruling that the arbitration clause "provides a fair and cost-efficient arena to solve problems between the parties." The case now returns to Kaplan's court. (The Washington Post, March 09, 2001) FORD MOTOR: Lawyers Ask $3 Bil for Damages Due to Fauty Ignition Part --------------------------------------------------------------------- Attorneys pressing a class-action lawsuit against Ford Motor Co. over a faulty ignition part are asking an Alameda County Superior Court judge to order the carmaker to pay about $3 billion in damages. "We're asking for $1,000 in statutory damages each for (an estimated 3 million Ford owners in California)," plaintiffs' attorney Paul Nelson said. Judge Michael E. Ballachey made a historic ruling in October, ordering the automaker to recall a faulty ignition part called the thick film ignition, or TFI. The judge found that Ford knew that the distributor-mounted TFI would heat up and fail, causing stalling, but that it did nothing about it. Ballachey is supposed to preside over a jury phase of the trial to determine the amount of punitive damages, if there are any. However, Nelson said, according to state law in this type of case, the plaintiffs can collect either statutory or punitive damages. Because the judge already has found the auto giant guilty under the state Consumers Legal Remedies Act, he can award the $1,000 minimum statutory amount to each class member, according to the plaintiffs' motion filed March 5 in Alameda County. The actual damages can be taken care of through the recall, which is being worked out by a court-appointed referee, Nelson said. Ford attorney Richard Warmer said he is working on a reply to the plaintiffs' motion. "I don't think it'll be appropriate until we state our position (in court papers)," Warmer said. Ballachey is expected to rule on the issue on March 23.(The San Francisco Chronicle, March 9, 2001) HIP IMPLANT: CEO Says Sulzer Sufficiently Insured to Cover All Claims --------------------------------------------------------------------- Sulzer AG unit Sulzer Industries chief executive officer Fred Kindle said the divestment of Sulzer Infra and Sulzer Textil will be concluded by the middle of next year. Speaking at the company's full-year results conference, Kindle said the group also intends to reduce the size of its management and to slim down its board of directors. Commenting on the recent recall of 25,000 deficient hip implants in the U.S., Sulzer unit Sulzer Medica AG chief executive officer Andre Buchel said the company is sufficiently insured to cover all claims. Moreover, Buchel said he is convinced that class actions and lawsuits filed in connection with the recall will prove unfounded. (AFX European Focus, March 9, 2001) Kerr-Mcgee: Sued in Mississippi for Creosote Syndrome ----------------------------------------------------- In a class action complaint filed earlier this month in federal court in Mississippi, Plaintiffs charge that years of toxic creosote contamination by the Kerr-McGee wood treatment plant in Columbus, Mississippi have caused Creosote Syndrome illnesses and property damage in that community of 250,000 residents. The complaint was filed by Lundy & Davis, L.L.P., Roda & Nast, P.C. and Bennett Lotterhos Sulser & Wilson, P.A. The Columbus operation is one of six plants in Kerr-McGee's Forest Products Division, which collectively treat about 40 percent of railroad crossties sold in the United States. The Columbus wood treatment plant has been in operation since 1928. The Mississippi plant applies creosote chemicals to wooden railroad crossties. According to the complaint, up until the mid 1970s, PCP (pentachlorophenol) and creosote, were used. The use of PCP was later discontinued, and coal-tar creosote is now used. The complaint alleges that creosote is toxic to humans, and additional toxic substances are produced through the treatment process. The class action lawsuit was filed on behalf of numerous Columbus residents who allege that Kerr-McGee should take responsibility for contamination of the environment. According to Louisiana lawyer, Hunter Lundy, Plaintiffs' counsel in the suit, "The contamination from operations at Kerr-McGee occurs at numerous points during the wood treatment process. Drips, spills, leaks, accidents, air emissions and waste disposal practices throughout the years and continuing into the present have led to widespread contamination of the plant site and neighboring community." "Ask any resident of Columbus and he or she can tell you about the strong creosote odor that permeates the air throughout Kerr-McGee's neighborhood and the surrounding area," said Dianne M. Nast, a Pennsylvania attorney who is one of co-counsel to Plaintiffs in the suit. "This odor is caused by creosote vapors, a toxic substance released into the air at the plant," Nast said. Uncontrolled releases of creosote waste have spread from the plant into the environment, the complaint alleges, and large, open ditches transport waste products from the plant to the Lauxapalilla Creek. "Sediment and soil in the ditches and on the banks have been significantly contaminated as a consequence of Kerr-McGee's waste discharge practices," explains Mississippi attorney Richard (Dick) Bennett, a co-counsel to Plaintiffs. "Children who have played in this ditch have been exposed to dangerous, toxic substances," Bennett said. Residents living in close proximity to the plant have a Creosote Syndrome disease rate much higher than in a similar population not exposed to creosote, according to the complaint. Health problems typical of Creosote Syndrome include respiratory diseases and reproductive and neurological disorders, according to the complaint. The complaint also alleges that the value of property owned by class members in the affected area has been substantially diminished because of Kerr-McGee's environmental contamination. The complaint seeks money damages and class-wide medical monitoring. Contact: Hunter W. Lundy of Lundy & Davis, L.L.P., 337-439-0707, or fax, 337-439-1029, or Dianne M. Nast of Roda & Nast, P.C., 717-892-3000, or fax, 717-892-1200, or Richard T. Bennett of Bennett Lotterhos Sulser & Wilson, P.A., 601-944-0466, or fax, 601-944-0467 NIKE JORDAN: Lawyer Alleges Design of Sports Shoes Is Too Cutting Edge ---------------------------------------------------------------------- On Jan. 31, 14-year-old Aaron Farquharson was playing basketball during gym class at Miami Palmetto Senior High School. He was wearing a new pair of Nike Jordan Trunner 2000 cross-training sports shoes, which he had received for Christmas. At one point during the game, he jumped for a rebound. A thin piece of metal on the outside of one of his heels had come loose and protruded from the shoe, forming a sharp edge. As Farquharson returned to earth, the sliver of metal allegedly stabbed his calf, causing a gash that required 14 stitches. Since then, Nike USA Inc. has acknowledged the perils of this line of shoes. On Feb. 22, the company announced a nationwide recall of its Jordan Trunner LX and Jordan Trunner 2000 cross-training shoes, offering a store credit to anyone who returned the footwear. The shoes cost $ 100 to $ 125 a pair. Nearly 300,000 pairs have been sold. Feeling he deserved more than a store credit as compensation, Farquharson's father, Leonard, a Miami-Dade police officer, called Kendall attorney John W. McLuskey, a partner at the nine-lawyer firm McLuskey McDonald & Payne. McLuskey promptly shipped young Farquharson's shoe to David Fried, a sports shoe expert in New York. "Our expert took one look at the sneaker and could tell that whoever designed it was not thinking straight," McLuskey says. "This kind of accident was bound to happen." So, just four days after Nike announced its recall, McLuskey filed a negligence and product liability suit in U.S. District Court in Miami against the Beaverton, Ore.-based company. The suit alleges that Nike "breached its duty of reasonable care" by negligently designing, constructing, manufacturing, testing and inspecting the shoes. "As direct cause of the negligence of Nike, plaintiffs suffered the injuries and damages," the suit states. The suit also alleges that the "shoe was defective in manufacture in that it failed to keep the sharp metal strip in the heel area of the shoe from protruding from the shoe so as to create a sharp knife-like edge which caused injury when coming in contact with human flesh." McLuskey hasn't specified any damage figure yet. He hopes to get the suit certified for class-action status nationwide, which is why he filed it in federal court. This isn't the first time Nike has had to recall a line of shoes because of a wayward piece of metal. In 1998, the company took back 350,000 pairs of the Nike Air Face Up basketball shoes because a decorative metal rivet on the outside of the shoe tended to bend and form a sharp edge. The company had received nearly 40 reports from young basketball players who complained about cuts on their lower legs. No class-action suit emerged from that recall. Ken Jiles, a spokesman for the U.S. Consumer Product Safety Commission in Washington, D.C., says Nike complied fully with federal law by publicly announcing its most recent recall and offering a refund. Officials at Nike's corporate headquarters did not return phone calls seeking comment about the recall or about the Farquharsons' suit. So far, the Farquharsons are the only clients named in McLuskey's would-be class-action suit. But the Kendall attorney says he's confident more will turn up. McLuskey hasn't previously handled a class-action suit for a plaintiff, though he says he's helped defend insurance companies against class-action suits. McLuskey plans to place newspaper ads around the country looking for people injured by the Nike shoes. He claims he's not looking for a big payoff. "I really see this as almost a pro bono matter," he says, adding that he took the case for the sake of "consumer rights." cross-training shoes, offering a store credit to anyone who returned the footwear. The shoes cost $ 100 to $ 125 a pair. Nearly 300,000 pairs have been sold. Feeling he deserved more than a store credit as compensation, Farquharson's father, Leonard, a Miami-Dade police officer, called Kendall attorney John W. McLuskey, a partner at the nine-lawyer firm McLuskey McDonald & Payne. McLuskey promptly shipped young Farquharson's shoe to David Fried, a sports shoe expert in New York. "Our expert took one look at the sneaker and could tell that whoever designed it was not thinking straight," McLuskey says. "This kind of accident was bound to happen." So, just four days after Nike announced its recall, McLuskey filed a negligence and product liability suit in U.S. District Court in Miami against the Beaverton, Ore.-based company. The suit alleges that Nike "breached its duty of reasonable care" by negligently designing, constructing, manufacturing, testing and inspecting the shoes. "As direct cause of the negligence of Nike, plaintiffs suffered the injuries and damages," the suit states. The suit also alleges that the "shoe was defective in manufacture in that it failed to keep the sharp metal strip in the heel area of the shoe from protruding from the shoe so as to create a sharp knife-like edge which caused injury when coming in contact with human flesh." McLuskey hasn't specified any damage figure yet. He hopes to get the suit certified for class-action status nationwide, which is why he filed it in federal court. This isn't the first time Nike has had to recall a line of shoes because of a wayward piece of metal. In 1998, the company took back 350,000 pairs of the Nike Air Face Up basketball shoes because a decorative metal rivet on the outside of the shoe tended to bend and form a sharp edge. The company had received nearly 40 reports from young basketball players who complained about cuts on their lower legs. No class-action suit emerged from that recall. Ken Jiles, a spokesman for the U.S. Consumer Product Safety Commission in Washington, D.C., says Nike complied fully with federal law by publicly announcing its most recent recall and offering a refund. Officials at Nike's corporate headquarters did not return phone calls seeking comment about the recall or about the Farquharsons' suit. So far, the Farquharsons are the only clients named in McLuskey's would-be class-action suit. But the Kendall attorney says he's confident more will turn up. McLuskey hasn't previously handled a class-action suit for a plaintiff, though he says he's helped defend insurance companies against class-action suits. McLuskey plans to place newspaper ads around the country looking for people injured by the Nike shoes. He claims he's not looking for a big payoff. "I really see this as almost a pro bono matter," he says, adding that he took the case for the sake of "consumer rights." (Miami Daily Business Review, March 8, 2001) NORTEL NETWORKS: Burt & Pucillo Announces Securities Lawsuit Filed in NY ------------------------------------------------------------------------ Pursuant to Section 21D(a)(3)(A)(i) of the Securities Exchange Act of 1934, Notice is hereby given that on March 7, 2001, a class action lawsuit alleging violations of the federal securities laws was filed in the United States District Court for the Eastern District of New York against Nortel Networks Corporation (NYSE:NT) and certain of the officers and directors of that Company. The action is captioned Smith v. Nortel Networks Corporation, et al., Civil Action No. 01cv1361, and is brought on behalf of a class of persons who purchased the common stock of Nortel Networks Corporation ("Nortel" or the "Company") during the period from November 1, 2000 through and including February 15, 2001 (the "Class Period"). The complaint charges that Nortel and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing materially false and misleading financial information concerning the demand for the Company's product. Specifically, the complaint asserts that during the Class Period, Nortel touted strong revenue and earnings guidance for first quarter and fiscal year 2001. On January 18, 2001, Nortel issued a press release announcing that it would "continue to outpace the market and gain profitable market share" despite the "tightening of capital within the telecom sector." All along, however, the complaint alleges, that Nortel executives knew that the Company was experiencing a substantial shortfall in sales and earnings due to decreased orders from its customers. The complaint alleges that on February 15, 2001, after the close of trading and just 28 days after issuing a bullish first quarter forecast, defendants issued a stunning press release dramatically lowering Nortel's guidance for first quarter and fiscal year 2001 because of decreased demand for its product. On February 16, 2001, the stock plummeted as much as 36% to $19.50 on enormous trading volume in excess of 20 million shares, finally closing at $20.02 - erasing nearly $33 billion in market capitalization. Moreover, the complaint alleges that, during the Class Period but before the devastating announcement on February 15, 2001, Nortel's senior management sold substantial amounts of Nortel stock, reaping proceeds of over $7 million from insider sales. Contact: Burt & Pucillo, LLP, West Palm Beach Michael J. Pucillo or Wendy H. Zoberman 561/835-9400 or 800/349-4612 law@burt-pucillo.com or burtpucill@aol.com PACIFIC LUMBER: To Pay Millions In 1996-97 Humboldt Landslide Suit ------------------------------------------------------------------ Pacific Lumber Co. has agreed to pay $3.3 million to the victims of a catastrophic mudslide on the steep slope of a clear-cut mountain that wiped out nearly half of the Humboldt County hamlet of Stafford. The mudslide, wide as a football field and 25 feet high, caught residents by surprise during a torrential rainstorm on Dec. 31, 1996, and Jan. 1, 1997. It destroyed seven houses. Pacific Lumber, Humboldt County's biggest employer, initially denied that its logging operation on the watershed above Stafford was the cause of the mudslide, but settled just as the trial was to have begun in Eureka before visiting Judge Frank Petersen. Michael R. O'Neal -- also known as "Mountain Mike" -- lead plaintiff among the 26 who will share in the settlement, said that he feels vindicated. "Pacific Lumber went in there three times and clear-cut on what was practically a vertical slope, and they said it was our fault," he said. "We put a dent in them. At least it'll deter them before they start logging over other people's houses." The settlement includes $150,000 to be paid by Barnum Timber, which owns the land below the area clear-cut by Pacific Lumber. As part of the settlement, Pacific Lumber will install lights at the base of the mountain. In the wake of the landslide, Pacific Lumber has installed a pond and levee system aimed at preventing a reoccurrence of mudslides on the still-unstable slope that could damage some of Stafford's remaining houses. The ancient redwood in which Julia (Butterfly) Hill made her epic two-year tree sit to protect logging excesses stands near the top of the hill where the mudslide occurred.E-mail Eric Brazil at ebrazil@sfchronicle.com. (The San Francisco Chronicle, March 9, 2001) PARTY CITY: Faces 12 Securities Suits in N.J. at Early Stage ------------------------------------------------------------ Party City Corp. has been named as a defendant in twelve class action complaints. The Company's former Chief Executive Officer and former Chief Financial Officer and Executive Vice President of Operations have also been named as defendants. The complaints have all been filed in the United States District Court for the District of New Jersey. The complaints were filed as class actions on behalf of persons who purchased or acquired Party City common stock during various time periods between February 1998 and March 19, 1999. In October 1999, plaintiffs filed an amended class action complaint and in February 2000, plaintiffs filed a second amended complaint. The second amended complaint alleges, among other things, violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeks unspecified damages. The plaintiffs allege that defendants issued a series of false and misleading statements and failed to disclose material facts concerning, among other things, the Company's financial condition, adequacy of internal controls and compliance with certain loan covenants. The plaintiffs further allege that because of the issuance of a series of false and misleading statements and/or failure to disclose material facts, the price of Party City common stock was artificially inflated. Defendants have moved to dismiss the second amended complaint on the ground that it fails to state a cause of action. The Court has not yet issued a decision with respect to the motion to dismiss. Because this case is in its early stages, no opinion can be expressed as to its likely outcome. On April 23, 1999, plaintiff Emil Asch, Inc. ("Emil Asch") filed a complaint in the United States District Court for the Eastern District of New York against the Company and co-defendants Amscan, Inc., Hallmark, Inc., and Rubie's Costume. The complaint alleges five claims which pertain to price discrimination under the Robinson-Patman Act, unfair competition, tortious interference with contractual relations, and false and deceptive advertising. Plaintiff seeks damages of $2 million, as well as treble and punitive damages for certain counts. On February 3, 2000, Emil Asch amended its complaint by adding Ron's: The Party Store, Inc., as an additional plaintiff to the suit. The amended complaint asserts the same causes of action against the same defendants and seeks the same damages that were sought in the original complaint. The Company has answered the amended complaint, and discovery is proceeding. At this point, no opinion can be expressed as to the likely outcome of the litigation. The Company's management is unable to express a view on the likely outcome of these litigations because they are in their early stages, they could have a material adverse effect on the Company's business and results of operations. SMART WORLD: Bragar Wexler Announces Commencement of Securities Lawsuit ----------------------------------------------------------------------- The law firm of Bragar Wexler Eagel & Morgenstern, LLP has commenced a class action on behalf of a purchaser and all other similarly situated purchasers of Smart World Technologies, LLC securities from November 1, 1999 through June 29, 2000, inclusive (the "Class Period"). The Complaint seeks remedies for violations of Section 12(a)(1) and (a) (2) of the Securities Act of 1933 against the defendants as control persons pursuant to Section 15 of the Securities Act. The Complaint alleges that during the Class Period, the Company failed to register the Company's offering of securities with the Securities and Exchange Commission as required by Sections 6 and 7 of the Securities Act, and no exemption from registration was applicable to the Company's securities offering. In addition, the Complaint alleges that in connection with the offering, the Company made misstatements of material facts, and omitted material facts from its disclosures required so as not to make the disclosures misleading, all in connection with the Company's financial condition, and prospects for financing the Company's business. On June 29, 2000, the Company and two of its subsidiaries filed for protection under the Bankruptcy Code. Contact: Bragar Wexler Eagel & Morgenstern, LLP Paul D. Wexler, Esq., 212/308-5858 Wexler@BragarWexler.com TOBACCO LITIGATION: 70-Year-Old Ex-Smoker First To Receive Compensation ----------------------------------------------------------------------- Grady Carter, a 70-year-old ex-smoker who lost a lung to cancer, proved the tobacco industry and legal analysts wrong when he walked away from his lawyer's Jacksonville office last Thursday March 8 with a $ 1.1 million check from Brown & Williamson Tobacco Corp. Carter, a retired air-traffic controller who used to live in Plantation, is the first person to collect money from a tobacco company after beating them in court. A jury awarded him $ 750,000 in compensatory damages in 1995, and that amount continued to accrue interest as the case wound its way through the appellate courts. Carter was pragmatic about his victory. "I've lost a lung and Brown & Williamson lost $ 750,000, so I think I came out on the short end of the deal," he said during a telephone call from his Orange Park home last Thursday evening. Carter's lawyer, who handed the check over to his client during a news conference, was more grandiose. "Brown & Williamson has tried everything to stop this from happening and they couldn't. Try as they might, they were ultimately, and for the first time, held responsible for the damage caused by their product," said Woody Wilner, Carter's attorney. But a Brown & Williamson spokesman urged Carter not to spend the money. The Florida Supreme Court upheld the verdict against the cigarette maker, but the company still plans to appeal it to the U.S. Supreme Court, said Mark Smith, a company spokesman. The cigarette maker claims it should have been exempt from liability because of the warning labels on cigarette cartons, Smith has said. But Wilner scoffed at that argument. He considers the case over. On March 7, the state Supreme Court refused to allow the cigarette maker to avoid paying Carter while the company pursues the federal appeal. And on March 8, Carter's lawyers accepted a wire transfer from the company for the full $ 1,087,191. The company must also pay Wilner's fee. Wilner took the case in 1995, after several attorneys refused to take on the tobacco company. Carter, who started smoking as a teen in the late 1940s, was finally able to kick the habit in 1990. But the following year, after coughing up blood, he was diagnosed with lung cancer. About two years later, he fumed as he sat before his television and watched executives from the world's largest cigarette companies testify before Congress that their products were not addictive. "I knew how hard it was for me to quit, and I felt I had to do something about it," Carter said. But many lawyers were not willing to use their own money to take on tobacco. Others before them had tried, only to run out of cash as the tobacco companies, which had deeper pockets, dragged the cases out through the appeals courts. Finally, Carter found Wilner, who had handled some asbestos cases and in the process come across documentation about the hazards of cigarette smoking. "My goal was for the cigarette company to say that nicotine was addictive and that smoking did cause severe medical problems," said Carter. "At my trial they said it wasn't addictive and it had not been proved that tobacco caused health problems, but I knew better." And Wilner said that he and the other lawyers in his firm who worked on the case were the first to bring forth evidence about the hazards of cigarettes that had been discovered by tobacco industry scientists who later became whistleblowers. And the legal team also presented evidence showing there were safer alternatives the tobacco companies had chosen not to employ, Wilner said. "And I'm proud to say it was right at that point where things started changing very rapidly for the cigarette industry," he said. Last year, in the statewide class action case against the industry, a jury in Miami-Dade Circuit Court ordered the country's five largest cigarette manufacturers to pay a record $ 145 billion to Florida's sick smokers. Brown & Williamson, based in Louisville, Ky., was one of the firms to lose in that case. The industry is appealing it. Anti-tobacco activists hailed Carter's payout as pivotal. "What this means is that the tobacco industry and their friendly Wall Street analysts, who have been saying for years that plaintiffs' lawyers will never get involved in these cases until someone actually sees the money, are going to have to change their tune," said Richard Daynard, president of the Tobacco Control Research Center at Northeastern University in Boston. "Today, they paid." Carter, who has to have a checkup every three months and worries every time he has a slight cough, said he didn't enter this courtroom battle for the money. His plea is much more personal. "If anyone out there is smoking, please stop. If you haven't started, don't," he said. (Information from The Associated Press was used to supplement this report, published in (Sun-Sentinel (Fort Lauderdale, FL), March 9, 2001) UNITED-US: Air Deal Stuck with Fed Regulators, May Need Changes --------------------------------------------------------------- Stuck in a lengthy holding pattern with federal regulators, United Airlines' long-pending merger with US Airways may not fly until more changes in the deal are made, analysts say. The latest delay in the nearly 10-month-old merger review process, announced earlier this week, has increased skepticism on Wall Street that the biggest-ever airline merger will be consummated as proposed. US Airways' stock price, considered a barometer of market confidence in the deal's ultimate approval, fell sharply. Justice Department spokeswoman Gina Tallamona declined comment on reports in USA Today and The Washington Post that the $4.3 billion deal appears to be in antitrust trouble. But the department's request Tuesday for more information about the deal, extending the review period indefinitely beyond an April 2 target date, has some industry experts assuming the worst. Transportation Secretary Norman Mineta indicated last week that an in-depth analysis will be made on the competitive aspect of all mergers. While Justice Department regulators have the final say, analysts suggest that DOT's additional scrutiny could be a determining factor. ``The current thinking is that the deal's not going to be rejected outright, it will just be continually postponed,'' Ray Neidl, an airline analyst for ING Barings, said from London. ``United probably wants US Air enough to make more concessions. But maybe at some point it'll come down to the fact that, at $60 a share, it's just not worth doing the deal,'' he said. In an effort to ease anti-competitive concerns and ensure government approval, United agreed in January to sell some US Airways assets to American Airlines, including half of US Airways' Washington-New York-Boston shuttle. There has been speculation of more selloffs coming. Elk Grove Village, Ill.-based United issued a statement labeling as ``not based on fact'' reports that the deal is in jeopardy because it would enable the merged airline to dominate East Coast routes and several major airports. United, the world's largest airline, said additional new competition from both it and American in key East Coast markets, where currently Delta Air Lines and US Airways are strong, ``would benefit consumers and communities.'' Another potential obstacle to a smooth implementation of the merger is ongoing labor trouble. The International Association of Machinists and Aerospace Workers, which represents about 60,000 United employees, opposes the merger. And members of the Association of Flight Attendants, who want their current contract with United re-examined, say they could strike if the merger is approved. United said any strike or slowdown by the AFA would violate federal labor law, and the airline promised to seek damages and an injunction against the union and participating flight attendants. Analysts and other experts can only guess at the regulators' final decision, and opinions remain split. Julius Maldutis of CIBC World Markets thinks that while American's acquisition of Trans World Airlines is likely to obtain approval because it involves a failing airline, the United-US Air deal is unlikely to pass muster. ``The fact of the matter is it would create a carrier that would have significant market dominance,'' he said. Robert Milmore of Arnhold and S. Bleichroeder said there are ``too many moving pieces,'' including ongoing labor woes at United, for the Justice Department to rush a decision by an arbitrary deadline. ``It still can get done,'' he said of the United-US Air deal. ``But it may take some more divestitures.'' Neidl said that before this week he thought the merger had two chances in three to succeed, but now he puts the odds of passing at ``even money.'' On the Net: http://www.united.com http://www.usair.com(The Associated Press, March 8, 2001) WILLIAM GOREN: Sentence Due for Securities Fraud; Millions Are Missing ---------------------------------------------------------------------- From 1983 to 2000, William Goren stole more than $30 million from investors on Long Island and in Queens. His favorite targets were widows and retired couples, like Helga and Simon Novack, Holocaust survivors who gave Mr. Goren their life savings. Mr. Goren spent $2.5 million of the money he stole on his home, according to authorities. He spent $680,000 on his cars. He spent $650,000 on vacations. He spent $306,000 on jewelry. Mr. Goren, who pleaded guilty to securities fraud in September, was scheduled to be sentenced March 9 in Federal District Court in Central Islip. He is expected to receive a sentence of about six years under a plea agreement. But prosecutors say they still cannot account for millions of dollars that Mr. Goren stole, money that could ensure Mr. Goren, 54, a comfortable retirement when he leaves prison. The people whom Mr. Goren defrauded would like to know what happened to the money he stole, all of it. And they worry that if they do not get an answer now, before he is sentenced, they will never know. "Since William Goren embezzled our money, our everyday lives have become terribly difficult," Mrs. Novack wrote in a letter to Judge Thomas C. Platt, who is overseeing the case. "It would be an embittering experience were this perpetrator to go free after five or six years. It would be an even greater travesty were he to then enjoy the proceeds of his crimes." Mr. Goren operated one of the longest-running Ponzi schemes in the nation's history from his brokerage office in Melville, N.Y., according to prosecutors and the Securities and Exchange Commission. In a Ponzi scheme, a promoter pays back his initial investors with money he has raised from new investors. Eventually, the promoter can no longer find enough new investors to pay off the people who have already put up money, and the scheme collapses. Mr. Goren told some investors they were buying high-risk, high-return promissory notes. But most victims thought they were buying brand-name mutual funds or money market funds, which are intended for risk-averse investors. In fact, Mr. Goren spent most of the money on himself, his office or ill-fated business ventures, prosecutors say. Over all, investors lost $32.7 million, according to records provided to Judge Platt by the S.E.C. and by Richard L. Stone, the receiver who took control of Mr. Goren's assets. Jeremy Temkin, Mr. Goren's lawyer, would not comment on the case and said that Mr. Goren would not be available for comment. "He ruined hundreds of lives, and in many cases the victims were elderly or retired," said Sigmund Wissner-Gross, a lawyer for the investors defrauded by Mr. Goren, who are bringing a class-action lawsuit charging that Fleet Bank and other third parties aided Mr. Goren's fraud. Fleet declined comment on the charges. Mr. Wissner-Gross said he was concerned that federal prosecutors had not done enough to make sure that Mr. Goren had given up all the money he stole. "I'm not yet persuaded that a full investigation has been done to determine the location of that money," he said. Mr. Goren carried large amounts of cash and frequently traveled overseas, giving him many opportunities to hide money, Mr. Wissner-Gross said. Until earlier this month, Mr. Goren was unable to account for more than $8 million of the money he stole, according to court records. In the last two days, that figure has been cut to less than $2 million, according to people close to the case, who said Mr. Goren had accounted for more money spent between 1983 and 1995. David Pitofsky, the assistant United States attorney overseeing the case, said his office and the Federal Bureau of Investigation had tried to investigate whether Mr. Goren had hidden any money. "I'm satisfied that the investigation was as complete as it could be and didn't turn anything up," he said. Mr. Goren was required to swear that he had not hidden any assets, and if he is discovered to have lied, he could face additional charges, Mr. Pitofsky said. Federal sentencing guidelines call for Mr. Goren to be imprisoned for 63 to 78 months, according to the September plea agreement, although Judge Platt could impose a different sentence. Mr. Goren's recommended sentence was lightened because he cooperated with prosecutors and the receiver, Mr. Pitofsky said. (The New York Times, March 9, 2001) * Census Data for N.J., WI and MS Finds Diversity Spreading to Suburbs ---------------------------------------------------------------------- From the Northeast to the Midwest and Deep South, racial and ethnic diversity once concentrated in the nation's cities has spread significantly into suburbs and small towns, according to the 2000 census data for New Jersey, Wisconsin and Mississippi. "The new diversity is different from the old," said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at New Jersey's Rutgers University. "We're seeing both concentration in cities and dispersion across the suburbs." All three states mirrored the national trend of burgeoning Hispanic and Asian populations relative to much slower growth rates among whites and blacks. In New Jersey, non-Hispanic whites has declined by 2.8 percent, or 161,757 people, since 1990. The Hispanic populations in Mississippi and Wisconsin more than doubled over the decade, while New Jersey's long-established Hispanic presence grew 51 percent, to 1.1 million -- accounting for more than half of the state's population growth since 1990, according to data released. The number of Asians in all three states rose more than 80 percent, and in New Jersey, with a 93 percent increase, Asians were the fastest-growing racial minority. Officials attributed the dispersion of racial and ethnic minorities to the spread of job opportunities as the economy strengthened throughout the 1990s. By far the largest growth among Hispanics in New Jersey came in more urban areas near New York. But it was evident also in fast-growing, suburban Somerset County, which was once exclusive "horse country." Somerset County provides a microcosm of the diverse growth patterns. Known as the nation's medicine chest because of its concentration of pharmaceutical companies, the county's population grew about 24 percent over the decade as high-tech and science-oriented businesses expanded, followed by residential and commercial growth. Racial and ethnic minorities flocked to job opportunities in the high-paying high-tech sector and the minimum-wage service industries. Over the decade, Somerset had the state's fastest-growing Hispanic population and second-fastest-growing Asian population. Its black population also grew by more than half. The county's Asian growth was mirrored in wealthy Montgomery Township, where school enrollment swelled from 1,522 in 1991 to more than 4,000 this year. The township approved $ 34 million for school construction in a referendum in the mid-1990s and another $ 70 million last fall. Meanwhile, there was a large influx of Hispanics in older, middle-class North Plainfield borough. Over the decade, the borough hired its first Hispanic police officers and a Spanish-language translator in the borough hall. Failing downtown businesses reopened as Spanish-style restaurants, said borough business administrator John Katilas. In all three states, growth occurred much faster in small to mid-sized towns than larger cities, continuing the suburbanization trend evident in the 1990 census. But none of their cities hemorrhaged as much as they did in the 1980s. Milwaukee lost 5 percent of its population and Mississippi's capital city, Jackson, lost 6 percent, but Newark, which lost more than 16 percent in the 1980s, held almost even in the 1990s. The census shows New Jersey's largest city shrank 0.6 percent. State labor commissioner Mark Boyd said immigration was largely responsible for the leveling-off of New Jersey's urban population. He said the state's many ethnic communities served as magnets. Mayor Sharpe James, who believes Newark was undercounted in 1990, said many residents were too fearful of the government to fill out census forms, despite a vigorous campaign to get them to comply. He said he will join with Los Angeles in a class action suit demanding a recount based on statistical sampling. (The Washington Post, March 09, 2001) * Japan Needs More Lawyers, L.A. Times Presents a Changing Situation -------------------------------------------------------------------- For centuries, Japan's harmonious methods for settling disputes helped shape the nation's cultural identity. And as recently as the 1980s, the country credited its relative paucity of lawyers as one reason Japan Inc. was drubbing the rest of the world. Of course, Japan today, with its struggling economy, is no longer so fearsome. And it might be sheer coincidence, but suddenly the Japanese need lawyers -- so desperately that they're offering special payments to attorneys willing to move to the country's mostly rural lawyer-free zones. That's right, subsidies for lawyers. While small towns in America often help foot the bill for doctors willing to move to their communities, Japan is doing the same for lawyers, guaranteeing them an annual income of as much as $ 150,000. Masaki Kunihiro, 54, was the first to sign up under the so-called Sunflower Fund program. He had visions of a quiet, rustic life when he moved to Hamada, on the Japan Sea, last year. After decades spent in Kyoto and Tokyo, he looked forward to lots of time to read, hike and grow vegetables. He has managed to start a small garden, but his books remain unpacked eight months later as he deals with an enormous pent-up demand for legal services. "The first day I arrived in my office, there were 15 people waiting," Kunihiro said. "It's been a veritable flood ever since." The ability of the Japanese to mediate and compromise their way to agreement and consensus paid huge dividends in the years after World War II by skirting obstacles to economic progress. While Americans, in particular, learned to sue anything that moved, Japan made its way in the global marketplace unburdened by the costly delays of lawsuits. Humorist Russell Baker once suggested that, to level the playing field, the United States send Japan a lawyer every time Japan sends the United States a car. Evidence suggests, however, that the Japanese are quick to fight for their rights in court if given half a chance. As cost and regulatory barriers fall, the number of shareholder, copyright protection, civil and criminal lawsuits has more than doubled since 1990. Some recent examples: Shareholders have filed a $ 1.7-billion class-action suit against Sumitomo Corp. over its massive copper-trading losses. Mitsubishi Motors stockholders are contemplating a suit over the auto maker's two-decade-long cover-up of consumer complaints. And Dai-Ichi Kangyo Bank and Cosmo Securities have settled shareholder suits alleging management misdeeds out of court. That said, the Japanese doubt they will ever become as litigious as Americans. "I think Japanese people have more common sense," said Etsuko Asanaka, a secretary at the Iwami Legal Counseling Center in Shimane prefecture. "I've heard that some Americans sue fast-food restaurants if they spill coffee on themselves. Japanese know how to take responsibility." Japan has just 4% as many lawyers as the United States. Japan has set a goal of reaching France's level of one lawyer per 1,900 people. That compares with its current level of about one per 7,155 people and America's world-beating one lawyer per 295 people. The relative scarcity of lawyers here is the result not only of a consensus-driven society but also of a long-running resistance by lawyers themselves to any efforts to expand their numbers, introduce substantive reforms or make the law accessible to the masses. The bar exam has a 3% pass rate; law school graduates routinely try five or six times before they succeed. Much routine legal work is done by nonlawyers. Thus, though lawyers in America have an image problem, in Japan they enjoy a kind of rarefied stature, in part because there are so few of them. "I've never seen an attorney," said Noriaki Miyakoshi, a 30-year-old employee of a government agency. "I'm not even sure I know very much about them." Marc Galanter, a University of Wisconsin law professor who is compiling a book of lawyer jokes, says he has searched for years for a Japanese lawyer joke without success. The Sunflower Fund was started by Japan's National Federation of Bar Assns. to address a growing demand for legal services in remote areas. About 68 of Japan's 315 court districts have just one lawyer or none at all. The fund estimates that, even in the most remote areas, lawyers will make $ 45,000 a year. To lure them there, it guarantees them an additional $ 105,000 in income and as much as $ 35,000 for office space, computers and staff. Among the perks, as outlined in bar association publications: Be a big deal in a small town. Enjoy great scenery. Fish. Play lots of golf. Even so, it hasn't been an easy sell. About 60% of Japanese lawyers are concentrated in Japan's two main cities of Tokyo and Osaka, and few seem eager to move to the sticks. "When we try and recruit people, most say they don't want to go," said Toshikazu Nagaoka, an attorney and a Sunflower Fund administrator. Lawyer Mika Matsumoto, 26, agreed to spend two years in snowy Hokkaido, Japan's northernmost island, in the small town of Mombetsu. Her mission: to shine a legal light where none had shown before. As far as anyone can tell, she said, Mombetsu had never had a lawyer. Matsumoto said she heard about the Sunflower Fund and figured everyone would jump at it. "I was so surprised to find I was the only one to apply," she said. People in Mombetsu, meanwhile, are excited she's coming. They're doing everything possible to make sure she doesn't change her mind. During a recent look-see trip, town elders spent the entire time downplaying the cold weather, treating her at the best restaurants, talking up local attractions. Matsumoto, an avid skier, figures she'll make more money than she would working in a city, gain valuable experience and have fun at the same time. Back in Hamada, meanwhile, Kunihiro hasn't had to take advantage of the bar association's income guarantee. With his heavy workload, he's pulled down $ 180,000 in his first six months. One problem with the Sunflower system, funded by a monthly $ 8.40 contribution from each of Japan's 17,000-plus attorneys, is that it takes two lawyers to argue a civil case, but many districts have only one. "We have to start somewhere," said administrator Nagaoka. In the past, in lieu of attorneys, Japan tended to rely on go-betweens to settle disputes. That might mean bringing in a neighbor to help resolve a petty dispute or a local dignitary for more substantive problems. Despite the image of social harmony such a system evokes, critics say it often has resulted in powerful adversaries exploiting weaker players who were expected to suffer in silence, no matter how great the injustice. "The system was used to protect the powerful," said Eric Feldman, associate director of New York University's Institute for Law and Society. In the last decade, however, Japan's view of legal services has changed, sociologists and legal experts say. Increasingly, mediators are ill-equipped to handle complex technical and financial disputes. More people distrust bureaucrats, politicians and corporations, so ordinary Japanese are less willing to forgo their rights or suffer indignities quietly. And the weak economy has pushed people further into debt, spurring use of bankruptcy law. A few of the 60 cases Kunihiro has so far accepted include land disputes going back generations. More common are so-called sarakin problems, the Japanese term for the often-rapacious loan companies that sprouted like mushrooms during the 1990s to lend people money at exorbitant rates as the economy tanked. In Hokkaido, lawyer Matsumoto says relieving hard-working locals of their debt burdens is her highest priority. With the closest lawyer more than 100 miles away, the Mombetsu area has long been "sarakin heaven," she said. "With no one watching them, they did whatever they wanted." To some extent, however, the paltry number of Japanese lawyers is deceiving. Almost as many people study undergraduate law here as attend U.S. law schools. But many end up doing legal work at banks and other enterprises, never becoming full-fledged attorneys. Only attorneys can file suits and appear in court. Robert Grondine, Tokyo-based partner with the New York law firm White & Case and president of the American Chamber of Commerce in Japan, says the barriers to lawyers reflect in part a fear of change, a desire to maintain the status quo and a bid to protect the livelihoods of a privileged few. One unfortunate side effect has been a social dependence on organized crime for help in settling thorny disputes, Grondine says. Recently, however, as legal demand from Japan's own companies and citizens has exploded, politicians, bureaucrats and the bar association have become more open to reform. Under discussion now is a doubling of law school graduates, introduction of a partial jury system, faster handling of cases so they don't take up to 20 years to resolve and making sure that judges have a legal rather than a bureaucratic background. But reform comes slowly in Japan. In a stinging critique, attorney Shumpei Uemura criticized judges for making decisions that lacked common sense, and called for them to be "chosen from the ranks of lawyers." That was in 1898. (Makiko Inoue in The Times' Tokyo bureau contributed to this report, published in Los Angeles Times, March 9, 2001) ********* 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. 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