/raid1/www/Hosts/bankrupt/CAR_Public/020702.mbx
C L A S S A C T I O N R E P O R T E R
Tuesday, July 2, 2002, Vol. 4, No. 129
Headlines
AK STEEL: Employees Commence Racial Discrimination Suit in Ohio Court
AMDOCS LTD.: Denies Allegations in Suits Filed Over Revised Forecasts
APPLE COMPUTER: Executives Sell Stock Just Before Low Earnings Warnings
BAPTIST FOUNDATION: Trial in Suit Over 1999 Collapse Set For April 2002
CENTURY BUSINESS: OH Court Dismisses Consolidated Securities Fraud Suit
DICK CLARK: Asks CA Court To Dismiss Suit Seeking To Block DCPI Merger
DOV PHARMACEUTICAL: Vigorously Opposing Securities Suits in NY, NJ
EASY MONEY: KY Court Grants Class Certification To Consumer Fraud Suit
EASY MONEY: Asks LA Court To Dismiss Consumer Fraud Suit Over Loan Fees
ENRON CORP.: Criminal Investigation Expands To Include Commercial Banks
FMC CORP.: Judge Grants Tentative Approval to $1.35M Suit Settlement
GEORGIA: Will Open Doors, Records Of Children's Shelters For Inspection
HERCULES INC.: CA Court Grants Final Certification To Carbon Fiber Suit
HOUSEHOLD FINANCE: Can't Compel Arbitration Use, CA Federal Court Rules
INFORMAX INC.: Plaintiffs File Amended Securities Fraud Suit in S.D. NY
KENTUCKY: Settlement Ends Lawsuit Over Alleged Sexual Abuse Of Boys
LEISURE HOMES: Trial in Consumer Suit Set For April 2002 in Nevada
LIGHT MANAGEMENT: Faces Suits For Securities Act Violations in S.D. NY
MERANT: Reaches Agreement To Settle Securities Fraud Suit In N.D. CA
NEBRASKA: Mothers File Suit Challenging Cuts In Child Care Subsidies
NEW YORK: Amityville School District Sued Over Voting Irregularities
ODYSSEY PICTURES: CA Court Refuses Stock Fraud Suit Certification
RED HAT: Plaintiffs Commence Amended Securities Fraud Suit in S.D. NY
SECURITIES FRAUD: Enron, Worldcom Scandals Affect WA Pension Funds
TOBACCO LITIGATION: State Farm Suit Rejection May Be Used V. Smokers
UTAH: ACLU Files Suit For Inmate Forced To Pay For Own DNA Samples
VOTING RIGHTS: FL Voting Rights Lawsuit Headed To Trial This Summer
WASHINGTON: Thurston County, Landfill Operators Settle With Landowners
WORLDCOM INC.: University of California Pension Funds Lose $341.6 M
WORLDCOM INC.: Illinois State Measures Loss, To Meet With Attorneys
WORLDCOM INC.: Company Employees File Suit Over Pension Funds Losses
WORLDCOM INC.: US Bondholders File Lawsuit To Recover Investment Losses
New Securities Fraud Cases
ALCATEL SA: Emerson Firm Commences Securities Fraud Suit in S.D. NY
AMDOCS LTD.: Charles Piven Commences Securities Fraud Suit in E.D. MO
CMS ENERGY: Schiffrin & Barroway Commences Securities Suit in E.D. MI
DUKE ENERGY: Rabin & Peckel Commences Securities Fraud Suit in S.D. NY
FLEXTRONICS INTERNATIONAL: Much Shelist Investigates Securities Fraud
FLEXTRONICS INTERNATIONAL: Scott + Scott Commences Securities Suit in NY
HALLIBURTON COMPANY: Schatz & Nobel Commences Securities Suit in TX
HALLIBURTON COMPANY: Emerson Firm Commences Securities Suit in N.D. TX
KNIGHT TRADING: Much Shelist Investigates Possible Securities Fraud
LANTRONIX INC.: Schiffrin & Barroway Commences Securities Suit in CA
MONTANA POWER: Charles Piven Commences Securities Fraud Suit in Montana
OMNICOM GROUP: Emerson Firm Commences Securities Fraud Suit in S.D. NY
WORLDCOM INC.: Klayman & Toskes Filing Suit For Stock Plan Participants
*********
AK STEEL: Employees Commence Racial Discrimination Suit in Ohio Court
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Seventeen people are suing AK Steel, and have filed a lawsuit in
Cincinnati, seeking class action status and accusing the Company of
racial discrimination, the Associated Press Newswires reported.
The lawsuit claims that the Company refused to hire 16 qualified black
men and women who applied at its plants and offices in Ashland,
Kentucky, and at its Middletown headquarters as well. The 16 people
who were not hired want jobs as well as back pay and the seniority they
would have earned. The lawsuit asks to represent all blacks who
applied at Company since June 26, 1998, four years before the lawsuit
was filed, but were not hired.
The plaintiffs want US District Judge Herman Weber to order the Company
to end the alleged discrimination and to appoint a task force to
monitor the Company's hiring policies. They also want Judge Weber to
maintain supervision of the Company to ensure compliance with the law.
The Company, which employs about 11,500 people, makes flat-rolled
carbon, stainless and electrical steel products for auto, appliance,
construction and manufacturing industries, along with pipe and tubular
steel products. The Company also makes snow and ice control products
and operates an industrial park in Houston, Texas.
AMDOCS LTD.: Denies Allegations in Suits Filed Over Revised Forecasts
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Three class actions were filed recently in St. Louis and New York
against Amdocs Ltd., after the Company revised downward its sales and
earnings, the St. Louis Post-Dispatch reports.
Milberg Weiss Bershad Hynes & Lerach of New York filed a class action
at US District Court in St. Louis, on behalf of shareholders who bought
the Company's between July 24, 2001, and June 20, 2002. They accuse
the company of violating securities laws when it failed to disclose in
a timely manner that the Company was experiencing declining sales.
The suit further charges that the Company inflated its financial
statements by maintaining inadequate reserves for doubtful accounts and
by failing to disclose that its figures on revenue growth improperly
included revenue from a recent acquisition.
The Los Angeles law firm of Glancy & Binkow, also filed a class action
jointly with the Dekel Sabo Law Office of Tel Aviv, Israel, in US
District Court in New York, on behalf of the Company shareholders who
bought their shares between July 18 2000 and June 20, 2002, alleging
similar violations of securities laws, as are included in the Milberg
Weiss filing. Another law firm in New York filed a suit against the
Company in federal court.
The Company said that the lawsuits had no merit, and said further that
its sales in the quarter ending June 30 would be about US$40 million
less than expected and that pro forma earnings would be about 20 cents
a share rather than 33 cents a share. The Company said the shortfall
results from telecommunications companies reducing their capital
spending and cutting back on expenses.
APPLE COMPUTER: Executives Sell Stock Just Before Low Earnings Warnings
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Twice in the past two years, Apple Computer executives have sold
Company stock for millions of dollars just weeks before the Company
warned of disappointing earnings, each warning sent shares tumbling,
the Associated Press Newswires reports.
While the sales could have innocent explanation, analysts consider them
unusual because there were no other large stock dumps by Apple
executives during the same period. While stock options often are a
major part of compensation, Apple executives tend to be less active
sellers than their counterparts at other companies. One of these
scenarios did result in a class action. What will develop from further
SEC investigation remains to be seen, whether investigation will yield
any additional bases for shareholder lawsuits.
"These sells seem well-timed," said Lon Gerber, director of insider
research at Thomson Financial, coming as they did on the eve of two of
three Apple earnings warnings over a period that began in August 2000.
"It is always a bit suspicious" when executives sell before a warning,
said Martin Friedman, director of research at Friedman, Billings,
Ramsey & Co. Inc. The Company defended the sales, which were
questioned in a column last week on a Web site for Mac enthusiasts,
called Resexcellence.com.
"I can assure you that no executive would have exercised options had
they believed we would not meet our original guidance for the quarter,"
said Fred Anderson, Apple's chief financial officer, said in a written
statement. Mr. Anderson, one of the executives who sold stock prior to
warnings, refused further comment. So did other executives.
The biggest flurry of sales, 1.9 million shares worth more than $49
million, occurred between April 22 and May 31, according to Securities
and Exchange Commission filings, and were executed by Mr. Anderson and
five other executives.
During that period, Company stock was hovering around $24 on the Nasdaq
Stock Market. On June 18, Apple warned that revenues for the quarter
that began April 1 would be lower than expected. Shares are now
trading at about $17.
A similar scenario occurred back in August 2000, with sales by the same
executives, followed one month later by an earnings warning for the
quarter that was to end in two days. Stunned investors lopped the
value of the Company's shares in half. Shareholders who had accused
Apple and its executives of misleading the public about the Company's
financial prospects filed a still-pending class action that mentions
the pre-stock plunge sales by the executives.
To guard against insider trading, companies often restrict officers
from buying or selling their stock within certain time periods, and
some executives exercise their options on regular schedules to avoid
any appearance of insider trading. Apple refused to detail its policy
and is not required to disclose it. The SEC would not comment on the
Apple stock activity.
BAPTIST FOUNDATION: Trial in Suit Over 1999 Collapse Set For April 2002
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The trial date of April 1, has been set in the lawsuit brought by the
failed Baptist Foundation of Arizona, according to a report by the
Associated Press Newswires. Judge Paul A. Katz of Maricopa County
Superior Court certified a class action and ruled that two accounting
firms and three former executives of the foundation will face trial on
the appointed date.
Lead auditor Arthur Andersen agreed in May to pay investors US$217
million to settle four lawsuits brought against the accounting firm,
which alleged that it did not properly audit the foundation, and this
was partially responsible for the foundation's collapse. Andersen
admitted no fault.
The remaining two defendant accounting firms, Nelson, Lambson & Co. of
Mesa, and Henry & Horne of Tempe, the Baptist Foundation accountants
who had been responsible for auditing the Individual Retirement
Accounts that the foundation was administering, were charged with
failing to audit the books properly and for failing to comply with US
Treasury regulations.
Rich Himelrick, an attorney representing the investors, said that
losses from the IRA accounts exceeded US$100 million.
Other defendants in the lawsuit include foundation executives William
Pierre Crotts, Thomas Dale Grabinski and Donald Dale Deardoff. Mr.
Deardoff, the Foundation's former treasurer, pleaded guilty last year
to two counts of fraud for his role in the foundation's collapse.
Mr. Crotts, the foundation's former chief executive, and Mr. Grabinski,
its former general counsel have pleaded innocent to criminal charges.
Criminal trial dates for Mr. Crotts and Mr. Grabinski have not been
set.
The foundation's 1999 bankruptcy was the largest by a nonprofit agency
in United States history, costing more than 10,000 mostly elderly
investors about US$570 million.
CENTURY BUSINESS: OH Court Dismisses Consolidated Securities Fraud Suit
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The United States District Court for the Northeast District of Ohio
dismissed the consolidated securities class action against Century
Business Services, Inc. (Nasdaq: CBIZ). The ruling, which was rendered
by the Honorable Paul R. Matia clears the Company and all of the named
defendants in the suit of any wrongdoing by dismissing all of the
claims raised in the complaint.
"Since the complaint was filed in 1999, the Company has maintained the
allegations were completely without merit," Steven L. Gerard, Chief
Executive Officer said in a press statement. "We are gratified by the
court's ruling and look forward to continuing the progress that we have
made in establishing CBIZ as the premier provider of outsourced
business services to middle-market companies and continue our efforts
to build shareholder value."
DICK CLARK: Asks CA Court To Dismiss Suit Seeking To Block DCPI Merger
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Dick Clark Productions, Inc. asked the Superior Court of the State of
California, County of Los Angeles to dismiss the class action filed on
behalf of Walter Valenti and an alleged class of unaffiliated
stockholders of the Company.
The suit names the Company and its directors as defendants and alleges
that the defendants have engaged in acts of self-dealing and have
violated fiduciary duties of "care, loyalty, candor and independence"
owed to the unaffiliated stockholders in connection with the proposed
merger involving the Company and DCPI Investco, Inc. The complaint
further alleges that the $14.50 price per share is inadequate.
The complaint seeks, among other things:
(1) injunctive relief blocking the consummation of the merger, or
if it is consummated, rescinding the merger;
(2) imposition of a constructive trust, on behalf of the
plaintiff, upon any benefits received by defendants as a
result of their allegedly wrongful conduct; and
(3) costs and disbursements of the action, including attorneys'
and experts' fees in unspecified amounts.
The defendants have made a motion to dismiss the complaint for failure
to plead a cause of action, and three directors who are not residents
of California have moved to dismiss the complaint for lack of personal
jurisdiction. The plaintiff's time to respond to the motions has not
expired. In addition, discovery has been commenced in the action.
DOV PHARMACEUTICAL: Vigorously Opposing Securities Suits in NY, NJ
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DOV Pharmaceutical, Inc. faces several securities class actions filed
in the United States District Courts for the Southern District of New
York and for the District of New Jersey. The suit names as defendants
the Company, certain of its officers and directors and certain of the
underwriters in the Company's April 25, 2002 initial public offering of
5,000,000 shares of its common stock.
The suits allege violations of Sections 11, 12 and 15 of the Securities
Act of 1933 based upon the Company's alleged failure to disclose the
filing of a revised registration statement and prospectus for its
initial public offering reflecting changes to the 1999 financial
statements of its joint venture with Elan Corporation, PLC and DOV
(Bermuda), Ltd.
The Company believes that it has meritorious defenses to the claims
alleged in the purported class actions and intends to vigorously defend
against the claims. However, litigation is inherently uncertain and
the Company cannot give assurances as to the ultimate outcome or effect
of these actions.
EASY MONEY: KY Court Grants Class Certification To Consumer Fraud Suit
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The United States District Court for the Eastern District of Kentucky,
Lexington Division granted class certification to a consumer suit
pending against Easy Money of Kentucky, Inc. and:
(1) Easy Money of Virginia, Inc.,
(2) Easy Money Holding Corporation,
(3) David L. Greenberg,
(4) Tami Van Gorder,
(5) Jerome Greenberg,
(6) John Murphy,
(7) Sterling Financial Bank and
(8) unknown individuals and entities
The suit alleges that the defendants:
(i) violated the Kentucky Interest and Usury Statute;
(ii) violated the Kentucky Consumer Loans Act;
(iii) violated the Racketeer Influenced and Corrupt Organization
Act;
(iv) violated the Kentucky Consumer Protection Act; and
(v) engaged in fraud.
The plaintiffs brought this action as a class action claiming
defendants charged and collected from plaintiffs and other customers
similarly situated usurious interest rates for consumer loans. The
complaint alleges defendants illegally coerced payment of monies from
plaintiffs and other class members by threatening to pursue collection
of the debts. The complaint also charges that defendants were not
properly licensed under Kentucky state law.
The range of possible loss in this case is between $0 and the
plaintiffs' demand of US$40,000,000. The Company has not been advised
that a loss is probable in this case. The Company intends to
vigorously defend against this suit.
EASY MONEY: Asks LA Court To Dismiss Consumer Fraud Suit Over Loan Fees
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Easy Money of Louisiana asked the United States District Court for the
Eastern District of Louisiana to dismiss the class action pending
against it and:
(1) Easy Money Holdings, Inc.,
(2) Easy Money of Virginia, Inc.,
(3) David L. Greenberg,
(4) Tami Van Gorder and
(5) Jerome Greenberg
The suit alleges that the defendants violated the Racketeer Influenced
Corrupt Organization Act and the Louisiana Usury laws. The suit
further alleges defendants offered to loan money to consumers at
usurious rates, and also alleges defendants charged duplicate fees in
connection with certain rollover loan transactions.
The dismissal motion is pending with the court. The Company intends to
vigorously oppose the suit.
ENRON CORP.: Criminal Investigation Expands To Include Commercial Banks
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Criminal investigators examining the Enron debacle have expanded their
inquiry to focus on activities at the commercial banks that provided
billions of dollars in loans and other financial services to the
company, according to current and former Enron executives and others
involved in the investigation, The New York Times reports.
This is an area of investigation that could open up the possibility of
additional lawsuits by shareholders who may find in the evidence
unearthed by investigators enough facts to bring lawsuits against the
banks, whose pockets are deep and unprotected by Chapter 11 bankruptcy
filings, as is the case with Enron. No doubt the lead lawyers in the
class action filed in Houston, who already have filed a complaint
against a number of banks, will be on the alert to cull over what
government investigators may uncover.
Federal prosecutors are investigating whether individual bankers
illegally benefited from deals involving Enron-related entities,
potentially at the expense of their employers, people involved in the
case said. A number of bankers have been questioned about such self-
dealing, lawyers said, and the government is weighing whether to
bring charges in one such matter.
The government also has stepped up its examination of an Enron-related
partnership called Chewco. The financing for the partnership included
loans from Barclays Bank, structured in ways that hid them from Enron's
auditors, according to Congressional testimony. The discovery of the
hidden loans ultimately played a central role in the financial crisis
last fall that led to Enron's collapse.
The Manhattan district attorney's office, meanwhile working
independently of the federal Enron task force, has opened its own
inquiry into an array of transactions and financial institutions tied
to Enron. According to current and former Enron executives who have
been questioned by the Manhattan investigators, these include a series
of deals between Enron and JP Morgan Chase that have been described in
private lawsuits as disguised loans to the energy company.
Banks had complex financial relations with Enron, and the full details
of those only began to emerge amid the debris of the collapsed company.
Like most companies, Enron borrowed money to finance its operations.
However, banks also provided cash for the Company's off-the-books
partnerships and for outside investors in those entities.
Some financial institutions were themselves investors in the
partnerships. Major New York banks, meanwhile, engaged in circular
trades with Enron that allowed the company to obtain millions of
dollars in loans without disclosing them to shareholders, according to
trading records and court documents.
The federal investigation of banking matters relating to Enron is being
handled by William Kimball, a task force prosecutor who specialized in
securities-related cases. Mr. Kimball, an assistant United States
attorney in San Francisco, has long worked with Leslie Caldwell, the
head of the Washington-based task force. Mr. Kimball was said to be
focusing on matters relating to Chewco, formed in 1997 by an Enron
financial executive to engage in transactions with Enron.
Under accounting rules, at least three percent of Chewco's capital had
to come from independent investors for Enron to keep the partnership's
financial results off the books. At least part of the outside equity
for Chewco purportedly came from Barclays through an entity called Big
River, whose sole member was another entity called Little River.
However, Andersen learned that the money from Barclays was actually a
loan secured by $6.6 million in cash collateral. Since the supposed
equity investment was actually a loan, Andersen insisted that Chewco
failed the three percent test, and its finances had to be consolidated
with those of Enron - a decision that was a big factor in a huge
restatement of Enron's financial results last November.
In recent weeks, Mr. Kimball was said to have been interviewing
numerous participants in the structuring of the Chewco transaction,
including bankers from Barclays. A spokesman for the bank has said
that it did not believe that there was "any basis" for a claim against
it. Bank officials also have said that there was no personal
investment by Barclays executives in the deal.
Separately, according to people involved in the case, bankers
interviewed by the government have been pressed about whether they
enriched themselves in dealing with people or entities related to Enron
In an instance involving at least one American bank, these people said,
prosecutors have discovered evidence of such self-dealing, and were
said to be deciding whether to bring indictments. The identity of the
bank and the employees could not be immediately determined.
FMC CORP.: Judge Grants Tentative Approval to $1.35M Suit Settlement
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A federal judge has scheduled a September hearing to consider final
approval of a proposed US$1.35 million settlement in a class action
stemming from a leak at a former FMC Corporation plant, Associated
Press Newswires reports. US District Judge Charles Haden II
tentatively approved the proposed settlement and set a hearing for
September 30.
The suit, which represents 406 people, would cover a variety of minor
injuries, lost wages and other alleged damages. In 1998, a jury found
Philadelphia-based FMC liable for more than US$38.8 million in damages.
The verdict was overturned after Judge Haden ruled that a witness
provided incorrect information to the jury.
The Company admitted liability in the second trial in 1999, but it
challenged the plaintiffs' injuries. The second jury found no link
between the leak and plaintiffs' injuries. That verdict was thrown out
by a federal appeals court, which ordered a third trial.
"There is no indication of bad faith or collusion," Judge Haden wrote
of the proposed settlement in his recent order. "These negotiations
are the culmination of six years of tenacious legal contest."
The Company was sued after more than 6,000 pounds of phosphorous
trichloride leaked from a tank at its Nitro plant in December 1995.
The chemical combined with rain to form a cloud of hydrochloric acid.
The release forced thousands of residents indoors and led officials to
close several highways. The company has since sold the plant.
GEORGIA: Will Open Doors, Records Of Children's Shelters For Inspection
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Lawyers who filed a class action against the state of Georgia in US
District Court, over its treatment of abused and neglected children,
will get to inspect two notorious children's emergency shelters in
about two weeks, federal judge Marvin Shoob ruled recently.
Children's Rights, a New York child advocacy organization, and Keenan's
Kids Law Center of Atlanta sued Governor Roy Barnes, the state, its
human resources department, and Fulton and DeKalb counties on behalf of
3,000 Georgia children.
Judge Shoob made his order after hearing arguments that the emergency
shelters in DeKalb and Fulton Counties are dangerous to children. The
condition of the shelters was one of a number complaints included in
the lawsuit, which was originally filed in state court, but later moved
to federal court at the request of the state.
The speed-up granted recently applies only to the shelters. Discovery
related to other claims in the lawsuit, among them, that the state
botched foster care placements and racially discriminatory in
adoptions, will begin in late summer or early fall.
The emergency shelters in DeKalb and Fulton counties are the only
publicly-run shelters for children in the state. Intended for short-
term stays, the shelters are housing children for months at a time.
Child Advocate Dee Simms issued a scathing report in 2001, and DeKalb
County juvenile public defender, Linda Pace, said in an affidavit that
the DeKalb shelter is diry, dark, dangerous, foul-smelling,
overcrowded, with minimal staff supervision and a volatile mix of
criminally charged children and children who have been abused.
Earlier in June, state officials said Georgia planned to close the
shelters in 18 months.
HERCULES INC.: CA Court Grants Final Certification To Carbon Fiber Suit
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The United States District Court for the Central District of California
issued a final order granting class certification to a class action
filed against Hercules, Inc. and several other carbon fiber and carbon
prepreg producers. The Company was named as defendant in connection
with its former consumer products division, which it sold to Hexcel
Corporation in 1996.
Several suits were commenced in August 1999 on behalf of purchasers
(excluding government purchasers) of carbon fiber and carbon prepreg in
the United States from the named defendants from January 1, 1993
through January 31, 1999. The lawsuits were brought following
published reports of a Los Angeles federal grand jury investigation of
the carbon fiber and carbon prepreg industries.
In these lawsuits, plaintiffs allege violations of Section 1 of the
Sherman Antitrust Act for alleged price fixing. In September 1999,
these lawsuits were consolidated by the court, with all related cases
ordered dismissed. This lawsuit is in the early stages of motion
practice and discovery.
In March 2002, the court tentatively granted plaintiffs' motion to
certify class. That order was made final on May 2, 2002.
The Company has denied liability and will vigorously defend this
action.
HOUSEHOLD FINANCE: Can't Compel Arbitration Use, CA Federal Court Rules
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Judge Claudia Wilken of the US District Court for Northern California,
has decided that Household Finance Corporation cannot compel the use of
arbitration in the cases of the three plaintiffs in the class action
known as Association of Community Organizations for Reform Now.
(ACORN, alleging predatory lending.
Judge Wilkens' ruling means that the lawsuit, filed in California last
year, will proceed. ACORN also has filed a similar suit in Illinois on
behalf of borrowers, alleging the Company issued high-cost loans it
knows the borrowers cannot afford. The Company denies the allegation.
The judge ruled, "The Company's standard arbitration rider contains
numerous one-sided provisions, including the prohibition on class
actions, judicial remedies with respect to foreclosure, and a
confidentiality provision. Taken together, these provisions compel the
conclusion that the arbitration agreement is unconscionable and
unenforceable."
INFORMAX INC.: Plaintiffs File Amended Securities Fraud Suit in S.D. NY
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Plaintiffs in the consolidated securities class action against
Informax, Inc., two of its former executive officers and its
underwriters filed an amended suit in the United States District Court
for the Southern District of New York.
The amended suit alleges, among other things, that certain of the
underwriters of the Company's initial public offering violated the
securities laws by failing to disclose certain alleged compensation
arrangements (such as commissions paid to them by the underwriters'
customers) in the offering's registration statement and by engaging in
manipulative practices to artificially inflate the price of the
Company's stock in the after-market subsequent to the IPO.
The Company is named in the amended complaint pursuant to Section 11 of
the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the
Securities Exchange Act of 1934 on the basis of an alleged failure to
disclose the underwriters' alleged compensation arrangements and
allegedly manipulative practices.
The Company believes that meritorious defenses to these claims are
available and intends to vigorously contest and defend against them.
However, due to the inherent uncertainties of litigation, the Company
cannot accurately predict the ultimate outcome of the litigation.
KENTUCKY: Settlement Ends Lawsuit Over Alleged Sexual Abuse Of Boys
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A two-year-old lawsuit over alleged sexual abuse by the former head of
a city-financed organization has ended with a judge's approval of a
$2.4 million settlement, the Associated Press Newswires reports. US
District Judge Karl S. Forester said recently that he would issue an
order approving the agreement between the city of Lexington and 18 men
who allege the abuse.
The suit was filed by nine men, who claimed officials knew or should
have known that Ron Berry was molesting boys who attended his program.
Mr. Berry was the founder and operator of Micro-City Government from
the 1970s until he resigned upon conviction of sodomy in March 2000.
He was sentenced to three years in prison, but is free on bond pending
the outcome of an appeal before the Kentucky Supreme Court.
The settlement had grown to include 17 plaintiffs and was to be signed
on June 3, when an 18th man came forward, which threatened to derail
the agreement. After some conferring between plaintiffs' lawyers,
Judge Forester and the city's lawyers, the matter was settled by:
(1) including the 18th man in the lawsuit,
(2) plaintiffs' lawyers agreeing to withdraw a request for class
action status for the current lawsuit and
(3) Judge Forester's issuance of a ruling barring any future class
action on the subject of the instant lawsuit
On May 15, when the city first announced its plans to settle with what
were then 17 plaintiffs, Mayor Pam Miller said the decision to settle
was reached despite a lack of "credible evidence of wrongdoing on the
part of the government or its officials."
Although lawyers for the alleged victims of Mr. Berry have waived class
actions for the future, Robert Treadway, one of the plaintiffs'
lawyers, said that does not mean there won't be any more lawsuits. He
said that he and the other lawyers in the case have been approached by
men wanting to sue. However, Michael Baker, a defense attorney hired
by the city, said he doubted future suits would be successful. "We
believe that the statute of limitations has run," he said.
LEISURE HOMES: Trial in Consumer Suit Set For April 2002 in Nevada
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Jury trial in the class action against Leisure Homes Corporation and
its wholly owned subsidiary Central Nevada Utilities Company (CNUC)
will commence on August 13, 2002 in the Nevada District Court, County
of Clark.
The suit was commenced in August 1998, by Robert and Jocelyne Henry,
husband and wife individually and on behalf of all others similarly
situated against the Company, CNUC, and certain other defendants. The
suit asked for class action relief claiming that the Company and CNUC
were guilty of collecting certain betterment fees and not providing
associated sewer and water lines.
The court determined that plaintiffs had not properly pursued their
administrative remedies with the Nevada Public Utilities Commission
(PUC) and dismissed plaintiffs' complaint, as amended, without
prejudice.
Notwithstanding plaintiffs' appeal of the dismissal, plaintiffs filed
for administrative relief with the PUC. In November 1999, the PUC
found that CNUC, the only defendant over which the PUC has
jurisdiction, was not in violation of any duties owed the plaintiffs or
otherwise in violation of CNUC's approved tariffs.
Subsequent to the PUC's decision, plaintiffs voluntarily dismissed
their appeal. In May 2000, plaintiffs re-filed their complaint in
Nevada District Court, naming all of the above parties with the
exception of CNUC. The May 4, 2000 complaint is virtually identical to
the amended complaint discussed above and asserts claims for relief
against defendants:
(1) breach of deed restrictions,
(2) breach of contract,
(3) unjust enrichment,
(4) consumer fraud in violation of NRS 41.600 and
(5) violation of NRS 119.220
All the claims arose out of the alleged failure to provide water and
sewer utilities to the purchasers of land in the subdivisions commonly
known as Calvada Valley North and Calvada Meadows located in Nye
County, Nevada.
In September 2000, the Company filed a motion to dismiss each of the
claims made in the complaint, which the court granted the motion to
dismiss with respect to one defendant and denied the motion
in all other respects.
The plaintiffs then filed a motion to certify class, which defendants
opposed. In September 2001, the court held that "as to Classes A and
B, the showings required under NRCP 23(a) and (b)(2) have been made to
the extent injunctive relief / specific performance of the subject
alleged contractual obligations is sought, and the Court will certify
Classes A and B to such extent only. In all other respects, the Court
does not deem certification to be appropriate as to both Classes A and
B." As a result of this decision, the court refused to certify a class
for the claims of:
(i) breach of contract,
(ii) unjust enrichment,
(iii) consumer fraud in violation of NRS 41.600 and
(iv) violation of NRS, 119.220
Accordingly, the defendants are no longer subject to class claims for
monetary damages. The defendant's only potential liability is for the
construction of water and sewer facilities. The case is now beginning
the discovery phase of the litigation.
LIGHT MANAGEMENT: Faces Suits For Securities Act Violations in S.D. NY
----------------------------------------------------------------------
Light Management Group, Inc. faces several class actions pending in the
United States District Court for the Southern District of New York on
behalf of purchasers of the Company's common stock from June 9,1999
through November 20,2001.
The suit charges the Company and and certain of its current and former
officers and directors, with violating Sections 10(b) and 20(a) of the
Securities and Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market between June 9, 1999 through November 20, 2001, thereby
artificially inflating the market price of the Company's common
stock.
The Company intends to vigorously defend against this suit. The
Company is unable, however, to predict the outcome of this matter, or
reasonably estimate a range of possible loss given the current status
of the litigation.
MERANT: Reaches Agreement To Settle Securities Fraud Suit In N.D. CA
--------------------------------------------------------------------
MERANT (LSE:MRN) (Nasdaq:MRNT), a leading provider of software and
services supporting the management of enterprise code, content and
digital assets, forged an agreement in principle to settle all claims
in the class action securities litigation pending against the Company
and certain of its current and former officers and directors before the
United States District Court for the Northern District of California.
Gerald Perkel, Company President and Chief Executive Officer said in a
press release, "While the company continues to deny the validity of
plaintiffs' claims, settlement of this action will further enable our
new management team to focus on our business and avoid any distractions
associated with this litigation."
The proposed settlement remains subject to the negotiation and signing
of a definitive settlement agreement, the approval of the settlement by
the United States District Court in Oakland, California and certain
other conditions.
NEBRASKA: Mothers File Suit Challenging Cuts In Child Care Subsidies
--------------------------------------------------------------------
Three mothers recently filed a class action over the state's plans to
cut funding for a childcare subsidy program on July 1, the Associated
Press Newswire reports. The suit, filed in Lancaster County District
Court, alleges that the cuts proposed by Governor Michael Johanns were
done illegally. Gov. Johanns changed the rules for childcare subsidies
in an April veto.
The changes reduced the income cut-off for working families who are not
coming off welfare from 185 percent of the federal poverty level to 120
percent. A family of four can now earn up to $33,480 a year and
qualify for the subsidy, but that will drop to $21,180 on July 1. The
move is expected to save the state about $4.6 million a year.
The lawsuit was filed by the Nebraska Appleseed Center for Law in the
Public Interest, on behalf of Kendra Johnson and Jamie Longwell of
Lincoln and Jamie Koch of Scottsbluff. Attorney Becky Gould said the
scheduled cut-off in child care subsidies will impact at least 1,000
low-income working families and 1,5 00 children throughout the state.
Ms. Longwell, for example, will face an increase of between $606 and
$861 per month in her child care costs, said Ms. Gould. Ms. Johnsen
would face an increase of $585 and Ms. Koch, an increase of $388 per
month.
"Without a child care subsidy from the state, these working families
will be forced into desperate situations, facing homelessness,
dangerous and inadequate care for their children," Ms. Gould said.
"These families already must stretch every dollar, eliminating the
child care subsidy makes it impossible for them to make ends meet."
Further, argued Ms. Gould, the Governor's line-item veto of a budget
appropriation for child care subsidies as a major policy change not
directed by the Legislature. Ms. Gould said that it is
unconstitutional to take away subsidies for some families while keeping
them for families in an identical low-income situation.
Governor Johanns has defended the cut, saying the money was not there
to keep the program running at its current level, and that funding has
been generous in the past. He said that state and federal funding had
doubled in the past four years from US$24 million to US$28 million.
The subsidy program has grown over the last five years, from serving
9,000 children in 1997 to more than 16,000 this year.
NEW YORK: Amityville School District Sued Over Voting Irregularities
--------------------------------------------------------------------
Allegations of election irregularities fueled a million-dollar class
action filed recently against the Amityville school district in New
york, Newsday reports. The suit, filed in the United States District
Court in Central Islip, New York, names as defendants the Amityville
school district and:
(1) Stephanie Andrews, school board president,
(2) LeRoy Van Nostrand, school district attorney,
(3) Bruce MacGill, chief election inspector, and
(4) George Wolf, owner of the polling machines
Strong Voice Parents, a group of minority and concerned residents in
the school district, says in the lawsuit that district officials
violated the rights of voters and residents by tampering with the
results of the school board elections in May.
According to the lawsuit, about 1,000 votes recorded on a
malfunctioning machine appeared in positions that were not assigned to
candidates. These votes were later shifted to the candidates supported
by the current school board majority, the lawsuit says.
Because the election resulted in a predominantly white school board in
a district composed of about 85 percent minority students, the lawsuit
also made allegations of racial injustice under federal law. "This
election was stolen from decent black people who played fair and square
in the election. They were cheated by these white folks," said
attorney John Ray at a rally and news conference recently, that drew
about 40 representatives from the black community and local civil
rights groups.
The current school board majority supported three candidates, Diana
Koza Egglinger, Connie Palazzo and Charles Walters, who were declared
the winners. Strong Voice Parents supported Toni Bean, Juliet Jordon
Thompson and Sam Williams, who were defeated.
School board president Stephannie Andrews could not be reached for
comment. School district attorney LeRoy Van Nostrand previously
acknowledged that one machine was improperly aligned, but he said it
was clear what had happened, Newsday reports.
"There was no question with regard to the numbers," Mr. Van Nostrand
said. "If you count them in their relative position they all conform
with the other machines."
Alexandra Gilmore, president of Strong Voice Parents, said an appeal is
pending with the state commissioner of education. State officials said
only the commissioner can order a recount. According to state
education law, the petitioner must prove that the irregularities made a
difference in the election outcome.
On May 21, election officials at Amityville Memorial High School, went
to count the tallies at the back of the machine, but a row of zeros
appeared where there should have been votes for three candidates, said
Bruce MacGill, chief election inspector, in an interview before the
lawsuit was filed. Mr. MacGill also said that numbers also appeared in
three positions that had not been assigned to any candidate. "I
immediately impounded the machine because I knew something was wrong,"
Mr. Van Nostrand, Ms. Andrews and Mr. Wolf soon came to the site. The
group concurred that too much extra space at the top of each column
had caused the numbers to shift down one position. According to the
lawsuit, Ms. Andrews said that she would shift the numbers up and count
the tallies thereby produced for the respective candidates.
Alexandra Gilmore, president of Strong Voice Parents, who was a poll
watcher at the elections, said the zeros did not fall in a uniform
line, so merely shifting up was not appropriate. Further, the lawsuit
indicates that if the votes had not been shifted, there would have been
a different set of winners.
In spite of requests from the residents to impound the machine pending
further investigation, the district verified the results and zeroed out
the machines the next day, the lawsuit said.
"Why did they eliminate the machines? The assumption is because they
did something wrong," said John Ray, attorney for Strong Voice Parents.
"It is their word against our witness' words."
ODYSSEY PICTURES: CA Court Refuses Stock Fraud Suit Certification
-----------------------------------------------------------------
The Superior Court of California, County of Los Angeles refused to
grant class action status to a suit against Odyssey Pictures
Corporation. The suit names as defendants the Company and:
(1) N. Norman Muller,
(2) Jay Behling,
(3) Jeffrey S. Konvitz,
(4) Tom Smith,
(5) Jerry Silva,
(6) David Mortman,
(7) Renato Tomacruz,
(8) PricewaterhouseCoopers LLP
(9) Todman & Co.,
(10) Dorian Industries, Inc., and
(11) Does 1 through 100
The suit alleges fraud in the Company's financial pro formas relating
to the proposed merger of several predecessor companies to the Company
including Communications and Entertainment Corp., Double Helix Films,
Inc. and Odyssey International, Ltd. The suit alleges fraud and
manipulation of the market price of Company stock during the period
covering 1991 to 1994.
The plaintiffs requested class action certification and in a ruling
dated March 15, 2002 the court denied class action status.
The Company has consistently denied any and all claims and through its
counsel and participating with the counsel of other defendants
continues to pursue termination of the matter.
RED HAT: Plaintiffs Commence Amended Securities Fraud Suit in S.D. NY
---------------------------------------------------------------------
Plaintiffs in the securities class actions pending against Red Hat,
Inc. filed an amended suit in the United States District Court for the
Southern District of New York. The suit names as defendants the
Company and:
(1) Goldman Sachs,
(2) JP Morgan,
(3) Credit Suisse,
(4) Merrill Lynch,
(5) Robert F. Young,
(6) Matthew J. Szulik,
(7) Marc Ewing,
(8) Manoj K. George,
(9) Frank Batten and
(10) David G. Schummanfang
Several suits were commenced in March 2001 against the Company and
certain of its officers and directors, arising out of the Company's
initial public offering and secondary offering.
The suit alleges that that the defendants violated federal securities
laws by filing registration statements and distributing prospectuses
that contained materially false and misleading information and failed
to disclose material information. The suit also challenges certain IPO
allocation practices by underwriters and the lack of disclosure thereof
in initial public offering documents. No discovery has occurred to
date, and no dispositive motions have been filed.
The suit is similar to approximately 1000 class actions filed against
approximately 310 issuers, including the approximately twelve
complaints against the Company. These suits were later transferred to
Judge Schira Scheindlin of the Southern District of New York for
coordinated pre-trial proceedings.
The Company believes these complaints are without merit and will defend
itself vigorously in this matter. No assurance can be given, however,
that this matter will be resolved in the Company's favor.
SECURITIES FRAUD: Enron, Worldcom Scandals Affect WA Pension Funds
------------------------------------------------------------------
Business scandals involving giants Enron Corporation and Worldcom, Inc.
have taken a toll on Washington's pension funds, but investment
officials say the troubles will not affect payouts, the Associated
Press Newswires reports.
The state of Washington is fighting back in court, becoming the lead
representative of public bond holders in the massive class action
against Enron Corporation 1filed in Houston, said Attorney General
Cheryl Reed. Ms. Reed also said that Washington is examining its
options, including a lawsuit that would try to recoup some of the
WorldCom losses.
Washington lost US$75 million in WorldCom bonds and US$97.5 million in
Enron stock and bonds. However, the losses represent a small fraction
of the State Investment Board's US$53 billion in assets, according to
Gary Brubaker, chief investment officer for the State Investment Board.
"We care about every dollar, but the reality is you lose money on some
investments - it will not have an impact on the financial standing of
the assets we manage," Mr. Brubaker said.
More troubling than the loss, said Mr. Brubaker, is the way it
happened. WorldCom recently revealed that it had hidden US$3.8 billion
in expenses. That means WorldCom may have lost millions of dollars
when it was reporting profits. Congress and the Securities and
Exchange Commission are investigating, and a criminal investigation is
possible.
Enron declared bankruptcy in December after acknowledging that it
overstated profits and engaged in questionable accounting practices.
The Company is under investigation by Congress, the Justice Department
and the Securities and Exchange Commission.
Mr. Brubaker said state investors will scrutinize companies more
closely now. They even may start using new credit-rating tools.
However, it is hard to protect pension funds against scandals like
Enron and WorldCom. "The trouble is all we can use is publicly
available information," he said. If companies don't report financial
information accurately, "it makes our job fairly tough."
TOBACCO LITIGATION: State Farm Suit Rejection May Be Used V. Smokers
--------------------------------------------------------------------
A Florida state appeals court has struck down a class action against
State Farm Insurance, in a decision that could be used by Big Tobacco
in its appeal to wipe out a record-setting $145 billion verdict for
Florida smokers.
A three-judge panel of the Third District Court of Appeal concluded
recently that the State Farm lawsuit lacked several of the basic
requirements for allowing people with shared claims to sue as one -
that is, as a single class. The same court is waiting for the final
round of court filings this summer before hearing an appeal by the
nation's five biggest cigarette makers, Big Tobacco, that would
challenge a jury award of US$145 billion to sick Florida smokers.
The tobacco industry had argued in the trial court that class
certification should never have been granted. In 1996, the appeals
court ruled in favor of the smokers on this issue.
The cigarette makers now claim the 1996 decision is out of step with
other state and federal courts, which, since then, have largely
rejected attempts to assemble large groups of smokers for a legal
attack on the industry.
Now, perhaps definitively for the tobacco defendants, along comes the
State Farm decision by the Third District Court of Appeal, which the
cigarette makers could very well fit into their appeal to the same
court. If the court's reasoning fits the Florida case, Big Tobacco
could walk out of court unfettered by the US$145 billion punitive
verdict.
Seth Markowitz, spokesman for RJ Reynolds Tobacco Co., said that "the
very same principles" discussed in the State Farm case have been raised
by tobacco attorneys against the smokers' class. "If you have got a
situation where you have widely diverse individuals and widely diverse
relationships and histories concerning the product, then it simply does
not make sense" to cover them under one trial, he said.
Attorney Steve Hunter, who sued State Farm, said he was "very
surprised" by the decision but does not expect the ruling to hurt
smokers at all. "The Third District is still affirming the principle
upon which they affirmed the first class action against the tobacco
industry," he said. "It means they still believe in it."
The court itself said that the State Farm class certification failed
because the class wasn't large enough, policyholders did not share
either common or typical claims and the named plaintiff did not
represent the group well. Class certification is only one of several
legal issues raised by the cigarette makers to throw out the jury's
punitive damage award. Another key claim is that the award violates
state law barring a bankrupting verdict.
UTAH: ACLU Files Suit For Inmate Forced To Pay For Own DNA Samples
------------------------------------------------------------------
The Utah chapter of the American Civil Liberties Union (ACLU) recently
filed a lawsuit in an effort to prevent inmates from being forced to
pay to have samples of their DNA taken, The Salt Lake Tribune reports.
A new state law that takes effect in but a day's time requires all
convicted Utah felons to have the insides of their mouths swabbed to
collect genetic material for a national crime database. The law
requires that the inmates must pay $75 for the process.
The two lead plaintiffs in the lawsuit are seeking to have the lawsuit
certified as a class action. Salt Lake City attorney Brian Barnard,
who represents the men along with the ACLU, argues that charging an
inmate for a sample is illegal unless a judge has ordered the sample
taken and has ordered as well that the inmate pay for it.
"The statute says the sentencing court shall enter an order that a
specimen be given, and if the inmate has the ability to pay, the court
shall order him to pay," Mr. Barnard said. The lawsuit also challenges
the state's blanket request for DNA samples. "The statute provides
that if the Department of Corrections already has a sample, there is no
need to take another sample and charge $75," he added.
"Our plan is to collect the samples as required by law. Those who
already provided a sample, will not have to give a seconded sample,"
said Corrections spokesman Jack Ford. Mr. Ford said he had not seen a
copy of the lawsuit, and he was not aware that the statute allows a
court to determine whether or not an inmate is able to pay for the
collection.
VOTING RIGHTS: FL Voting Rights Lawsuit Headed To Trial This Summer
-------------------------------------------------------------------
A voting rights lawsuit against the state of Florida, the county of
Miami-Dade and several other counties stemming from the disputed 2000
presidential election is headed to trial later this summer after
attorneys deadlocked on a settlement, a federal judge said, according
to a report by The Miami Herald. The trial date has been set for
August 26, two weeks before the fall primaries.
"As far as I am concerned, this case is going to trial," said US
District Judge Alan Gold, after hearing that attempts for successful
mediation had failed. One issue left unresolved was whether the
lawsuit will receive class action status. Such a designation would
allow all voters who say their voting rights were violated to join the
lawsuit.
The lawsuit alleges that improper registration and polling procedures
disenfranchised thousands of minority voters. The plaintiffs bringing
the lawsuit are:
(1) National Association for the Advancement of Coloured People
(NAACP),
(2) American Civil Liberties Union (ACLU),
(3) the Advancement Project,
(4) Lawyers Committee for Civil Rights Under Law and
(5) The People for the American Way Foundation.
The class action has alleged that thousands of voters in predominantly
black precincts were disqualified or wrongfully taken off voting rolls
or their registrations were not properly processed.
The civil rights groups want the judge to examine the way the state and
counties drop voters, process registration applications and address
changes, as well as the way they assign precinct equipment and
staffing. Further, the organizations want the state to restore people
who were improperly purged from voting rolls. The plaintiff
organizations also want guarantees that the voter registration would be
tightened to ensure that applications were correctly processed.
Defense attorney have argued that the new provisional ballot would
address many of the plaintiffs' allegations. However, the plaintiff
civil rights groups say that those ballots will not solve all the voter
problems, they will not address, for example, how the counties maintain
voter lists.
The counties of Broward and Leon settled last month. Choicepoint,
which the state of Florida contracted to compile a database used to
purge voter lists, also settled, although the details were not
available. Judge Gold strongly encouraged the remaining parties to
work on a settlement. However, the mediator, former Miami-Dade Circuit
Judge Gerald Wetherington said that the parties were at an impasse.
The stalemate throws Miami-Dade, a key battleground of the 2000
election, back in the national spotlight. Murray Greenberg, first
assistant county attorney of Miami-Dade county, said that the county
had made "every reasonable" effort to reach an agreement. "The
plaintiffs keep changing their positions," he said. "We have tried to
mediate in good faith."
Civil rights attorneys said they were willing to continue talks with
the defendants. "We continue to be willing to talk to all the
defendants," said Elliot Mincberg, senior counsel with People for the
American Way Foundation, one of the plaintiffs. However, very few are
willing to discuss a settlement seriously, at this point, he said.
The defendants include:
(1) Secretary of State Katherine Harris,
(2) State Elections Director Clay Roberts and
(3) the elections supervisors for Miami-Dade, Duval, Hillsborough,
Orange and Volusia counties.
Leon and Broward counties, under the terms of their settlements, have
both agreed to identify and reinstate residents who were wrongfully
purged from the voter rolls. They also are required to develop voter
education plans, which will be monitored by civil rights groups.
Under provisions of the agreement, both counties, also, will have to
provide a written explanation to anyone whose provisional ballot, used
when a voter's qualifications could not be immediately verified, was
ultimately rejected.
Broward County, also, must have laptop computers at each precinct to
check the master voter rolls, a solution designed to address the
problems experienced in 2000, when voters were turned away because they
were not listed at a particular precinct, and there was no way to
verify their registration.
WASHINGTON: Thurston County, Landfill Operators Settle With Landowners
----------------------------------------------------------------------
Thurston County, Washington, and the owners of its Hawk's Prairie
landfill will pay nearby property owners $8.5 million to settle a class
action brought by the property owners, The News Tribune reports. The
landowners contended that the landfill attracted birds and rodents and
emitted odors, thereby lowering their property values.
Thurston County officials and Skagit Sand and Gravel opted to settle
with the residents, business owners and developer Vicwood Meridian
Partnership. A trial had begun on June 17 in Thurston County Superior
Court. Thurston County Chief Administrative Officer Donald Krupp said
the settlement allows the county to avoid an expensive trial.
The county officials added that the settlement will not result in rate
increases at waste transfer stations, since most of the settlement
money will be covered by insurance.
WORLDCOM INC.: University of California Pension Funds Lose $341.6 M
-------------------------------------------------------------------
The University of California said its pension and endowment funds lost
$341.6 million on shares of WorldCom Inc., more than twice the amount
it had lost from the collapse of Enron Corp., according to a report by
the Contra Costa Times (Walnut Creek, CA).
The University is the lead plaintiff in a class action brought by Enron
shareholders. It declined to comment on whether it is considering
legal action against WorldCom. The University lost US$144.9 million
when Enron shares plunged in value last year.
The University of California holds 14.6 million shares of WorldCom,
said spokesman Trey Davis. The University's losses add to the more
than $1.6 billion lost by US pension funds in WorldCom stock and bonds.
Mr. Davis said, "The University favors securities reforms that will
ensure the investors' trust and confidence in the markets." Where we
are now, explained Mr. Davis, "You buy on the basis of information you
have, and if there is fraud or other misrepresentation, it is difficult
to make accurate investment decisions."
WorldCom's public announcement that it had wrongly accounted for $3.9
billion of costs or expenses, spurs prediction that the Company will
seek bankruptcy protection.
WORLDCOM INC.: Illinois State Measures Loss, To Meet With Attorneys
-------------------------------------------------------------------
Fearing an Enron-sized bite out of state pension funds, Illinois state
officials will meet in the coming days to discuss the financial fallout
from the WorldCom accounting scandal, The Pantagraph (Bloominton, IL)
reports. In an announcement, Attorney General James Ryan said he has
called together representatives of the pension systems "to find out
exactly what our exposure is, what our losses might be."
"We are meeting with both the fund managers and the attorneys," Mr.
Ryan said. The meeting is mirrored after the state's response to the
Enron Corporation collapse that resulted in an estimated $40 million
loss from state pension investments. The financial hit associated with
WorldCom's troubles is expected, however, to be less, pension officials
said.
For example, James Hacking, director of the State Universities
Retirement System(SURS), said SURS lost about US$8 million from Enron,
but likely will see a $1 million loss from WorldCom's demise. Enron is
not just history, however - Illinois is awaiting the outcome of class
actions filed by other states to determine whether any of the Enron-
related losses can be recouped.
In addition to discussing possible litigation in relation to WorldCom,
the attorney general's office has been pursuing Arthur Andersen LLP for
its role in the Enron collapse. Both Enron and WorldCom used Andersen,
which was convicted earlier this month of obstruction of justice for
destroying and altering Enron audit documents. At least eight staff
members in the attorney general's office have been assigned to the
Andersen inquiry, as the investigation turns toward litigation.
WORLDCOM INC.: Company Employees File Suit Over Pension Funds Losses
--------------------------------------------------------------------
Employees of WorldCom, Inc. filed the second-largest US long-distance
company and its former chief executive officer to recover billions of
dollars that their pension funds lost by investing in company stock,
the Contra Costa Times (Walnut Creek, CA), reports.
The suit accuses the Company, its former CEO Bernard J. Ebbers, its
former Chief Financial Officer Scott Sullivan and other officials of
violating federal pension laws. The class action says they illegally
permitted or caused employees to keep Company stock in 401(k) accounts
while knowing the Company was overstating income.
The Company said last week that it had hidden US$3.9 billion in costs
and would have to restate income for both this year and last year. The
Company reported earlier this year that it might have to write off as
much as $20 billion in goodwill because it had paid to overpaid to
acquire telecommunications companies.
"WorldCom workers have lost their retirement savings," said Lynn L.
Sarko, a Seattle lawyer who represents the employees. "This case shows
that Enron was not an isolated incident but was rather an omen of
things to come."
Company spokeswoman Julie Moore said the Company never prevented its
employees from buying or selling Company shares in its 401(k) program.
Mr. Ebbers could not be reached immediately for comment and calls to
Mr. Sullivan's attorney for comment were not immediately returned, the
Associated Press reports.
WORLDCOM INC.: US Bondholders File Lawsuit To Recover Investment Losses
-----------------------------------------------------------------------
US investors holding bonds in the troubled, collapsing company that is
WorldCom today, filed a class action in a federal court in Mississippi,
lawyers said, according to a report by Agence-France Presse.
The suit was brought on behalf of the bondholders by the New York law
firm of Wechsler Harwood Halebian and Feffer for actions occurring
between April 26, 2001 and June 25, 2002.
The Company, once the second-largest long distance telephone company,
said that officials had improperly put $3.8 billion worth of expenses
in the positive side of its ledgers. The revelation wiped out reported
profits for all of 2001 and the first quarter of 2002, and was
instantly heralded as a record-setting corporate financial scandal.
The bondholders' lawsuit alleges that corporate executives and the
Company's auditors at the time, Arthur Andersen, "knew that this type
of accounting practice was improper, yet knowingly condoned or
recklessly failed to correct the subject financial statements," the
lawyers said.
New Securities Fraud Cases
ALCATEL SA: Emerson Firm Commences Securities Fraud Suit in S.D. NY
-------------------------------------------------------------------
The Emerson Firm initiated a securities class action in the United
States District Court for the Southern District of New York on behalf
of:
(1) all purchasers of the common stock of Alcatel S.A. relating to
Alcatel's Class O common shares (Nasdaq:ALAO) in or traceable
to the initial public offering (IPO) of the ADSs conducted by
Alcatel on or about October 20, 2000, and
(2) all persons other than defendants who purchased Alcatel's
Class A common shares (NYSE:ALA) and Class O common shares in
the form of ADSs between October 20, 2000 and May 29, 2001,
inclusive
The complaint charges the Company and certain of its officers and
directors with issuing a false and misleading prospectus on October 20,
2000, and by making material misrepresentations to the market between
October 20, 2000 and May 29, 2001.
Specifically, the complaint alleges that on October 20, 2000, the
Company issued a prospectus for the sale of Class O stock in the form
of American Depositary Shares (ADSs) that purportedly would track the
performance of its Optronics Division. The prospectus was materially
false and misleading, as alleged in the complaint, because it failed to
disclose:
(i) that demand for the Company's optical components was weakening
as Alcatel and the Optronics Division's other customers were
experiencing severe and persistent business slowdowns;
(ii) that the purportedly increasing demand for the Optronics
Division's optical components was the result of a massive
inventory build at the Optical Division's primary customer,
Alcatel, and at the Company's external customers;
(iii) that the Company was amassing hundreds of millions of dollars
of obsolete inventory which would have to be written-off; and
(iv) that in light of the decreasing demand for optical components,
the Company was not in a position to successfully promote
sales of all product lines to outside customers.
Subsequently, on May 29, 2001, the Company issued an unexpected and
severe profit warning and separately announced that it expected to
report a second-quarter loss of approximately $2.6 billion. Following
this announcement, the price of Alcatel Class O common shares, in the
form of ADSs, declined by 11% from a closing price of $21.26 on May 29,
2001 to a closing price of $18.92 on May 30, 2001. Similarly, Alcatel
Class A common shares, in the form of ADSs declined by 8.8% from $27.14
to 24.74.
For more details, contact Tanya R. Autry by Mail: P.O. Box 25336,
Little Rock, AR 72221-5336 by Phone: 800-663-9817 or by E-mail:
tanya.autry@worldnet.att.net
AMDOCS LTD.: Charles Piven Commences Securities Fraud Suit in E.D. MO
---------------------------------------------------------------------
The Law Offices Of Charles J. Piven, PA initiated a securities class
action on behalf of shareholders who acquired Amdocs Limited (NYSE:DOX)
securities between July 24, 2001 and June 20, 2002, inclusive. The
case is pending in the United States District Court for the Eastern
District of Missouri, against the Company and:
(1) Bruce K. Anderson,
(2) Robert A. Minucci,
(3) Avinoam Naor and
(4) Dov Baharav
The action charges that defendants violated federal securities laws by
issuing a series of materially false and misleading statements to the
market throughout the class period which statements had the effect of
artificially inflating the market price of the Company's securities.
For more details, contact Charles J. Piven by Mail: The World Trade
Center-Baltimore, 401 East Pratt Street, Suite 2525, Baltimore,
Maryland 21202 by Phone: 410-986-0036 or by E-mail: piven@pivenlaw.com
CMS ENERGY: Schiffrin & Barroway Commences Securities Suit in E.D. MI
---------------------------------------------------------------------
Schiffrin & Barroway, LLP initiated a securities class action in the US
District Court for the Eastern District of Michigan, claiming that CMS
Energy Corp. (NYSE:CMS) misled shareholders about its business and
financial condition.
Plaintiff seeks damages for violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (and/or the Securities Act of 1933)
on behalf of all investors who bought Company securities between August
3, 2000 and May 10, 2002.
The complaint alleges that the Michigan-based Company, throughout the
class period, improperly recognized approximately $4.4 billion in
revenues by engaging in transactions lacking any economic substance
using what are known as "round-trip" trading transactions. The
improperly recognized revenues were, according to the complaint,
reported in the Company's quarterly and annual press releases and in
financial filings with the Securities and Exchange Commission (SEC),
throughout the class period.
On May 10, 2002, the Company announced that the SEC was investigating
the propriety of its "round-trip" trading practices. In response to the
announcement, its common stock price collapsed, falling from a high of
$20.06 on May 10, 2002 to a low of $15.72 on May 13, 2002, a drop of
more than 21% on extremely heavy trading volume.
For more details, contact Marc A. Topaz or Stuart L. Berman by Phone:
888-299-7706 (toll free) or 610-822-2221 by E-mail: info@sbclasslaw.com
or visit the firm's Website: http://www.sbclasslaw.com
DUKE ENERGY: Rabin & Peckel Commences Securities Fraud Suit in S.D. NY
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Rabin & 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 Duke Energy Corporation
securities (NYSE:DUK) between July 22, 1999 and May 17, 2002, both
dates inclusive. The suit names as defendants the Company and:
(1) Richard Priory,
(2) Robert Brace,
(3) David L. Hauser,
(4) Keith G. Butler,
(5) Sandra P. Meyer,
(6) Jeffrey L. Boyer, and
(7) Richard J. Osborne
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 22, 1999 and May 17, 2002, thereby artificially
inflating the price of Company securities.
The complaint also alleges that during the class period the defendants
issued numerous statements and filed quarterly and annual reports with
the SEC which described the Company's increasing revenues and financial
performance. The complaint alleges that these statements were
materially false and misleading because they failed to disclose and/or
misrepresented the following adverse facts, among others:
(i) that the Company had engaged in approximately $1 billion of
"round-trip" energy trades that provided no economic benefit
for the Company;
(ii) that the Company lacked the necessary internal controls to
adequately monitor the trading of its power; and
(iii) that as a result, the value of the Company's revenues and
financial results were materially overstated at all relevant
times.
On May 17, 2002, the last day of the class period, the Company issued a
press release announcing that it had "analyzed its trades for the
three-year period from 1999 through 2001 to identify those trades which
may have some of the characteristics of sell/buy-back trades." These
trades, known as "round-trip" or "wash" transactions, involve the
simultaneous buying and trading of power in the same price and same
amount and provide no economic benefit to the Company.
Following this announcement, shares of the Company fell $1.18 per share
to close at $33.52 per share, after reaching a split-adjusted class
period high of $44.97 on November 30, 2000.
For more details, contact Eric Belfi or Sharon Lee by Phone: (800) 497-
8076 or (212) 682-1818 by Fax: (212) 682-1892 by E-mail:
email@rabinlaw.com or visit the firm's Website: http://www.rabinlaw.com
FLEXTRONICS INTERNATIONAL: Much Shelist Investigates Securities Fraud
---------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
possible securities fraud claims on behalf of purchasers of the
securities of Flextronics International Ltd. (Nasdaq:FLEX) between
October 2, 2001 and June 4, 2002, inclusive.
It has been alleged that the Company, Michael E. Marks, its Chief
Executive Officer, Michael McNamara, President of American Operations
and Robert R. B. Dykes, its Chief Financial Officer, 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 materially false and
misleading statements to the market.
According to the allegations, the Company failed to disclose that its
business and operations were being adversely affected by a host of
negative factors, including, but not limited to:
(1) the Company was experiencing declining sales as its business
began to be affected by adverse market forces. Throughout the
class period, defendants repeatedly emphasized that the
Company was not being affected by the slowdown in the US or
global economy, when, in fact, it was;
(2) Throughout the class period, many of the Company's customers
were experiencing severe financial difficulty, making it
highly foreseeable that they would not be able to complete
anticipated sales, causing the Company to suffer a decline in
its revenues. At all times throughout the class period,
defendants lacked a reasonable basis upon which to publish
and/or affirm the revenue guidance they provided to analysts
and investors; and
(3) Defendants had purposely and/or recklessly under-reported the
amount of financing needed to complete the Company's
restructuring and over-stated the status of the completion of
this reorganization, as well as made false statements
concerning the Company's financial and operational condition
because it was critical that defendants raise cash by selling
more equity during the upcoming months.
On June 4, 2002, the last day of the class period, defendants shocked
the market when they finally revealed that the restructuring, which was
purportedly paid for in October 2001 and substantially completed
thereafter, was still far from complete. Defendants admitted that
there were at least an additional $150 million in restructuring charges
that they had to record. Defendants also stated that they could not
possibly meet the Company's previous earnings and revenue forecasts for
its first fiscal quarter 2003.
In response to the announcement, the Company's common stock fell from
$12.32 per share to as low as $9.50 per share, a decline of almost 23%,
on tremendous volume of 47 million Company shares traded.
For more details, contact Carol V. Gilden by Phone: 800-470-6824 or by
E-mail: investorhelp@muchshelist.com
FLEXTRONICS INTERNATIONAL: Scott + Scott Commences Securities Suit in NY
-----------------------------------------------------------------------
Scott + Scott, LLC initiated a securities class action on behalf of
purchasers of the securities of Flextronics International Ltd. (Nasdaq:
FLEX) between October 2, 2001 and June 4, 2002, inclusive, in the
United States District Court, Southern District of New York against the
Company and:
(1) Michael E. Marks,
(2) Michael Mcnamara and
(3) Robert R. B. Dykes.
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 October 2, 2001 and June 4, 2002, thereby artificially
inflating the price of Company securities.
The complaint alleges that the Company failed to disclose that its
business and operations were being negatively affected by a host of
adverse factors, including, but not limited to:
(i) that the Company was experiencing declining sales as its
business began to be affected by adverse market forces.
Throughout the class period, defendants repeatedly emphasized
that the Company was not being affected by the slowdown in the
US or global economy, when, in fact, that was not true;
(ii) throughout the class period, many of the Company's customers
were experiencing severe financial difficulty such that it was
highly foreseeable that they would be unable to complete
anticipated sales, thereby causing the Company to suffer a
decline in its revenues. At all times throughout the class
period, defendants lacked a reasonable basis upon which to
publish and/or affirm the revenue guidance they provided to
analysts and investors; and
(iii) defendants had purposely and/or recklessly under-reported the
amount of financing needed to complete the Company's
restructuring and over-stated the status of the completion of
this reorganization, as well as made false statements
concerning the Company's financial and operational condition
because it was critical that defendants raise cash by selling
more equity during the upcoming months.
On June 4, 2002, the last day of the class period, defendants shocked
the market when they finally revealed that the restructuring, which was
purportedly paid for in October 2001 and substantially completed
thereafter, was still far from complete. Defendants now admitted that
there were at least an additional $150 million in restructuring charges
that must be recorded. In addition, defendants also stated that they
could not possibly meet the Company's previous earnings and revenue
forecasts for its first fiscal quarter 2003.
In response to this negative announcement, the price of Company stock
dropped precipitously, falling from $12.32 per share to as low as $9.50
per share, a decline of almost 23%, on tremendous volume of 47 million
Flextronics shares traded.
For more details, contact Neil Rothstein or David R. Scott by Phone:
800-404-7770 by E-mail: nrothstein@scott-scott.com or drscott@scott-
scott.com or visit the firm's Website: http://www.scott-scott.com
HALLIBURTON COMPANY: Schatz & Nobel Commences Securities Suit in TX
-------------------------------------------------------------------
Schatz & Nobel PC initiated a securities class action in the United
States District Court for the Southern District of Texas on behalf of
all persons who purchased the common stock of Halliburton Company
(NYSE: HAL) between July 22, 1999 and May 28, 2002, inclusive.
The suit alleges that the Company violated the federal securities laws
by issuing false and misleading statements during the class period.
Specifically, the suit alleges the Company implemented a revenue
recognition policy, which recognized revenue on claims and change
orders relating to construction cost-overruns that its clients had not
approved. The suit alleges the recognition of revenue in this manner
violates Generally Accepted Accounting Principles (GAAP).
On May 28, 2002, the last day of the class period, the Company
announced the SEC had begun a preliminary investigation of the
Company's accounting treatment of cost overruns on construction jobs.
For more details, contact Nancy A. Kulesa by Phone: 800-797-5499 by E-
mail: sn06106@aol.com or visit the firm's Website: http://www.snlaw.net
HALLIBURTON COMPANY: Emerson Firm Commences Securities Suit in N.D. TX
----------------------------------------------------------------------
The Emerson Firm initiated a securities class action in the United
States District Court for the Northern District of Texas on behalf of
purchasers of Halliburton Company (NYSE:HAL) publicly traded securities
during the period between July 22, 1999 and May 28, 2002, inclusive.
The complaint charges that the Company violated Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder,
by issuing a series of materially false and misleading statements to
the market between July 22, 1999 and May 28, 2002.
As alleged in the complaint, beginning in the fourth quarter of 1998,
unbeknownst to the public, the Company materially changed its revenue
recognition policy to recognize revenue on claims and change orders
relating to cost-overruns which its clients had not approved.
Previously, the Company would only recognize revenue on approved change
orders or claims.
The suit further alleges that the alteration of the Company's
accounting policy and financial results reported as a result thereof
throughout the class period were materially false and misleading and in
violation of Generally Accepted Accounting Principles (GAAP) because,
among other things, the accounting change was not disclosed to the
public or supported as the preferred accounting treatment in the
Company's financial statements and because collection of the claims or
change orders was not probable and the amounts involved could not be
estimated reliably.
As a result of these violations of GAAP, according to the complaint,
the Company's quarterly and annual earnings press releases and
financial reports filed with the Securities and Exchange Commission
(SEC) throughout the class period were materially false and misleading
and artificially inflated the Company's reported revenues and earnings,
thereby artificially inflating the price of Company securities.
On May 28, 2002, after the close of the market, the Company issued a
press release announcing that the SEC is conducting an investigation
into its accounting for cost overruns. In reaction to the press
release, the price of Company stock dropped by 3.3% in one day on
extremely heavy trading volume.
For more details, contact Ms. Tanya R. Autry by Mail: P.O. Box 25336,
Little Rock, AR 72221-5336 by Phone: 1-800-663-9817 or by E-mail:
tanya.autry@worldnet.att.net
KNIGHT TRADING: Much Shelist Investigates Possible Securities Fraud
-------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
for possible securities fraud Knight Trading Group, Inc. on behalf of
purchasers of the Company's securities (Nasdaq:NITE) between February
29, 2000 and June 3, 2002, inclusive.
It has been alleged that the Company and Kenneth D. Pasternak, its
Chief Executive Officer, 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 materially false and misleading statements to
the market.
According to the allegations, defendants issued statements regarding
the Company's financial performance and trading practices, which were
materially false and misleading because they failed to disclose and/or
misrepresented, among other things, that:
(1) the Company's traders were engaging in an elaborate system of
trading-rule violations known as "front-running," in which
customer orders were delayed while defendants' traders made
purchases in the same stocks ordered by customers, thereby
benefiting themselves at the expense of the customer; and
(2) that the Company's front-running practices subjected the
Company to the heightened risk that it would be sanctioned by
the National Association of Securities Dealers.
On June 3, 2002, the last day of the class period, the Company
disclosed that the Securities and Exchange Commission and the NASD were
investigating its trading practices. When the market opened for
trading the following day, shares of the Company plummeted 28% from the
previous day's close.
For more details, contact Carol V. Gilden by Phone: 800-470-6824 or by
E-mail: investorhelp@muchshelist.com
LANTRONIX INC.: Schiffrin & Barroway Commences Securities Suit in CA
--------------------------------------------------------------------
Schiffrin & Barroway LLP initiated a securities class action against
Lantronix Inc. (Nasdaq:LTRX) claiming that the company misled investors
about its business and financial condition. The suit was filed in the
US District Court for the Central District of California on behalf of
all investors who bought Company securities between November 2, 2000
and May 30, 2002.
The complaint alleges that the Company's alleged wrongful course of
business:
(1) artificially inflated the price of Company stock during the
class period;
(2) deceived the investing public, including plaintiff and other
class members, into acquiring Company securities at
artificially inflated prices;
(3) allowed certain of the Individual Defendants to sell more than
$13 million worth of the shares held/controlled by them and
allowed the Company to sell $50 million worth of its own
stock; and
(4) permitted the Company to grow and benefit economically from
the wrongful course of conduct.
The Company and its top officers inflated the price of the Company's
stock in order to pursue an accelerated securities sale program.
Defendants knew that concealing the Company's joint venture and the
true impact it would have on the Company provided the only way that
they could foster the perception in the business community that the
Company was a "growth company," i.e., the only way it could post the
revenue and earnings per share growth claimed by defendants.
For more details, contact Shareholder Relations Manager by Phone:
888-299-7706 (toll free) or 610-822-2221 by E-mail: info@sbclasslaw.com
or visit the firm's Website: http://www.sbclasslaw.com
MONTANA POWER: Charles Piven Commences Securities Fraud Suit in Montana
-----------------------------------------------------------------------
The Law Offices Of Charles J. Piven, PA initiated a securities class
action on behalf of shareholders who acquired Montana Power Company,
n/k/a Touch America Holdings, Inc. (NYSE:TAA) securities between
January 30, 2001 and November 14, 2001, inclusive. The suit is pending
in the United States District Court for the District of Montana,
against defendants Touch America and Robert Gannon.
The action charges that defendants violated federal securities laws by
issuing a series of materially false and misleading statements to the
market throughout the class period which statements had the effect of
artificially inflating the market price of the Company's securities.
For more details, contact Charles J. Piven by Mail: The World Trade
Center-Baltimore, 401 East Pratt Street, Suite 2525, Baltimore,
Maryland 21202 by Phone: 410-986-0036 or by E-mail: piven@pivenlaw.com
OMNICOM GROUP: Emerson Firm Commences Securities Fraud Suit in S.D. NY
----------------------------------------------------------------------
The Emerson Firm initiated a securities class action in the United
States District Court for the Southern District of New York on behalf
of purchasers of Omnicom Group, Inc. (NYSE:OMC) publicly traded
securities during the period between April 25, 2000 and June 11, 2002,
inclusive. The suit names as defendants the Company and:
(1) John D. Wren,
(2) Randall J. Weisenburger,
(3) Bruce Crawford and
(4) Philip J. Angelastro
The defendants allegedly 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 April 25, 2000 and June 11, 2002, thereby artificially
inflating the price of Company securities.
The complaint alleges that prior to and throughout the class period,
defendants reported that the Company was continuing to experience
growth in its revenues and earnings, despite the overall economic
slowdown and the worst decline in advertising revenue that the industry
had ever experienced.
As alleged in the complaint, the Company's growth was attributed, for
the most part, to the numerous acquisitions made by the Company, which
were accretive to the Company's earnings. However, on June 12, 2002,
an article in The Wall Street Journal highlighted the Company's
acquisition accounting and raised questions concerning the Company's
creation of an off-balance sheet entity in which it transferred certain
Internet investments.
In particular, with respect to the Company's accounting for
acquisitions, the article noted that:
(i) the Company immediately included revenue and earnings from
recent acquisitions in its reported financial results, in
contrast to its competitors who excluded the results for the
first year after the company was acquired, thereby creating a
materially misleading impression of the Company's performance;
(ii) that the Company continued to owe hundreds of millions of
dollars in additional payments for companies that it had
previously acquired; and
(iii) the Company faced a potential future liability whereby, under
certain circumstances, it might be required to acquire
companies in which it had invested. With respect to the off-
balance sheet entity, the article described the Company's
transfer of its Internet investments to Seneca, which had been
jointly created with Pegasus Capital LLP in May 2001.
According to the article, Seneca had been created as a vehicle for the
Company to avoid reporting a loss on its investments in Internet
companies that had become devalued.
In response to the revelations contained in The Wall Street Journal
article, the price of Company stock dropped precipitously, falling
almost 20% to close at $62.28, on volume of more than 31 million shares
traded.
For more details, contact Tanya R. Autry by Mail: P.O. Box 25336,
Little Rock, AR 72221 by Phone: 800-663-9817 or by E-mail:
tanya.autry@worldnet.att.net
WORLDCOM INC.: Klayman & Toskes Filing Suit For Stock Plan Participants
-----------------------------------------------------------------------
Klayman & Toskes, PA is preparing to file a securities class action
against on behalf of a WorldCom, Inc. (Nasdaq:WCOM) Employee Stock
Option Plan (ESOP) participant against Morgan Stanley Dean Witter & Co.
for alleged unlawful conduct at both its West Lebanon, New Hampshire
and Middletown, Rhode Island branch offices.
Previously, securities suits have been filed against Salomon Smith &
Barney, Merrill Lynch & Co. The suit allege that the firms failed to
recommend to Company's ESOP participants hedging strategies to protect
their concentrated position in the Company as a result of the exercise
of their stock options through the use of margin.
The claims focus on Salomon's, Merrill's and Morgan Stanley's
mismanagement of their clients' portfolios given the fact that there
were option strategies available at the time of exercise that would
have protected the value of the margined, concentrated portfolio, known
as a "zero cost" collar.
"The recent events surrounding WorldCom's disclosure of accounting
irregularities points out the fallacy behind any advice given to
clients to concentrate all of their assets in a single stock without
any protection. The basis of our clients' damages is articulated
through the use of options available at the time of exercise, known as
a 'zero-cost collar' strategy. The tenets of risk management need to be
adhered to at all times. As such, our clients' portfolios needed to be
hedged," according to Lawrence L. Klayman, principal partner of the
firm.
Numerous class action lawsuits have been filed. These actions are
distinct and separate from the arbitration claims that have been filed
by K&T on behalf of WorldCom ESOP participants. The sole purpose of
this release is to investigate, on behalf of our clients, sales
practice violations of licensed brokers at Salomon, Merrill, and Morgan
Stanley.
The firm is pursuing arbitration suits before the New York Stock
Exchange and the National Association of Securities Dealers for
securities violations including the misuse of margin, the misuse of
stock option plans, failure to supervise, unsuitability claims,
misrepresentation and material omissions of fact, unauthorized
transactions, and excessive trading/churning of customers' accounts.
For more details, contact Lawrence L. Klayman by Phone: 888-997-9956 or
visit the firm's Website: http://www.nasd-law.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
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Information contained herein is obtained from sources believed to be
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