/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/020325.mbx C L A S S A C T I O N R E P O R T E R Monday, March 25, 2002, Vol. 4, No. 59 Headlines ALABAMA: Supreme Court To Rule On Dispute Over Franchise Tax Refunds CONSTELLATION ENERGY: Labels "Without Merit" Race Bias Suit in Maryland CONSTELLATION POWER: Faces Suit Over Fraudulent Power Contracts in CA DIXON INDUSTRIES: Recalls 28,000 Lawn Mowers Over Burn, Injury Hazard EXMARK MANUFACTURING: Recalls 21,000 Riding Mowers Due To Fire Hazard HENRY SCHEIN: Asks Texas Court To Allow Review Of Class Certification ILLINOIS: IL Court Grants Certification To Intrust Depositors Suit MAJOR LEAGUE: Massachusetts Court Says Soccer League Not A Monopoly PREMCOR REFINING: IL Residents Sue For 1994, 2000 Used Catalyst Release TORO COMPANY: Voluntarily Recalls 13T Riding Mowers Due To Fire Hazard UNITED STATES: INS Says Haitian Policy Set To Deter Future Refugees XEROX CORPORATION: Employees Commence Race, Gender Bias Suit With EEOC *Arizona Homeowners Fight Bill Giving Builders More Defect-Fixing Time Securities Fraud ADVANCED SWITCHING: To Mount Vigorous Defense V. Securities Suits in VA BRISTOL-MYERS CORP.: Wolf Haldenstein Lodges Securities Suit in S.D. NY BROADCOM CORPORATION: Federal Suit Dismissed, Derivative Suits Pending CALPINE CORPORATION: Cauley Geller Commences Securities Suit in N.D. CA CALPINE CORPORATION: Schiffrin Barroway Lodges Securities Suit in CA DYNACQ INTERNATIONAL: Bernstein Liebhard Lodges Securities Suit in TX ENRON CORPORATION: Appeals Court Upholds Prohibition on State Suits GLOBAL CROSSING: Schoengold Sporn Commences Securities Suit in S.D. NY L90 INC.: Milberg Weiss Commences Securities Fraud Suit in C.D. CA LEXENT INC.: Securities Suit Will Not Affect Financials, Operations LEXMARK INTERNATIONAL: Sued For Securities Act Violations in E.D. KY MDI ENTERTAINMENT: Shareholders Sue To Block Sale of Shares in Delaware MICROSTRATEGY INC.: Court Allows Distribution of Securities Settlement NEWPOWER HOLDINGS: Rabin Peckel Commences Securities Suit in S.D. NY ONI SYSTEMS: To Mount Vigorous Defense Against Securities Suit in NY ONI SYSTEMS: Shareholders Sue To Block Merger With CIENA Corporation PACIFICARE HEALTH: Asks For Dismissal of Securities Suit in C.D. CA PACIFICARE HEALTH: California Securities Suit Over FHP Merger Dismissed PNC FINANCIAL: Bernstein Liebhard Commences Securities Suit in W.D. PA RAYTHEON COMPANY: Moves For Dismissal of Securities Fraud Suit in ID WESTPOINT STEVENS: Emerson Firm Files Derivative Suit in GA State Court WILLIAMS COMPANIES: Goodkind Labaton Lodges Securities Suit in N.D. OK ********* ALABAMA: Supreme Court To Rule On Dispute Over Franchise Tax Refunds -------------------------------------------------------------------- Attorneys for corporations recently urged the Alabama Supreme Court to grant class action status to companies seeking some $1 billion in franchise tax refunds, the Associated Press recently reported. However, lawyers for the state of Alabama argued that the thousands of companies claiming back taxes are required by law to file lawsuits separately, not as a class. The Supreme Court will rule on the issue later, and justices commenting from the bench praised attorneys on both sides for their arguments. They gave no indication, however, how the court might decide. Chuck Dauphin, an attorney for the class of companies suing the state, said Alabama should be required to allow a class action as a remedy for unconstitutionally taking the companies' money. "Otherwise, the state would be inundated with thousands and thousands of lawsuits all arguing the same thing," Mr. Dauphin said after the hearing. Attorneys representing some of the companies, including Gladwin Corporation, Arizona Chemical and Jefferson Smurfit, claim state officials are hoping that if class action status is denied the companies, small out-of-state companies will not seek refunds on their own due to the legal expense and time involved, thereby saving the state money. Joe Espy, a Montgomery lawyer representing Alabama, said the companies should follow the procedures set out in the state law for getting refunds rather than going to court. "One way is to pay the tax and appeal or, the other way is to say you don't owe it and protest," Mr. Espy said. Mr. Espy also maintains the state cannot be sued in this tax dispute because the Alabama Constitution grants the state immunity. Nearly 400 out-of-state companies have sued the state for franchise tax refunds, and 2,700 more are seeking refunds from the state Revenue Department. Some 15,500 out-of-state companies currently doing business in Alabama have not sought refunds. The US Supreme Court ruled Alabama's franchise tax unconstitutional in 1999, because it taxed out-of-state companies doing business in Alabama at a higher rate than Alabama-based companies. The state replaced the franchise tax with new taxes that were supposed to raise the same amount of revenue as the franchise tax. However, the new taxes have not lived up to expectations. CONSTELLATION ENERGY: Labels "Without Merit" Race Bias Suit in Maryland ----------------------------------------------------------------------- Constellation Energy Group faces a discrimination class action filed in the US District Court for the District of Maryland, on behalf of 150 past and present employees at the Calvert Cliffs Nuclear Power Plant. The suit also names as defendants: (1) Baltimore Gas and Electric Company, (2) Constellation Nuclear and (3) Calvert Cliffs Nuclear Power Plant The suit alleges racial discrimination at the nuclear power plant. The amount of damages is unspecified, however the plaintiffs seek back and front pay, along with compensatory and punitive damages. The Court scheduled a briefing process for the motion to certify the case as a class action for the beginning of 2003. The Company believes this case is without merit, but cannot predict the timing, or outcome, of the suit or its possible effect on the Company's financial results. CONSTELLATION POWER: Faces Suit Over Fraudulent Power Contracts in CA --------------------------------------------------------------------- Constellation Power Development, Inc. faces a class action filed in the Superior Court, County of San Francisco, California, seeking damages of $43 billion, recession and reformation of approximately 38 long-term power purchase contracts, and an injunction against improper spending by the state of California. The suit also names California governor Gray Davis, and 21 other power companies as defendants. The Company is named as a defendant but does not have a power purchase agreement with the state of California. However, its High Desert Power Project does have a power purchase agreement with the California Department of Water Resources. The Company believes this case is without merit. However, it cannot predict the timing, or outcome, of it or its possible effect on its financial results. DIXON INDUSTRIES: Recalls 28,000 Lawn Mowers Over Burn, Injury Hazard --------------------------------------------------------------------- Dixon Industries, Inc. is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling about 28,000 riding lawn mowers. The fuel tanks on these mowers can crack and leak fuel, posing a fire hazard and risk of burn injuries to consumers. The Company has received about 532 reports of fuel leaking from these mowers. There are no reports of injuries or property damage, other than minor lawn damage. The recall includes the following model Dixon ZTR riding mowers, which are blue, with the serial numbers in the following ranges: (1) Model 2301 - 2555 through 3100, (2) Models 3303 and 3304 - 54241 through 66276, (3) Model 3014 - 14116 through 23741, (4) Model 4421 - 88987 through 89316, (5) Models 5020, 5022, 5023, 5503 - 2118 through 6575, (6) Models 5017, 5423, 5424, 5425 - 4580 through 5835, (7) Model 5502 - 8484 through 8547, (8) Model 5601 - 2103 through 2116, and (9) Classic Series - 97579 through 97798, or 97844 through 97883 The model numbers are located on the body of the mower near the bottom of the seat, or on both sides of the front of the body above the wheels. The serial numbers are located on the left rear corner of the riding mowers, behind the engine. The name "DIXON" is on the front of the mowers. Dixon dealers sold these mowers nationwide at various time periods from July 1997 through March 2002 for between $2,500 and $7,400. For more information, contact the Company by Phone: 877-288-6673 between 8 am and 5 pm CT Monday through Friday, or visit the Firm's Web site: http://www.dixon-ztr.com. EXMARK MANUFACTURING: Recalls 21,000 Riding Mowers Due To Fire Hazard --------------------------------------------------------------------- Exmark Manufacturing is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling about 21,000 Exmark-brand commercial-grade, riding mowers. The riding mower's exhaust system can ignite fuel vapors from spilled fuel if the engine backfires. The Company has received 15 reports of fires caused when these mowers backfired and ignited nearby fuel vapors. At least one serious burn injury was reported, and two other users reported minor burns. Property damage has varied from minor damage to the machine itself to several thousand dollars damage to other mowing equipment stored nearby. The recall includes Exmark-brand Lazer Z HP series riding mowers, which are red. They are equipped with 17 to 23 horsepower engines and have mowing decks from 44 to 52 inches. The mowers have independently controlled rear-drive wheels, front casters, and a centrally mounted mowing deck. The brand and series names (Exmark Lazer Z HP) appear on the front of the mower. Exmark dealers nationwide sold these riding mowers between January 1998 and December 2001 for between $6,000 and $7,300. For more information, contact the Company by Phone: 800-479-8379 between 8 am and 5 pm CT Monday through Friday by E-mail: service@exmark.com or visit the firm's Web site: http://www.exmark.com HENRY SCHEIN: Asks Texas Court To Allow Review Of Class Certification --------------------------------------------------------------------- The Texas Supreme Court allowed a review of a Texas federal court's order granting class certification to a lawsuit against direct mail company, Henry Schein, Inc., charging the Company with consumer fraud and violating certain state laws. The suit was originally commenced in Texas District Court, Travis County against the Company and one of its subsidiaries, alleging among other things: (1) negligence, (2) breach of contract, (3) fraud, and (4) violations of certain Texas commercial statutes involving the sale of certain practice management software products sold prior to 1998 under the Easy Dentalr name. In October 1999, the Court, on motion, certified both a Windowsr sub- class and a DOS sub-class to proceed as a class action pursuant to Texas R.Civ. P.42. It is estimated that 5,000 Windowsr customers and 15,000 DOS customers could be covered by the court's ruling. In November 1999, the Company filed an interlocutory appeal of the certification to the Texas Court of Appeals on the issue of whether this case was properly certified as a class action. In September 2000, the appeals court affirmed the federal court's certification order. In January 2001, the Company asked the Texas Supreme Court to find "conflicts jurisdiction" to permit review of the federal court's class certification, but the high court dismissed the petition in August 2001. The Company filed a motion for rehearing in September 2001 requesting that the high court reconsider and reverse its finding that it is without conflicts jurisdiction to review the case. The Texas Supreme Court granted this motion for rehearing and withdrew its August 2001 order. The Court heard oral arguments for the review on February 6, 2002, but has yet to release a decision. Pending a decision by the Supreme Court, a trial on the merits, currently scheduled for July 2002, will be stayed. ILLINOIS: IL Court Grants Certification To Intrust Depositors Suit ------------------------------------------------------------------ Investors who deposited money in the failed Independent Trust Corporation (Intrust) have been granted class action status in a lawsuit filed against the state regulator that oversaw the Orland Park firm, the Chicago Sun-Times reported recently. The class action status approved by the Illinois Court of Claims Chief Justice Andrew Raucci, means the lawsuit against the Illinois Office of Banks and Real Estate will represent some 12,000 depositors of Intrust. Depositors lost some of their investments after the regulator shut down the company in April 2000 and discovered $68.1 million missing. A criminal investigation is pending. It means that all of the former Intrust depositors will be represented in this case and eligible for the share of any recovery," said attorney Michael Behn of Futterman & Howard, one of the attorneys representing former Intrust clients. "Now, instead of a $3 million or $4 million case, it's a $70 million case to the state." People who are eligible to belong to the class include: (1) people who held trust accounts with Intrust; (2) investors who were forced by another court to give up nearly nine percent of their account values to make up the shortfall; and (3) account-holders who had to pay any expenses or fees related to the state's takeover of Intrust Mr. Behn said he and other attorneys are now working to get the Office of Banks' financial oversight documents of Intrust, a good deal of which are confidential, released to the public. He believes these documents could prove regulators knew what was going on at Intrust, but did not act swiftly enough. "We would like the public and certainly the class members to know the confidential reports the state was issuing about Intrust," Mr. Behn said. Intrust has been sold and is being run by new owners under the name Millennium Trust Corporation. MAJOR LEAGUE: Massachusetts Court Says Soccer League Not A Monopoly ------------------------------------------------------------------- A federal appeals court in Boston recently gave a victory to Major League Soccer owners, upholding a jury decision that rejected the Players' claims that the League is an illegal monopoly designed to depress salaries, the Associated Press recently reported. The players had filed an antitrust class action in US District Court, accusing the League of keeping salaries low in order to increase profits, and of conspiring with the US Soccer Federation to eliminate competition for top players. After a three-month trial, a jury agreed with the League's owners that the League was not a monopoly because it competed with Division I leagues in Europe and Latin America, and with minor leagues in the United States. When the players appealed the jury's ruling, the First US Circuit Court of Appeals upheld the jury decision, saying "The jury found that control of US Division I soccer would not comprise a monopoly." The players claimed in their lawsuit that there could be a thriving marketplace for soccer leagues and players in the United States if soccer's governing body would sanction other Division I leagues. However, the jury, which heard testimony that Major League Soccer lost $250 million in its first five years, agreed with the owners that two leagues would overwhelm the limited American interest in the sport. Players also claimed that the centralized ownership structure of the League was itself an antitrust violation. That claim was thrown out before trial. "The players are obviously very disappointed with the decision," said Jeffrey Kessler, the lawyer for the players. "However, the fight for player rights and free agency does not end here," he said. PREMCOR REFINING: IL Residents Sue For 1994, 2000 Used Catalyst Release ----------------------------------------------------------------------- Petroleum company, Premcor Refining Group, Inc., faces a class action in Illinois Trial Court, after their Blue Island refinery experienced an accidental release of used catalyst into the air in October 1994 and in June 2000. The suit seeks damages for alleged property damage and personal injury resulting from the catalyst release. The suit was later amended to add allegations of subsequent events that allegedly diminished property values. In June 2000, the Blue Island refinery experienced an electrical malfunction that resulted in another accidental release of used catalyst into the air. Following the 2000 catalyst release, two cases were filed purporting to be class actions. Both cases seek damages for alleged property damage and personal injury resulting from that catalyst release. These cases have been consolidated for the purpose of conducting discovery, which is currently proceeding. TORO COMPANY: Voluntarily Recalls 13T Riding Mowers Due To Fire Hazard ---------------------------------------------------------------------- The Toro Company is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling about 13,000 Toro-brand commercial-grade, riding mowers. The riding mower's exhaust system can ignite fuel vapors from spilled fuel if the engine backfires. The Company has received 10 reports of fires caused when these mowers backfired and ignited nearby fuel vapors. One serious burn injury was reported. Property damage was limited to varying degrees of damage to the mowers. The recall includes Toro-brand Zmaster Z100 series riding mowers. They are red, equipped with 17 to 23 horsepower engines and have mowing decks from 44 to 52 inches. The mowers have independently controlled rear-drive wheels, front casters, and a centrally mounted mowing deck. The brand and model names (Toro Zmaster) appear on the front of the mower. Toro dealers nationwide sold these riding mowers between January 1998 and December 2001 for between $6,000 and $7,300. For more information, contact the Company by Phone: 800-225-0578 anytime or visit the firm's Web site: http://www.Toro.com. UNITED STATES: INS Says Haitian Policy Set To Deter Future Refugees ------------------------------------------------------------------- The Immigration and Naturalization Service (INS) has issued a response to the class action recently filed against the agency on behalf of more than 240 Haitians held in detention since December of last year, The Miami Herald recently reported. Peter Michael Becraft, acting deputy INS commissioner in Washington, explained that the INS is no longer routinely releasing Haitian asylum- seekers as part of a strategy to deter the refugee exodus from the impoverished nation of Haiti. This statement, contained in a court filing in Miami, is the first public explanation that the indefinite detention of Haitian nationals at Krome Service Processing Center and other facilities is meant as a message to prospective refugees not to attempt the perilous voyage to Florida. Until the arrival of 187 Haitians by sea on December 3, the Miami INS district office had regularly paroled asylum-seekers if they could show a credible fear of persecution in Haiti. The release was done pending a final resolution by an immigration judge on their asylum request. INS officials contend the releases were the result of a discretionary practice by the Miami district office and was not part of a nationwide INS policy. However, the reason for the change had not been explained until Mr. Becraft's statement contained in the court filing. "In the wake of this sharp increase in dangerous maritime departures from Haiti," Mr. Becraft wrote, "adjusting the INS' parole criteria" would be a "reasonable step" to discourage future trips. The class action was filed by several Miami immigration attorneys, including Cheryl Little, executive director of Miami-based Florida Immigrant Advocacy Center, and Ira Kurzban, a longtime defender of Haitian refugee rights. Mr. Kurzban said that Mr. Becraft's statement strengthens their argument that the INS is discriminating against Haitian asylum-seekers. "The government has acknowledged that they are using the Haitians' national origin as a criteria to determine parole decisions," Mr. Kurzban said. "The Supreme Court in 1985 ordered the government not to use race or national origin as criteria to determine parole, and therefore they (the government) are in violation of a direct order from the Supreme Court." The federal government's lawyers urged US District Judge Joan Lenard to dismiss the lawsuit on the grounds it would undermine the authority of the US government to decide whether a foreign national is admissible. XEROX CORPORATION: Employees Commence Race, Gender Bias Suit With EEOC ---------------------------------------------------------------------- Xerox Corporation faces a class action filed with the US Equal Employment Opportunity Commission by its employees from New York to Texas and South Carolina to California who have repeatedly complained of a pattern and practice of discrimination. The suit, filed by Leeds, Morelli & Brown, a leading civil rights firm, reveal that on a daily basis, Company employees are assaulted with degrading racial epithets, while management and human resources stand by and fail to respond to employees' cries for help. The complaints made by plaintiffs are both race and gender-based. Instances of discrimination faced by Company employees, according to the charges include: (1) small African-American dolls and "Afro-picks" were hung from nooses in the workplace; (2) white employees and supervisors regularly referred to the Company as "the ghetto" because it had hired so many people of Color; (3) a photograph of an African-American female employee was doctored by a white supervisor in order to portray the woman as a prostitute which carried the caption "Five Dolla, Make Ya Holla." This photo was displayed throughout the workplace repeatedly; (4) a white team leader told an African-American employee that the entertainer, James Brown, is a "super nigger" because he is wealthy; (5) when African-American employees came to work in the morning, they were questioned, "You're coming in here kinda late. What have you been doing, selling crack all night?" (6) white employees were allowed to display "neo-Nazi" or "skinhead" paraphernalia in the workplace; (7) a "joke book" filled with hundreds of examples of discriminatory and offensive jokes and pictures was copied and bound on Xerox equipment by employees, was distributed throughout the company. The suits also state that there are patterns of a lack of promotional opportunity and equal compensation, and asserts that minority employees find themselves passed over in favor of junior white applicants who lack their experience and credentials. In addition, minority employees find that they are paid less than their counterparts for performing the same functions, which range from vice president to equipment repair associates. Another dimension to the case, cited in the charges, is the systemic retaliation against those who have the temerity to raise complaints about the unjust treatment they suffered. Pleas to management and human resources repeatedly were ignored or mocked. "As a direct result of the conduct of Xerox, our clients say they have suffered depression and have become withdrawn from family and friends," noted Len Leeds, partner at Leeds, Morelli & Brown, lawyer for the plaintiffs. "These egregious acts of discrimination have caused degradation and severe emotional distress. Through this complaint, we hope to set an example to companies large and small that this behavior cannot and will not be tolerated." The complaints are rampant throughout the operations division of the Company. In May 2001, the sales force at Xerox filed a nationwide, race-based class action alleging unequal treatment and racial steering. For more information, contact Robert Zimmerman, Stacey Martin by Phone: 516-829-8374. *Arizona Homeowners Fight Bill Giving Builders More Defect-Fixing Time ---------------------------------------------------------------------- Angry state of Arizona homeowners packed a legislative committee hearing Monday to oppose a bill that would extend the time during which builders may fix construction defects, the Associated Press recently reported. The case of Tracy Schofield and her husband of Gilbert, Arizona, is typical of the dozens of people who packed the hearing room in opposition to the bill. She and her husband bought their $300,000 house two years ago. Since then, they have been fighting with the builder over cracks throughout the foundation and walls and missing parts in the framework. The couple has spent about $100,000 on inspections, engineering reports and legal fees. They are now considering a lawsuit. The bill (HB2620) would require a homeowner who experiences problems to write a letter to the builder listing the problems. The builder would then have 90 days to inspect the home and propose how to fix the problems. Finally, the owner would have 30 days to accept or reject the proposed solutions. If either side does not follow the process, that information could be used against them in court. After four hours of testimony, the committee endorsed the bill by a 6-2 vote, with two members abstaining. It now moves to the state's House for consideration. The builders who support the bill fear expensive class actions over construction defects. "Where you build 36,000 homes.you are going to have some problems," said Kevin O'Malley, an attorney representing the builders. "We are talking about encouraging people to get together and solve their problems." Alexander Passavoy, a construction consultant from Scottsdale, said other homeowners can be hurt when lawyers press class-action defect suits. Two years ago, lawyers offered homeowners in Mr. Passavoy's development the opportunity to join a lawsuit over poor stucco work. Only four of the 1,038 owners joined in, but the lawsuit made real estate agents and potential buyers question all the homes, Mr. Passavoy said. "Our community had a cloud over its head; real estate values plummeted," he said. However, the majority of the people who came to testify at the hearing on the bill described lengthy, frustrating attempts to get builders to fix problems that culminated in little success. They want a bill that would offer them the kind of protection leading to results, not one that forces them to wait even longer. Representative Jeff Hatch Miller, R-Paradise Valley, voted for the bill, but said he will pursue amendments that offer homeowners some relief "so it is not so one-sided. The current system through the Registrar of Contractors is not getting people the relief they seek," he said. Securities Fraud ADVANCED SWITCHING: To Mount Vigorous Defense V. Securities Suits in VA ----------------------------------------------------------------------- Advanced Switching Communications, Inc. labeled "without merit" the securities class action pending in the United States District Court, Eastern District of Virginia on behalf of purchasers of its securities between October 5, 2000 and February 12, 2002, inclusive. The suit names as defendants the Company and: (1) Asghar D. Mostafa, (2) Harry J. D'Andrea, (3) Robert Ted Enloe, III, (4) Betsy S. Atkins, (5) Ronald S. Westernik, and (6) Morgan Stanley Dean Witter The suit alleges that defendants violated Sections 11 and 15 of the Securities Act of 1933 by issuing a materially false and misleading prospectus and registration statement in connection with the Company's initial public offering (IPO). The suit further states that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between October 5, 2000 and February 12, 2002, thereby artificially inflating the price of Company securities. The Company intends to contest these claims vigorously. However, the outcome of the suits cannot be predicted. BRISTOL-MYERS CORP.: Wolf Haldenstein Lodges Securities Suit in S.D. NY ----------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP initiated a securities class action in the United States District Court for the Southern District of New York, on behalf of purchasers of Bristol-Myers Squibb Company (NYSE: BMY) between September 19, 2001 and January 4, 2002, inclusive, against the Company and certain of its officers. The suit alleges that defendants violated the federal securities laws by making itself, and allowing its drug development partner to make, without correction, materially false and misleading statements about the progress of its Erbitux cancer treatment drug's application for FDA approval even as the Company knew that the application and data were false. Specifically, the complaint alleges that on December 28, 2001, a press release disclosed that the FDA had rejected the filing of a Biologics License Application for Erbitux. On January 4, 2002, The Cancer Letter reported that the FDA repeatedly informed defendants about problems with the Erbitux clinical trials during the class period. These shocking revelations caused the stock to plummet from a class period high of $56 to below $50 - and now to $40. For more details, contact Fred T. Isquith, Gustavo Bruckner, Michael Miske, George Peters, Derek Behnke by Mail: 270 Madison Avenue, New York, New York 10016 by Phone: 800-575-0735 or by E-mail: classmember@whafh.com. E-mail should refer to BRISTOL-MYERS. BROADCOM CORPORATION: Federal Suit Dismissed, Derivative Suits Pending ---------------------------------------------------------------------- The United States District Court for the Central District of California dismissed the consolidated securities class action pending against Broadcom Corporation and certain of its top officers for alleged federal securities act violations. The consolidated suit arose from thirty-one lawsuits, alleging violations of the Securities Exchange Act of 1934. The suit was filed on behalf of all persons who purchased the Company's public securities, or bought or sold options on the Company's stock, between July 31, 2000 and February 26, 2001 and alleges claims under Sections 10(b) and 20(a) of the 1934 Act and Rule 10b-5 promulgated thereunder. The essence of the allegations was that the defendants intentionally failed to properly account for the financial impact of performance- based warrants assumed in connection with Broadcom's acquisitions of Altima Communications, Inc., Silicon Spice, Inc., Allayer Communications, SiByte, Inc., and Visiontech Ltd., which plaintiffs alleged had the effect of materially overstating the Company's reported financial results. The suit further asserted that the defendants intentionally engaged in this alleged improper accounting practice to inflate the value of the Company's stock and thereby obtain alleged illegal insider trading proceeds, as well as to facilitate the use of the Company's stock as consideration in other acquisitions. The suit also alleged that there was inadequate disclosure regarding the warrants and the terms of the particular agreements at issue. The Company filed a motion to dismiss the complaint under the Private Securities Litigation Reform Act of 1995 and Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, and that motion was granted by the court on March 11, 2002. The court granted plaintiffs leave to file a second amended complaint within twenty days of the court's order, and the Company anticipates that plaintiffs will do so. The Company believes the suit is without merit and intends to defend any amended complaint vigorously. The Company, along with its directors and officers, face five shareholder derivative actions - four of which were filed in the Superior Court of the State of California for the County of Orange, and one which was filed in the US District Court for the Central District of California. The four state suits were later consolidated. The parties have stipulated that the federal case will be stayed while the consolidated derivative lawsuit proceeds in the California Superior Court. These derivative suits are based upon the same general set of alleged facts and circumstances outlined above in connection with the shareholder class action. These lawsuits were filed as shareholder derivative actions under California law and allege that certain of the individual defendants sold shares while in possession of material inside information (and that other individual defendants aided and abetted this activity) in purported breach of their fiduciary duties to the Company. The suits also allege: (1) breaches of fiduciary duties and gross mismanagement, (2) waste of corporate assets and abuse of control based upon the same general set of alleged facts and circumstances alleged in the federal class action, and upon an additional allegation (made only in the state derivative action) that the defendants intentionally failed to properly account for the financial impact of warrants assumed in connection with the Company's acquisition of NewPort Communications, Inc. The suits also purport to allege violations of the California Corporations Code against certain of the individual defendants for alleged insider trading. Pursuant to court order, on March 8, 2002 the plaintiffs filed their consolidated amended complaint in the state action. The Company believes the allegations in these purported derivative actions are also without merit and intends to defend the actions vigorously. CALPINE CORPORATION: Cauley Geller Commences Securities Suit in N.D. CA ----------------------------------------------------------------------- Cauley Geller Bowman & Coates, LLP initiated a securities class action in the United States District Court for the Northern District of California on behalf of purchasers of Calpine Corporation (NYSE: CPN) common stock during the period between January 5, 2001 and December 13, 2001, inclusive. The suit charges the Company and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. The Company owns, develops, acquires, and operates power-generation facilities and sells electricity and steam, primarily in the US Calpine's stock, which went public in 1996, on a split adjusted basis, went from $2 at the IPO stage to over $33 in January 2001. The suit alleges that the Company's stock price was very important because the Company was planning at this time to build or acquire $15 billion of plants over the next four years. The financing for these plants was based on the performance of its stock because many of its bond buyers were looking to convert to common stock. If the stock did not perform, financing would be difficult to fund the Company's expansion. However, certain of the Company's manipulative transactions, including those with Enron, such as inflated revenues, began to emerge on December 9, 2001. On December 14, 2001, prior to the market opening, Moody's Investors Service announced that it might cut the credit rating on the Company's $11.6 billion of debt to junk. In response, Company shares plummeted to $12.50, a more than 26% drop. Then, after the close of the market on December 14, 2001, Moody's Investors Service announced that it had in fact cut its rating of the Company's debt to junk. As now revealed, at all times during the class period, defendants issued false and misleading statements and press releases concerning the Company's sale of and demand for power and its ability to generate sufficient cash revenue to service its debt. During the class period, before the disclosure of the true facts, the defendants sold their personally held Company common stock generating more than $34 million in proceeds and the Company raised billions of dollars in a series of debt offerings. For more information, contact Jackie Addison, Sue Null or Shelly Nicholson by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944 or by E-mail: info@classlawyer.com CALPINE CORPORATION: Schiffrin Barroway Lodges Securities Suit in CA -------------------------------------------------------------------- Schiffrin & Barroway, LLP initiated a securities class action in the United States District Court for the Northern District of California on behalf of all purchasers of the common stock of Calpine Corporation (NYSE: CPN) from January 5, 2001 through December 13, 2001, inclusive. The suit charges the Company and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. Calpine owns, develops, acquires, and operates power-generation facilities and sells electricity and steam, primarily in the US Calpine's stock, which went public in 1996, on a split adjusted basis, went from $2 at the IPO stage to over $33 in January 2001. The suit alleges that the Company's stock price was very important because the Company was planning at this time to build or acquire $15 billion of plants over the next four years. The financing for these plants was based on the performance of its stock because many of its bond buyers were looking to convert to common stock. If the stock did not perform, financing would be difficult to fund the Company's expansion. However, certain of the Company's manipulative transactions, including those with Enron, such as inflated revenues, began to emerge on December 9, 2001. On December 14, 2001, prior to the market opening, Moody's Investors Service announced that it might cut the credit rating on the Company's $11.6 billion of debt to junk. In response, Company shares plummeted to $12.50, a more than 26% drop. Then, after the close of the market on December 14, 2001, Moody's Investors Service announced that it had in fact cut its rating of the Company's debt to junk. As now revealed, at all times during the class period, defendants issued false and misleading statements and press releases concerning the Company's sale of and demand for power and the Company's ability to generate sufficient cash revenue to service its debt. During the class period, before the disclosure of the true facts, the defendants sold their personally held common stock generating more than $34 million in proceeds and the Company raised billions of dollars in a series of debt offerings. For more information, contact Marc A. Topaz or Stuart L. Berman by Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone: 888-299-7706 (toll free) or 610-667-7706 or by E- mail: info@sbclasslaw.com DYNACQ INTERNATIONAL: Bernstein Liebhard Lodges Securities Suit in TX --------------------------------------------------------------------- Bernstein Liebhard and Lifshitz LLP initiated a securities class action on behalf of all persons who acquired Dynacq International, Inc. (NASDAQ: DYII) securities between November 29, 1999 and January 16, 2002, inclusive, in the United States District Court for the Southern District of Texas against the Company, Chiu Moon Chan, and Philip S. Chan. The complaint charges the Company and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the class period, defendants represented that the Company's favorable financial results were due to its commitment to quality and cost-effective care. Throughout the class period, defendants repeatedly stated that the Company's financials were strong and that it was consistently achieving "record results." Defendants actually knew that the quality of the Company's balance sheet was eroding, that it was violating federal law in the maintenance of its facilities, and that it improperly cared for patients. Then, on February 4, 20002, it was revealed that one of the named defendants, Chiu Moon Chan, was identified by a news agency as one of the 15 largest insider sellers for the reported week of January 25, 2002 to February 1, 2002. The news agency report stated that Mr. Chan sold approximately $525,000 worth of his personal shares in January 2002. These sales took place during the class period. For more details, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: 800-217-1522 or 212-779-1414 or by E-mail: DYII@bernlieb.com. ENRON CORPORATION: Appeals Court Upholds Prohibition on State Suits ------------------------------------------------------------------- A federal appeals court has expressed "serious reservations" about a Judge's order prohibiting lawyers from filing Enron-related lawsuits in state courts instead of joining a large federal class action, the Houston Chronicle reported recently. However, the Fifth US Circuit Court of Appeals let stand, for now, US District Judge Melinda Harmon's ruling that Fleming & Associates must stop filing suits in Texas courts against the fallen energy trader, its officers and auditors. "We have serious reservations about the propriety of a federal court's prohibition of non-class-action filings in a state forum," the appellate court said. However, the court, citing a procedural problem with the appeal, did not overturn Judge Harmon's order, but it did suggest the law firm try again another way. G. Sean Jez, a Fleming lawyer, said that he already had done so. By representing a handful of clients in several counties, the firm can obtain some leverage against the defendants and avoid being absorbed in larger class action. Federal securities law requires groups of more than 50 investors to sue in federal court. The Fleming firm always files for less than 50, although it represents more than 750 stockholders. The defense, however, is trying to keep the lawsuits in one court, where they can be covered with one settlement. GLOBAL CROSSING: Schoengold Sporn Commences Securities Suit in S.D. NY ---------------------------------------------------------------------- Schoengold & Sporn, PC initiated a securities class action in the US District Court for the Southern District of New York on behalf of all persons or institutions who acquired common shares of Global Crossing, Ltd. (NASDAQ: GBLXQ) between September 28, 1999 through and including October 4, 2001, at artificially inflated prices due to the defendants materially false and misleading statements concerning its net income and inventories. The suit alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market during the class period, thereby artificially inflating the price of the Company's common stock. Specifically, the suit alleges that the Company issued a series of statements concerning their businesses, financial results and operations which failed to disclose: (1) that the Company was experiencing declining demand for bandwidth; (2) its operating performance was artificially inflated through erroneous accounting with other telecom companies; (3) its managed network outsourcing services were declining; (4) the company was operating at levels well below company- sponsored expectations, such that revenue projections were overstated and costs and expenses were understated; (5) individual defendants and certain Company insiders sold their personally held common stock generating more than $1.5 billion in proceeds; and (6) the Company raised over $7 billion in debt and equity offerings. The Company issued announcements on October 4, 2001 overstating cash revenues and expected recurring adjusted EBITDA to be "less than $100 million," compared to forecasts of $400 million. As a result, Company shares plummeted to $1.07 per share, a decline of 49%. For more information, contact Jay P. Saltzman or Ashley Kim by Mail: 19 Fulton Street, Suite 406 New York, New York 10038 by Phone: 212-964-0046 by Fax: 212-267-8137 or by Email: Shareholderrelations@spornlaw.com L90 INC.: Milberg Weiss Commences Securities Fraud Suit in C.D. CA ------------------------------------------------------------------ Milberg Weiss Bershad Hynes and Lerach LLP initiated a securities class action on behalf of an institutional investor in the United States District Court for the Central District of California on behalf of purchasers of L90, Inc. (NASDAQ:LNTY) common stock during the period between July 26, 2001 and March 12, 2002. The suit charges the Company and certain of its officers with violations of the Securities Exchange Act of 1934. The suit alleges that as part of their effort to boost the price of Company stock, defendants misrepresented its true prospects in an effort to conceal its improper acts until they were able to conceal their fraud by selling the Company to a third party prior to filing the Company's 10-K (due March 31, 2002). In order to overstate revenues and assets in its second and third quarters of 2001, the Company violated generally accepted accounting principles and SEC rules by engaging in improper "roundtrip" transactions with HomeStore.com and its customers. These transactions had the effect of dramatically overstating revenues and assets. On February 4, 2002, the Company issued a press release entitled, "L90 Reports Regulatory Inquiries." The press release stated in part: "L90, Inc., an online media and direct marketing company, today announced that the Company has received notice from the Securities and Exchange Commission that the Commission is conducting an investigation into the Company. In connection with this investigation, the Commission has issued the Company and one of its directors subpoenas requesting documents related primarily to the Company's financial records." On this news the Company's shares plummeted by more than 50% the following trading day and continued to plummet further in the weeks that followed and defendants revealed further incriminating facts. On March 12, 2002, the Company issued a press release entitled, "L90 Provides Additional Information on Internal Investigation." The press release stated in part: "L90, Inc., an online media and direct marketing company, today provided additional information on the status of the ongoing internal investigation by the Company and the Audit Committee of its board of directors in response to the previously announced Securities and Exchange Commission investigation of the Company, and the request for information from Nasdaq Listing Investigations." For more information, contact William Lerach by Phone: 800-449-4900 by E-mail: wsl@milberg.com or visit the firm's Web site: http://www.milberg.com LEXENT INC.: Securities Suit Will Not Affect Financials, Operations ------------------------------------------------------------------- Lexent, Inc. (NASDAQ: LXNT) expressed confidence that the securities class action pending against it in the United States District Court for the Southern District of New York will not have a material effect on its financial positions or operations. The suit, filed on behalf of purchasers of the Company's securities between July 27, 2000 and December 6, 2000, inclusive, names the Company, certain of its officers and its underwriters as defendants. The suit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint further alleges that the prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which those underwriters allocated to those investors material portions of the restricted number of IPO shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares to those customers in the IPO in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices LEXMARK INTERNATIONAL: Sued For Securities Act Violations in E.D. KY -------------------------------------------------------------------- Lexmark International, Inc. labeled "without merit" the consolidated securities class action pending in the United States District Court for the Eastern District of Kentucky against the Company and certain of its officers and directors. The suit, filed on on behalf of a purchasers of the Company's stock during the period March 20, 2001 through October 22, 2001, allege that the defendants made false and misleading statements about the company's business and financial performance in violation of Sections 10(b) and 20(a) (as well as Rule 10b-5) of the Securities Exchange Act of 1934. In a disclosure to the Securities and Exchange Commission, the company stated its intention to mount a vigorous defense against the suits. MDI ENTERTAINMENT: Shareholders Sue To Block Sale of Shares in Delaware ----------------------------------------------------------------------- MDI Entertainment, Inc. faces a securities class action filed on behalf of its public stockholders in the Court of Chancery of the State of Delaware against the Company, all the members of its board of directors and Scientific Games Corporation, to enjoin the Scientific Games' acquisition of Company stock which it does not already own. The suit alleges that the consideration offered to the Company's stockholders is unfair and inadequate because the plaintiffs believes that the intrinsic value of the Company's common stock is materially in excess of the amount offered giving consideration to its growth and anticipated operating results, net asset value, and future profitability. The suit further alleges that independent valuations performed by the Company's board of directors before they approved the proposed transaction valued the Company in excess of the value of the proposed transaction. The suit further states that the defendants have approved a proposal that favors their own interests over those of the Company's public stockholders. The Company believes that the lawsuit lacks merit and intends to contest it vigorously. MICROSTRATEGY INC.: Court Allows Distribution of Securities Settlement ---------------------------------------------------------------------- The US District Court for the Eastern District of Virginia has entered the final order allowing the distribution of the settlement consideration for plaintiffs in the consolidated securities class action against Microstrategy, Inc. The suit was originally commenced as twenty-five class actions in federal courts in various jurisdictions. The suits alleged that the Company, certain of its officers and directors and its outside auditor, PricewaterhouseCoopers, LL, violated section 10(b) of the Securities and Exchange Act of 1934, as amended, Rule 10b-5 promulgated thereunder, and section 20(a) and section 20A of the Exchange Act. The suits contained varying allegations, including that the Company made materially false and misleading statements with respect to its 1999, 1998 and 1997 financial results in filings with the Securities and Exchange Commission, analysts' reports, press releases and media reports. In June 2000, these suits were consolidated, and the plaintiffs filed an amended class action complaint naming the same defendant, and alleging claims under section 10(b), section 20(a) and section 20A of the Exchange Act. On October 23, 2000, the defendants, and plaintiffs' counsel entered into a settlement agreement in the consolidated suit. Under the settlement agreement, class members will receive: (1) five-year unsecured subordinated promissory notes issued by the Company having an aggregate principal amount of $80.5 million and bearing interest at 7.5% per year; (2) 2,777,778 shares of our class A common stock; and (3) warrants to purchase 1,900,000 shares of class A common stock at an exercise price of $40 per share with the warrants expiring five years from the date they are issued. On November 7, 2001, certain of our officers tendered to us for no consideration an aggregate of 1,683,504 shares of class A common stock held by them for cancellation, in satisfaction of a condition to the settlement agreement relating to the class action. Accordingly, upon the completion of the distribution, the Company will have effected a net issuance of 1,094,274 shares of class A common stock as part of the class action settlement. On January 19, 2001, the court authorized notice of the proposed settlement to be sent to all putative class members, informing them of their rights including their rights to object to the proposed settlement and to object the proposed settlement and pursue their claims separately. On April 2, 2001, the district court approved the settlement, and the period from which an appeal could have been taken has expired. The settlement is subject to various closing conditions. On March 12, 2002, the court entered the final distribution order allowing distribution of the settlement consideration. The Company expects that the consideration will be issued to the class members in the second quarter of 2002 after the remaining closing conditions have been met. NEWPOWER HOLDINGS: Rabin Peckel Commences Securities Suit in S.D. NY -------------------------------------------------------------------- Rabin and Peckel LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all persons or entities who purchased NewPower Holdings, Inc. common stock (NYSE:NPW) between October 5, 2000 and December 5, 2001, both dates inclusive. This suit, based on violations of section 10(b) of the Securities Exchange Act of 1934, and section 11 of the Securities Act of 1933, charges the Company, certain of its officers and directors, and the underwriters of its October 5, 2000 offering with issuing false and misleading statement concerning its business and financial condition. In particular, the complaint alleges that the registration statement and prospectus for the Company's offering on October 5, 2000 contained material misrepresentations and omissions concerning the adequacy of risk management systems put in place in conjunction with Company affiliate, Enron Energy Services, Inc. (EES), and the true nature and purpose of certain related party transactions, including transactions pursuant to which Enron attempted to hedge its investment in NewPower through use of a partnership known as "Raptor III." In addition, it is alleged that the Company and certain of its officers and directors misrepresented or failed to disclose: (1) that the Company had not adopted effective and appropriate hedging strategies against volatility of commodity prices; (2) that the Company was on course to achieve its financial goals and had sufficient liquidity to do so; and (3) that certain forward contracts with EES posed little risk of loss when in truth and in fact they were driving the Company toward insolvency, and were largely structured to protect and enrich Enron, the Company's controlling shareholder. The suit alleges that as a result of these false and misleading statements the price of Company common stock was artificially inflated throughout the class period causing plaintiff and the other members of the class to suffer damages. For more information, contact Eric Belfi or Maurice Pesso by Mail: 275 Madison Avenue, New York, NY 10016 by Phone: 800-497-8076 or 212-682-1818 by Fax: 212-682-1892 or by E-mail: email@rabinlaw.com. ONI SYSTEMS: To Mount Vigorous Defense Against Securities Suit in NY -------------------------------------------------------------------- Oni Systems, Inc. faces a consolidated securities class action pending in the United States District Court for the Southern District of New York against the Company and: (1) Hugh C. Martin, chairman, president and chief executive officer; (2) Chris A. Davis, former executive vice president, chief financial and administrative officer; and (3) certain underwriters of the Company's initial public offering The suit alleges, among other things, that the underwriter defendants violated the securities laws by failing to disclose alleged compensation arrangements (such as undisclosed commissions or stock stabilization practices) in the initial public offering's registration statement. The Company and these officers are named in the complaints pursuant to Section 11 of the Securities Act of 1933, and under Section 10(b) of the Securities Exchange Act of 1934. No specific amount of damages has been claimed. The Company believes that the suit is part of the trend of securities suits that are being launched against more than 300 other issuers that have had initial public offerings since 1998. The Company further stated in a disclosure to the Securities and Exchange Commission to defend these actions vigorously. ONI SYSTEMS: Shareholders Sue To Block Merger With CIENA Corporation -------------------------------------------------------------------- ONI Systems, Inc. faces a class action filed in the Superior Court of the State of California, County of San Mateo on behalf of a purported class of Company security holders, challenging the proposed merger with CIENA Corporation. The suit names as defendants the Company and: (1) Matthew Bross, (2) Kevin Compton, (3) Jonathan Feiber, (4) Gregory Maffei and (5) Hugh Martin The suit seeks an injunction to prevent the consummation of the proposed merger with CIENA, alleging that the defendants, in connection with the approval of the proposed merger, breached their fiduciary duties, including duties of loyalty and good faith, to Company stockholders by, among other things: (1) failing to obtain the highest value for Company stockholders; (2) engaging in self-dealing and (3) unjustly enriching themselves and other insiders or affiliates of the Company. The Company believes that the lawsuit is without merit and intends to defend this action vigorously. PACIFICARE HEALTH: Asks For Dismissal of Securities Suit in C.D. CA ------------------------------------------------------------------- Pacificare Health Systems, Inc. asked the United States District Court for the Central District of California to dismiss a consolidated class action filed against the Company and its former directors and executive officers. The suit, filed on behalf of purchasers of the Company's stock from October 27,1999 to October 10, 2000, alleges that the Company made false projections about its 2000 financial performance in violation of federal securities laws, which led to the artificial inflation of the Company's stock. The first consolidated suit was commenced in April 2001. The court later dismissed the suit, but gave the plaintiffs permission to file an amended complaint. A second consolidated amended class action complaint was filed in December 2001, and on January 17, 2002, the Company again filed a motion to dismiss the second consolidated complaint. The Company denies all material allegations and will vigorously defend itself against the actions. PACIFICARE HEALTH: California Securities Suit Over FHP Merger Dismissed ----------------------------------------------------------------------- The Ninth Circuit Court of Appeals dismissed the securities class action filed against Pacificare Health Systems, Inc. and several of its directors and officers at the request of the plaintiffs in the suit. The suit was filed in the United States District Court for the Central District of California, on behalf of purchasers of the Company's common stock from February 14,1997 through November 24,1997, when the Company announced that earnings for the fourth quarter of 1997 would be lower than expected. The suit charged the Company with omitting and/or misrepresenting material facts with respect to its acquisition of FHP International, Inc. and its financial position. In October 2001, the Court dismissed the suit with prejudice and without leave to amend. Thereafter, the plaintiffs filed a notice of appeal with the Ninth Circuit Court of Appeals. The plaintiffs subsequently requested dismissal of this case, which the Appeals Court entered on March 12, 2002, thereby terminating the case. PNC FINANCIAL: Bernstein Liebhard Commences Securities Suit in W.D. PA ---------------------------------------------------------------------- Bernstein Liebhard and Lifshitz LLP initiated a securities class action on behalf all persons who acquired PNC Financial Services Group, Inc. (NYSE: PNC) securities between July 19, 2001 through January 29, 2002, in the United States District Court, Western District of Pennsylvania against the Company and: (1) Ernst & Young, LLP, (2) James E. Rohr, and (3) Robert L. Haunschild The suit alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between July 19, 2001 and January 29, 2002, thereby artificially inflating the price of Company securities. The suit alleges that, throughout the class period, defendants issued multiple press releases reporting the Company's quarterly financial performance, and filed reports confirming such performance with the United States Securities and Exchange Commission (SEC). These reports positively portrayed the Company's performance during the class period. As alleged in the complaint, however, these statements were materially false and misleading because the Company was engaged in improper and/or suspect accounting practices which affected the accuracy of its financial results and that, contrary to the statements in documents filed with the SEC during the class period, the Company's financial statements were not prepared in accordance with generally accepted accounting principles. On January 29, 2002, the Company issued a press release announcing that the Federal Reserve Board had raised concerns about accounting inaccuracies in its financial statements for the second, third, and fourth quarters of fiscal year 2001. Specifically, the Company had failed to consolidate preferred interests in three subsidiaries. As a result, the Company announced that it would restate its earnings for the second and third quarters of fiscal year 2001 and revise its fourth quarter earnings for the same year, resulting in year-end earnings being reduced $155 million to approximately $412 million, or $1.38 a share. The Company also revealed that these accounting adjustments would cause its non-performing assets to rise by $125 million to $393 million. Additionally, the Company stated that the Federal Reserve Board and SEC were making inquiries about its transactions and that the Company would cooperate with the investigations. In response to these disclosures, shares of the Company fell $5.79, or nearly 10%, to close at $56.08 on extremely heavy trading volume of 6,305,100 shares. For more details, contact Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: 800-217-1522 or 212-779-1414 by E-mail: PNC@bernlieb.com or visit the firm's Web site: http://www.bernlieb.com. RAYTHEON COMPANY: Moves For Dismissal of Securities Fraud Suit in ID -------------------------------------------------------------------- Raytheon Company asked the United States District Court in Boise, Idaho to dismiss the securities class action pending against it and certain of its officers, on behalf of all purchasers of Washington Group, Inc. (WGI) securities during the period April 17, 2000 through March 1, 2001. The suit relates to the sale of Company subsidiary Raytheon Energy and Construction (RE&C) to WGI. The suit alleges that the Company and certain of its officers allegedly violated federal securities laws by purportedly misrepresenting the true financial condition of RE&C in order to sell RE&C to WGI at an artificially inflated price. An amended complaint was filed in October 2001 alleging similar claims. The Company and the individual defendants filed a motion seeking to dismiss the action in mid-November 2001. The court heard arguments on that motion on March 7, 2002 and it is currently evaluating the parties' arguments regarding dismissal. The Company believes that it and the other defendants have meritorious defenses to the claims made in each and all of the aforementioned complaints and intends to contest each lawsuit vigorously. However, an adverse resolution of any of the lawsuits could have a material adverse effect on the Company's financial position and results of operations. WESTPOINT STEVENS: Emerson Firm Files Derivative Suit in GA State Court ----------------------------------------------------------------------- The Emerson Firm commenced a shareholder derivative lawsuit in the Superior Court of Fulton County, Atlanta, Georgia on behalf of WestPoint Stevens Inc. (NYSE:WXS). Named as defendants in the action are: (1) Holcombe T. Green, Jr., (2) William F. Crumley, (3) Thomas J. Ward, (4) Morgan M. Schuessler, (5) Charles W. McCalll, (6) Dale C. Williams and (7) Gerald B. Mitchell The suit alleges each individual defendant personally benefited from their wrongful actions through insider stock sales of $6.2 million, and Mr. Green was able to use his personal holdings of Company stock to secure a $250 million loan for another company he controls. The suit charges that the defendants breached the fiduciary duties they owed to the Company by wrongfully causing the Company to report better- than-expected 4th Quarter 1998 and 1st Quarter 1999 results, and thus exposing the Company to liability. The defendants also assured investors and analysts that the Company's business remained extremely strong, demand for all of its products was good, its inventories were under control and that it remained postured to achieve revenue and EPS growth of 5% and 20%, respectively, going forward and was increasing its 99 and 00 EPS forecasts to $1.82-$1.85 and $2.10-$2.20, respectively. Based on these better-than-expected 1st Quarter 1999 results and defendants' positive commentary on the Company's business, Company stock advanced to a high of $37-9/16 in late April 1999. When the Company reported its 2nd Quarter and 3rd Quarter 1999 results, the defendants again assured investors that the Company's business was very strong. They also told investors that while its inventories had increased, especially towels, the increased towel inventory did not pose any significant risk of loss to the Company because it was basic solid colored goods with core value. The defendants continued to forecast strong revenue for the Company and EPS growth for the balance of 1999 and 2000, including 2000 EPS of $2.10-$2.20. On June 28, 2000, the defendants announced that the Company's Eight- Point Program would ensure strong performance in the future, that momentum was building for strong prospects throughout 2000 and inventory was now on target to below $400 million by year-end and the Company was still on tract to report EPS of $2.08+ and $2.40 in 2000 and 2001, respectively. As a result, Company stock stabilized in the $10-$15 range. However, by late September, 2000, the defendants knew that it would be impossible for them to continue to conceal the severe deterioration in the Company's business any longer, and that once the Company reported its 3rd Quarter 2000 results, it would be apparent to the market how horrible the Company's business was actually performing and the stock would collapse. In an attempt to cause the stock to make a "soft landing" for what they knew would be horrible 2000 results, defendants on September 27, 2000 announced that 3rd Quarter 2000 results would be flat with 3rd Quarter 1999 results, in the same press release in which the Company also announced a new licensing agreement with Disney. The Company's stock declined only slightly on this news to $11-9/16 due to defendants' positive statements. Then, on October 10, 2000, the defendants caused the Company to reveal that 3rd Quarter 2000 sales would actually decline 3% from the prior year, with earnings of only $0.55-$0.60 per share, lower than prior guidance. On this news, Company stock declined to below $9 per share. For more information, contact John G. Emerson by Phone: P.O. Box 25336, Little Rock, AR 72221-5336 by Phone: 501-907-2555 by Fax: 501-537-4888 or by Email: jge@emersonfirm.com WILLIAMS COMPANIES: Goodkind Labaton Lodges Securities Suit in N.D. OK ---------------------------------------------------------------------- Goodkind Labaton Rudoff & Sucharow LLP initiated a securities class action against Williams Communications Group (NYSE:WCG) and Williams Companies, Inc. (NYSE: WMB) in the United States District Court for the Northern District of Oklahoma on behalf of purchasers of both companies' stock during the period starting July 24,200 and January 29,2002, inclusive. The suit names as defendants the two Companies and: (1) Keith E. Bailey, (2) Howard E. Janzen, (3) Scott E. Schubert and (4) Steven J. Malcolm The complaint charges the defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b(5) promulgated thereunder. The suit alleges that during the class period, defendants issued a series of material misrepresentations to the market in press releases and SEC filings thereby artificially inflating the price of the Companies' securities. Specifically, the suit alleges that during the class period, the Companies entered into a scheme whereby WMB sold off its remaining WCG ownership purportedly to ensure both WMB and WCG had sufficient capital to pursue growth opportunities. Pursuant to the spin-off, WMB guaranteed to re-pay a $1.5 billion WCG's debt. The Companies failed to inform investors that WCG's financial future was extremely bleak because WCG was excessively over-leveraged and struggling to pay its debts. In addition, as the defendants knew, the telecommunications industry was suffering from an over supply of fiber optic network facilities which was driving down its revenue. Following the spin-off, the defendants undertook a campaign to mislead members of the class as to the dire financial circumstances surrounding WCG. The misleading information artificially inflated the price of the Companies' stock because investors were misled to believe that WCG's financial future was secure and WMB would not have to re-pay the debt. WMB took advantage of the artificially inflated stock price to purchase another energy company using WMB stock as currency. On November 1, 2001, WCG surprised investors by announcing it needed to obtain an extension on a bank credit plan. Then on January 29, 2002, WMB surprised investors by announcing it would be delaying the release of its full Year 2001 financial results as it tried to determine its full obligations to WCG shareholders following the spin-off. The news reported by WMB caused the price of WMB shares to fall 25% to $18.78. Following the WMB announcement WCG revealed banks had informed it that in the bank's opinion WCG was in default of its debts and WCG's earlier purchase of senior notes had possibly violated credit agreements. Following this revelation the price of WCG stock fell 30%, to close at $1 per share and WCG announced it was considering bankruptcy. For more information, contact Emily Komlossy or Henry Young by Mail: 100 Park Avenue, 12th Floor, New York, New York 10017-5563 by Phone: 212-907-0700 or by E-mail: ekomlossy@glrslaw.com or hyoung@glrslaw.com. ********* 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., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2002. 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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