/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/020708.mbx C L A S S A C T I O N R E P O R T E R Monday, July 8, 2002, Vol. 4, No. 133 Headlines BROOKSTONE INC.: Employees File Overtime Wage Suit in CA State Court CALDERA INTERNATIONAL: Vigorously Opposing Securities Suits in NY COLORADO: Panel Concludes Poor Training Lead To "Mixed" Police Files EDISON SCHOOLS: Faces Several Suits For Securities Violations in NY GOODYEAR TIRE: Appeals $20M Award in Suit Over Entran II Hose in CO HEWLETT PACKARD: Reaches Settlement With Shareholders in Compaq Suit INDIAN FUNDS: Interior Says Accounting For Funds Costly, Time-Consuming LANTRONIX INC.: Faces Several Suits For Securities Violations in CA MEN'S WEARHOUSE: CA Court Refuses Certification To Consumer Fraud Suit NCI BUILDING: Asks TX Court To Dismiss Securities Fraud Suit in S.D. TX NTL INC.: Shareholders File Several Securities Fraud Suits in S.D. NY PERKINELMER INC.: Mounting Vigorous Defense V. Securities Suits in MA RAFFLES TOWN: Key Witness Has Ulterior Motive, Defense Lawyer Says SCHICK TECHNOLOGIES: NY Court Approves $3.4M Securities Suit Settlement SOUTH CAROLINA: Deadline For Settlement Qualification Set for October TOMMY HILFIGER: Saipan Court Approves Settlement in "Sweatshops" Suit WORLDCOM INC: Massachusetts To Join Suit Over State Pension Losses WORLDCOM INC.: Judge Orders Former SEC Chairman to Monitor Company New Securities Fraud Cases 360NETWORKS INC.: Marc Henzel Launches Securities Fraud Suit in S.D. NY CMS ENERGY: Kirby McInerney Initiates Securities Fraud Suit in E.D. MI EDISON SCHOOLS: Kirby McInerney Commences Securities Suit in S.D. NY MERCK & CO.: Wolf Popper Commences Securities Fraud Suit in New Jersey MERCK & CO.: Kaplan Fox Commences Securities Fraud Suit in New Jersey MERRILL LYNCH: Bernard Gross Launches Securities Fraud Suit in S.D. NY MERRILL LYNCH: Kirby McInerney Commences Securities Suit in S.D. NY MH MEYERSON: Brian Barry Commences Securities Fraud Suit in New Jersey SEEBEYOND TECHNOLOGY: Glancy & Binkow Commences Securities Suit in CA TELLABS INC.: Brian Felgoise Commences Securities Fraud Suit in N.D. IL UNIROYAL TECHNOLOGIES: Milberg Weiss Commences Securities Suit in FL WORLDCOM, INC.: Lockridge Grindal Commences Securities Suit in S.D. MS WORLDCOM INC.: Marc Henzel Commences Securities Fraud Suit in S.D. NY ********* BROOKSTONE INC.: Employees File Overtime Wage Suit in CA State Court -------------------------------------------------------------------- Brookstone, Inc. faces a class action filed in California Superior Court in Los Angeles on behalf of current and former managers and assistant managers of the Company's California stores, alleging that they were improperly classified as exempt employees. The lawsuit seeks damages including overtime pay, restitution and attorneys fees. The Company has filed an answer denying the allegations and opposing class certification. At the present time, no class has been certified, nor has there been any determination regarding exempt classification or the extent to which overtime pay may or may not be owed. The Company is vigorously investigating and defending this litigation, but because the case is in the very early stages, the financial impact to the Company, if any, cannot be predicted at this time. The Company does not believe that any of these legal proceedings will have a material adverse effect on its financial condition or results of operations. CALDERA INTERNATIONAL: Vigorously Opposing Securities Suits in NY ----------------------------------------------------------------- Plaintiffs in the securities class actions against Caldera International, Inc. filed a consolidated amended suit in the United States District Court for the Southern District of New York. The suit charges the Company, certain of its officers and directors, and the underwriters of its initial public offering with violations of the securities laws. Specifically, the suit alleges certain improprieties regarding the circumstances surrounding the underwriters' conduct during the IPO and the failure to disclose such conduct in the registration statement. The Company stated that the suit is similar to several suits against over 340 other issuers, their underwriters and officers and directors, pending in the same court. The Company is not aware of any improper conduct by the Company, its officers and directors, or its underwriters, and denies any liability relating thereto. The Company plans to vigorously defend the action. COLORADO: Panel Concludes Poor Training Lead To "Mixed" Police Files -------------------------------------------------------------------- A Denver City-appointed review panel stated that routine public security information was lumped together with criminal files in police computers because officers were not adequately trained to use the computer software, the Associated Press Newswires reports. The panel examined police intelligence-gathering practices after the American Civil Liberties Union (ACLU) obtained the files in March. They showed, for example that the police had labeled the nonviolent American Friends Service Committee and other peaceful advocacy groups as "criminal extremist." The ACLU, which has filed a class action against the city over the files, says that the records document police misconduct and should not be destroyed. The panel, on the other hand, is saying that officers did not get enough training on the new computer filing software when the department's intelligence bureau began putting its paper files on computers. The result, the panel says, was a mixed bag of records on everyone from parade permit-holders to political protesters to people who threatened visiting dignitaries. The panel's report did not address why police had collected files on people not suspected of criminal activity in the first place. The review panel recommended against punishing anyone in the police department over the records because "there is no indication that any of the information was retained intentionally to harm someone or to inhibit the exercise of First Amendment-protection activities." The panel instead recommended that officers get better training on what information can be kept and that someone from outside the department review the new files periodically. Mayor Wellington Webb appointed three retired judges to constitute the panel after the ACLU disclosed the existence of the files. They are Roger Cisneros, Jean Dubofsky and William Meyer. The records began as a Rolodex file in 1954 and included intelligence contacts as well as information for routine public security work, the panel's report said. The files grew to include information on 3,277 people and 208 organizations. EDISON SCHOOLS: Faces Several Suits For Securities Violations in NY ------------------------------------------------------------------- Edison Schools, Inc. faces several securities class actions filed on behalf of purchasers of the Company's common stock between November 11, 1999 and February 13, 2002, inclusive. The action is pending in the United States District Court, for the Southern District of New York, against the Company and certain of its officers and directors. 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 November 11, 1999 and February 13, 2002, thereby artificially inflating the Company's stock price. The Company strongly denies these allegations and will defend itself vigorously. However, litigation is inherently uncertain and there can be no assurance that the Company will not be materially affected. GOODYEAR TIRE: Appeals $20M Award in Suit Over Entran II Hose in CO ------------------------------------------------------------------- The Goodyear Tire and Rubber Company appealed an approximately $20 million award made by a jury in a civil class action in a Colorado State Court, related to alleged breaches of warranties and defects in the Company's Entran II hose installed as a part of Heatway radiant heating systems in the homes of the claimants. The Company believes the verdict was based on material errors of fact and law. The Company is also a defendant in three class actions and twenty other civil actions in various federal and state courts related to the Company's Entran II hose installed as a part of Heatway radiant heating systems in the homes or other structures of the claimants. HEWLETT PACKARD: Reaches Settlement With Shareholders in Compaq Suit -------------------------------------------------------------------- Hewlett-Packard Co. (HPQ) has agreed to pay Compaq Computer Corp. shareholders US$28.6 million under the preliminary settlement of a class action, Dow Jones Business News reports. The lawsuit was filed in 1998, well before this year's US$19 billion merger made Compaq a part of the Company. In the lawsuit, shareholders claimed Compaq executives failed to disclose that their quarterly inventories of computers had built up, a process called channel stuffing that can temporarily inflate financial results. The proposed settlement is to be divided up among shareholders who owned Compaq stock between July 10, 1997, and March 6, 1998, and who lost money on their investment. The settlement came after three months of mediation, and has been tentatively approved by US District Judge Vanessa Gilmore in Houston. INDIAN FUNDS: Interior Says Accounting For Funds Costly, Time-Consuming ----------------------------------------------------------------------- It will take 10 years and at least US$2.4 billion to sort out more than a century's worth of transactions from a mismanaged trust fund system handling royalties from Indian-owned land, Interior Department officials said recently, according to an Associated Press Newswires report. The cost is six times more than what Interior Secretary Gale Norton told Congress in February that it would be. The new figure will likely get a cool reception from a cash-strapped Congress. The Department's plan offers "a full accounting, a robust transaction- by-transaction analysis . and we fully anticipate there will be some commentary or other direction by Congress," Interior spokesman Eric Ruff said. The expense reflects the enormous task of accounting for every cent of an estimated US$13 billion that has passed through as many as 500,000 individual trust accounts between 1887 and 2000, Interior officials said. The process includes reviewing 25 million electronic transactions and 500 million paper records, many deteriorating and damaged by time. The trust fund stems from Congress's decision in 1887 to designate small allotments of land to individual Indians and assign the Interior Department to manage the grazing, timber, and oil and gas rights arising from the leasing of that land and the royalties flowing from the leasing. However, the money was poorly managed and an unknown amount stolen, misappropriated or never collected. LANTRONIX INC.: Faces Several Suits For Securities Violations in CA ------------------------------------------------------------------- Lantronix, Inc. faces several securities class actions filed in the United States District Court for the Central District of California against the Company and certain of its current and former officers and directors alleging violations of the Securities Exchange Act of 1934, as amended/ The suits, filed on behalf of persons who purchased or otherwise acquired the Company's common stock during the period of April 25, 2001 through May 30, 2002, inclusive, allege that the defendants caused the Company to improperly recognize revenue and made false and misleading statements about the Company's business. The suit further alleges that that the Company materially overstated its reported financial results, thereby inflating the Company's stock price during its secondary Offering in July 2001, as well facilitating the use of the Company's stock as consideration in acquisitions. The Company is currently investigating the allegations in the complaints. There has been no discovery to date, and no trial date has been established. An adverse judgment or settlement of these lawsuits could have a significant impact on the Company's future financial condition or results of operations. The Company anticipates that all of these actions will ultimately be consolidated into one action and that a consolidated amended complaint will be filed after the appointment of lead plaintiff. The Company has not yet responded to any of the complaints, and discovery has not commenced. MEN'S WEARHOUSE: CA Court Refuses Certification To Consumer Fraud Suit ---------------------------------------------------------------------- The Superior Court of California for the County of San Diego refused to grant certification to a consumer class action, alleging several causes of action, each based on the factual allegation that the Company advertised and sold men's slacks at a marked price that was exclusive of a hemming fee for the pants. The suit seeks: (1) permanent and preliminary injunctions against advertising slacks at prices which do not include hemming; (2) restitution of all funds allegedly acquired by means of any act or practice declared by the Court to be unlawful or fraudulent or to constitute unfair competition under certain California statutes; (3) prejudgment interest; (4) compensatory and punitive damages; (5) attorney's fees; and (6) costs of suit The Company believes that the suit is without merit and the allegations are contrary to customary and well-recognized and accepted practices in the sale of men's tailored clothing. The suit was subsequently amended to add similar causes of action and requests for relief based upon allegations that the Company's alleged "claims that (it) sell(s) the same garments as department stores at 20% to 30% less" are false and misleading. The Company believes that such added causes of action are also without merit. The court recently ruled against the plaintiff's motion for class certification, declining to certify a class. The Company intends to vigorously defend the suit. NCI BUILDING: Asks TX Court To Dismiss Securities Fraud Suit in S.D. TX ----------------------------------------------------------------------- NCI Building Systems, Inc. asked the United States District Court for the Southern District of Texas to dismiss the consolidated securities class action pending against it and certain of its present officers. Several suits were commenced in April 2001, on behalf purchasers of the Company's common stock during various periods ranging from August 25, 1999 through April 12, 2001. The suits asserted various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and seek unspecified amounts of compensatory damages, interest and costs, including legal fees. The lawsuits were later consolidated into one class action. On January 10, 2002, the court appointed a lead plaintiff for the consolidated lawsuit. The lead plaintiff filed a consolidated amended complaint on February 1, 2002. The Company then asked the court to dismiss the suit in March 2002. The motion is currently pending. The Company denies the allegations in the complaint and intends to defend against them vigorously. The lawsuits are at a very early stage. Consequently, it is not possible at this time to predict whether the Company will incur any liability in excess of insurance coverage or to estimate the damages, or the range of damages, if any, that the Company might incur in connection with such actions, or whether an adverse outcome could have a material adverse impact on the Company's business, consolidated financial condition or results of operations. NTL INC.: Shareholders File Several Securities Fraud Suits in S.D. NY --------------------------------------------------------------------- NTL, Inc. faces several securities class actions pending in the United States District Court for the Southern District of New York on behalf of all persons who purchased or acquired the Company's securities between August 9, 2000 and November 29, 2001. The complaint charges the Company and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that, throughout the class period, defendants issued a series of materially false and misleading statements that caused the Company's stock price to be materially inflated. The Company does not know of any facts that would support these allegations, and intends to defend the lawsuits vigorously. PERKINELMER INC.: Mounting Vigorous Defense V. Securities Suits in MA --------------------------------------------------------------------- PerkinElmer, Inc. (NYSE:PKI) faces a securities class action securities law case filed in the United States District Court for the District of Massachusetts, on behalf of purchasers of the Company stock from July 15,2001 through April 11,2002. The suit asserts that various statements made by the Company and its management during that period were misleading with respect to the Company's prospects and future operating results. The Company believes it has highly meritorious defenses to the action and intends to contest it vigorously. RAFFLES TOWN: Key Witness Has Ulterior Motive, Defense Lawyer Says ------------------------------------------------------------------ The Raffles Town Club's attorney attacked the affidavit of a company director during the course of the trial in a class action filed by nearly 5,000 members for misrepresentation and breach of contract, The Straits Times (Singapore) reports. The attack, launched by the club's attorney, was aimed at a 55-year-old company director, Robert Lai, who was a prime mover in the class action against the club. Senior Counsel K. Shanmugan accused Mr. Lai of having an ulterior motive in the proceedings, specifically that Mr. Lai appears to want to take over the club. Mr. Shanmugam said Mr. Lai's motive can be inferred from the words of the plaintiff's lawyer earlier in the trial and from the leading role Mr. Lai has played in starting a lawsuit from which he has nothing to gain because he is not a founding member. Referring to the words of plaintiffs' lawyer, Senior Counsel Molly Lim, when asked what would happen if the club did not have the money to return the founding members their $28,000 entrance fee, Mr. Shanmugam said, "Ms. Lim said maybe the alternative is for the members to take over." Mr. Shanmugam continued, saying, that as a matter of inference and Mr. Lai's inexplicable role in these proceedings, "that there appears to be the motive, a small group of members led by Mr. Lai, who has orchestrated the whole proceedings to take over the club." In his affidavit, Mr. Lai said he was a founder of the Raffles 5000 committee that started the lawsuit and that he paid for the initial consultation fee for the lawyer as well as the setting up of an e-mail address to receive members' views. Mr. Shanmugam said, "One wonders why he is taking such a role when he himself admits no interest in the proceedings, no money to recover." Mr. Shanmugam added that Mr. Lai has said that he started it "out of a sense of outrage." Mr. Shanmugam also has argued as a defense that the plaintiffs' lawsuit is misconceived as a class action. The plaintiffs must show, as an essential element of a class action, their individual states of mind. He said, "The onus that each of the 4,895 plaintiffs has in proving his case and his state of mind cannot be circumvented and short-circuited by 10 of them coming to court and getting Mr. Robert Lai, who is not even a founder member, to say that all these 4,895 people believe the same things." The plaintiffs apparently believe they still have a cause of action although they have conceded that the club did not explicitly promise to limit its membership to 5,000 to 7,000 members. Nonetheless, the plaintiffs are relying on statements in the prospectus that members would enjoy "unparalleled privileges and facilities," that memberships would be "exclusive and limited" and that the club would be "without peer in terms of size, facilities and opulence." Such statements, made in the prospectus, were misleading, say the plaintiffs. SCHICK TECHNOLOGIES: NY Court Approves $3.4M Securities Suit Settlement ----------------------------------------------------------------------- The United States District Court for the Eastern District of New York granted final approval to the US$3.4 million settlement of the consolidated securities class action pending against Schick Technologies, Inc. The suit names as defendants the Company and: (1) David B. Schick, (2) Thomas E. Rutenberg, (3) David Spector, and (4) PricewaterhouseCoopers LLP Several suits were commenced in late 1998 through early 1999, alleging, inter alia, that certain defendants issued false and misleading statements concerning the Company's publicly reported earnings in violation of the federal securities laws. The Complaint sought certification of a class of persons who purchased the Company's common stock between July 1, 1997 and February 19, 1999, inclusive. The suits were later consolidated. The Company later entered into an agreement in principle with the plaintiffs for the settlement of the suit, as reflected in a Memorandum of Understanding. In June 2001, a stipulation of settlement was executed, under which all claims against the Company and the individual defendants were to be dismissed without presumption or admission of any liability or wrongdoing. The principal terms of the settlement agreement called for payment to the plaintiffs, for the benefit of the class, of the sum of US$3.4 million. In an order and final judgment entered by the court on February 12, 2002, the terms of the settlement were approved and the suit was dismissed with prejudice. SOUTH CAROLINA: Deadline For Settlement Qualification Set for October --------------------------------------------------------------------- A Richland County court, in South Carolina, recently gave preliminary approval to a US$1.1 million settlement between a Charleston insurance company and about 30,000 policyholders who say they paid higher premiums because they are black, the Associated Press Newswires reports. Atlantic Coast Life Insurance Co. agreed to the settlement of the class action last year. A fairness hearing on the proposed settlement will be held October 7, at the Richland County Courthouse, in Columbia. Policyholders with coverage in force and claims paid on or after July 17, 1989, would have their benefits increased by 12 percent to 18 percent. Anyone with claims paid before that date can make a request for increased benefits of 12 percent to 18 percent, plus interest up to $100,000. Policyholders must show proof in writing within 180 days that they received a claim. Lapsed or terminated policies must be reinstated to be eligible. Greenville-based Liberty Life Insurance Corp. is fighting a similar lawsuit, claiming it did not break the law when it used race to price policies issued in the 1940s through 1960s. The Company, which was sold to the Royal Bank of Canada more than a year ago, is also fighting an order by the state Insurance Department that would require it to pay $2 million to make restitution on those policies asking payment for race-based premiums and requiring the company to set aside $1 million for future claims. The Company also has appealed an order that it be suspended from doing business in South Carolina for one year. Liberty Life can sell policies while it is appealing the order. TOMMY HILFIGER: Saipan Court Approves Settlement in "Sweatshops" Suit --------------------------------------------------------------------- The Saipan federal court preliminarily approved a settlement in the class actions filed against Tommy Hilfiger Corporation, and other garment manufacturers and retailers asserting claims that garment factories located on the island of Saipan, which allegedly supply product to the Company and other co-defendants, engage in unlawful practices relating to the recruitment and employment of foreign workers. One suit, brought in San Francisco Superior Court, was filed by a union and three public interest groups alleging unfair competition and false advertising by the Company and others. The other suit, was filed in the United States District Court for the Central District of California and subsequently transferred to the Federal Court in Saipan. This suit was brought on behalf of an alleged class consisting of the Saipanese factory workers, and includes as defendants both companies selling goods purchased from factories located on the island of Saipan and the factories themselves. The federal complaint alleges claims under the: (1) Racketeer Influenced and Corrupt Organization (RICO) Act, (2) the Alien Tort Claims Act, (3) federal anti-peonage and indentured servitude statutes, and (4) state and international law The Company has entered into settlement agreements with the plaintiffs in the two suits. As part of these agreements, the Company specifically denies any wrongdoing or any liability with regard to the claims made in both suits. The settlement agreement provides for a monetary payment, in an amount that is not material to the Company's financial position, results of operations or cash flows, to a class of plaintiffs in the federal suit, as well as the creation of a monitoring program for factories in Saipan. On May 10, 2002, the federal court issued an order granting preliminary approval of the settlement. The Company and its subsidiaries are from time to time involved in routine legal matters incidental to their businesses. In the opinion of the Company's management, based on advice of counsel, the resolution of the foregoing matters will not have a material effect on its financial position, its results of operations or its cash flows. WORLDCOM INC: Massachusetts To Join Suit Over State Pension Losses ------------------------------------------------------------------ The Massachusetts pension system will join other states in a class action over WorldCom, Inc.'s alleged defrauding of its shareholders, a top pension official said, the Boston Herald reports. "We are certainly reviewing our legal options," said Massachusetts First Deputy Treasurer Michael Travaglini. "We will be actively involved in the class-action lawsuit against WorldCom." The Washington Post reports that many states are gearing up for a massive shareholder lawsuit on behalf of their respective pension plans. The Massachusetts pension plan, known as the Pension Reserves Investment Trust (PRIT) Fund, lost $25.1 million in actual and unrealized losses last week, Mr. Travaglini said. He said the PRIT Fund's losses happened because of a drop in value of WorldCom bonds. However, that is a small fraction of the state's roughly US$29 billion fund. It is much smaller than the losses that pension plans in other states suffered. The California pension system lost about $590 million, Maryland's pension system, similar in size to the Bay State's, lost about $52 million, according to the Washington Post. Mr. Travaglini said he does not expect Massachusetts to be a lead plaintiff in the lawsuit, because its losses were relatively low compared to other pension plans. He said the state is already part of a similar class action over losses in Enron investments. WORLDCOM INC.: Judge Orders Former SEC Chairman to Monitor Company ------------------------------------------------------------------ US District Judge Jed Rakoff in New York recently named a corporate monitor to oversee finances at beleaguered communications company Worldcom, Inc. as it struggled to stay out of a potentially devastating bankruptcy, Agence France-Presse reports. Former Securities and Exchange Commission (SEC) Chairman Richard Breeden was Judge Rakoff's choice of monitor to keep an eye on finances at the Company until the judge can hear a complaint from the SEC. Mr. Breeden will be paid his regular hourly rate of $800 per hour by the Company, which also will reimburse Mr. Breeden for any necessary support staff and costs. The monitor will make monthly reports to the court ahead of a trial that is set tentatively for March 31, 2003, said court clerk Nathan Reilly. Mr. Breeden will be required to sell some 6,000 shares of Company stock, according to Judge Rakoff. The monitor is to assure that no documents are destroyed and to guard against an "unjust enrichment" of executives as the Company tries to avert a meltdown. In the meantime, Judge Rakoff has ordered the Company not to make any payment over $100,000 to any current or former employee or officer, or any other large payment that is not contractually required. New Securities Fraud Cases 360NETWORKS INC.: Marc Henzel Launches Securities Fraud Suit in S.D. NY ----------------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court, Southern District of New York on behalf of purchasers of the shares of 360Networks Inc. (NASDAQ: TSIXQ.PK) between November 8, 2000 and June 28, 2001, inclusive. The action is pending against: (1) Gregory B. Maffei, (2) Jimmy D. Byrd, (3) Larry Olsen, (4) Ron Stevenson, (5) Vanessa Wittman and (6) Steve Baker 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 November 8, 2000 and June 28, 2001, thereby artificially inflating the price of Company shares. The complaint alleges that throughout the class period, the Company reported strong year-over-year revenue growth. Unbeknownst to investors, however, as alleged in the complaint, the Company was experiencing diminishing revenue growth. The suit alleges that in order to create the impression that the Company was continuing to experience growth, the Company engaged in a series of reciprocal transactions with certain competitors for the purchase and sale of dark fiber optic cable, the so-called dark fiber swap. The complaint alleges that as a result of these transactions, the Company artificially inflated its operating results and materially misrepresented its financial results at all relevant times. For more details, contact Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202 Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or 888-643-6735 by Fax: 610-660-8080 by E-mail: mhenzel182@aol.com or visit the firm's Website: http://members.aol.com/mhenzel182 CMS ENERGY: Kirby McInerney Initiates Securities Fraud Suit in E.D. MI ---------------------------------------------------------------------- Kirby McInerney & Squire, LLP commenced a securities class action lawsuit on behalf of all purchasers of CMS Energy Corporation (NYSE:CMS) securities during the period from August 3, 2000 through May 10, 2002. The action is pending in the United States District Court for the Eastern District of Michigan. The complaint charges the Company, as well as its Chief Executive, Chief Financial and Chief Operating Officers, with violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934. The alleged violations, according to the complaint, stem from materially false and misleading financial statements issued by the defendants during the class period that, as detailed below: (1) misrepresented the Company's business, operations and financial performance; and (2) caused the Company securities to trade at artificially- inflated prices. The suit alleges that, during the class period, the Company inflated its publicly reported revenues through sham "round-trip" energy trading in which the Company purchased and sold the exact same amount of energy at the exact same price. There is no reason for doing these transactions other than to inflate reported revenues, growth, and market share. As the complaint alleges, the Company has admitted to reporting $4.4 billion in false revenues from such sham energy trading, thereby inflating its publicly-reported revenues by approximately 30% during 2001. The suit alleges that the inflated and publicly reported revenue and trading figures misrepresented the Company's real revenue, growth rate, and market share. As a result, the complaint alleges, Company securities traded at inflated prices based on such publicly reported, but misleading, figures and investors who purchased Company securities at such inflated prices were damaged thereby. The SEC is now investigating the Company, which is restating its financial statements for 2001 in order to remove previously reported and misleading revenues stemming from round-trip trading. When the Company admitted the existence and extent of such round-trip trading, its shares lost approximately 20% of the their value, falling from above $20.00 per share on May 10, 2002 to below $16.00 per share on May 13, 2002. For more details, contact Ira M. Press or Michele Kennedy by Mail: 830 Third Avenue, 10th Floor, New York, New York 10022 by Phone: 212-317-2300 or 888-529-4787 by E-Mail: mkennedy@kmslaw.com or visit the firm's Website: http://www.kmslaw.com EDISON SCHOOLS: Kirby McInerney Commences Securities Suit in S.D. NY -------------------------------------------------------------------- Kirby McInerney & Squire, LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all purchasers of Edison Schools Inc. (Nasdaq:EDSN) common stock during the period from November 10, 1999 through May 14, 2002. The action charges the Company, its auditor PricewaterhouseCoopers LLP (PWC), and its chief executive officer and chief financial officer, with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The violations, as the complaint alleges, stem from the materially false and misleading statements made by the defendants during the class period that, misrepresented the Company's business, operations and financial performance and caused its stock to trade at artificially-inflated prices. The complaint alleges that, during the class period, the Company misrepresented and inflated its publicly reported revenues, and misrepresented and deflated its publicly reported liabilities. As the complaint alleges, investigative reporting on February 13, 2002 first apprized the investing public of the former, and an SEC cease and desist order on May 14, 2002 prompted Edison to admit to the latter. As the complaint alleges, the Company over-reported revenues by recording as revenue monies paid for teachers' salaries, student transportation and utility bills that were remitted directly by its clients (i.e., school districts). Although the Company never actually received these monies, the Company recorded them as revenue in its financial statements. Thus, the Company was able to boast revenue growth in its financial statements disseminated to the investing public. When this information was belatedly disclosed to the market on February 13, 2002, the following day, the price of Company shares dropped as low as $12.75. On May 14, 2002, the Company, in a settlement with the SEC, agreed to restate its financial statements so as to correctly account for certain liabilities that had not previously been reported. The following day, the Company's shares traded as low as $2.50 per share. For more details, contact Ira M. Press or Orie Braun by Mail: 830 Third Avenue, 10th Floor, New York, New York 10022 by Phone: 212-317-2300 or 888-529-4787 by E-Mail: obraun@kmslaw.com MERCK & CO.: Wolf Popper Commences Securities Fraud Suit in New Jersey ---------------------------------------------------------------------- Wolf Popper LLP initiated a securities class action on behalf of purchasers of the securities of Merck & Co., Inc. (NYSE:MRK) between July 1, 1999 and June 21, 2002, inclusive. The suit is pending in the United States District Court, District of New Jersey against the Company and: (1) Kenneth C. Frazier, (2) Richard C. Henriques, (3) Raymond V. Gilmartin, (4) Judy C. Lewent and (5) Mary M. McDonald 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 1, 1999 and June 21, 2002, thereby artificially inflating the price of Company securities. The complaint alleges that, throughout the class period, defendants issued numerous statements and filed quarterly and annual reports with the SEC that described the Company's increasing revenues and financial performance. As alleged in the complaint, these statements were materially false and misleading because they failed to disclose and/or misrepresented: (i) that the Company had materially overstated its revenues (by roughly $4.6 billion in year 2001 alone) by improperly including the value of co-payments made by consumers to their pharmacies (inasmuch as Merck had no rights or liabilities with respect to the co-payments); (ii) that the financial statements prepared and filed by defendants during the class period were not prepared in accordance with Generally Accepted Accounting Principles (GAAP) because neither Merck nor its Medco unit ever received any revenue from the co-payments that were made to pharmacies; and (iii) that as a result, defendants' statements concerning the size of the Company's revenues and financial results lacked a reasonable basis at all relevant times. On June 21, 2002, The Wall Street Journal published an article that revealed that the Company had boosted its reported revenues by roughly $4.6 billion in year 2001 alone by improperly including as revenue the value of co-payments made by consumers with a prescription-drug card to their pharmacies to cover their portion of the cost of a prescription under an insurance plan. Following this report, shares of the Company fell $2.22 per share to close at $49.98 per share, on volume of more than 15.2 million shares traded, or more than twice the average daily volume. For more details, contact Robert C. Finkel by Mail: 845 Third Avenue, New York, NY 10022-6689 by Phone: 212-451-9620 or 877-370-7703 by Fax: 212-486-2093 or 877-370-7704 by E-mail: irrep@wolfpopper.com or visit the firm's Website: http://www.wolfpopper.com MERCK & CO.: Kaplan Fox Commences Securities Fraud Suit in New Jersey --------------------------------------------------------------------- Kaplan Fox & Kilsheimer LLP initiated a securities class action against Merck & Co., Inc. (NYSE: MRK) and certain of its officers and directors, in the United States District Court for the District of New Jersey. This suit is brought on behalf of all persons or entities who purchased or otherwise acquired the Company's common stock between July 1, 1999 and June 21, 2002, inclusive. The complaint alleges that the Company and certain of its officers and directors violated the federal securities laws. The complaint alleges, among other things, that during the class period defendants overstated the Company's revenues. The Company's operations are comprised of two reportable segments: Merck Pharmaceutical and Merck's wholly owned subsidiary, Merck-Medco Managed Care, LLC. Since the Company acquired Merck-Medco in 1993 and throughout the class period, the Company and Merck-Medco have falsely inflated their reported revenues by billions of dollars, in violation of Generally Accepted Accounting Principles (GAAP). During the class period, Merck- Medco's revenues have made up over 50% of the Company's total revenues. Merck-Medco revenues are purportedly derived from the filling and managing prescriptions and health management programs. Consumers who are members of pharmacy benefits plans and purchase prescriptions must make a co-payment directly to the pharmacy. To artificially boost Merck-Medco's apparent sales, defendants included consumer co-payments for prescription drugs in its revenues, contrary to the revenue recognition practices of two of Merck-Medco's biggest competitors and in violation of GAAP. As a result, Merck-Medco and Merck overstated the companies' total economic activity, making it look more successful than it was in reality. According to a June 21, 2002 article in The Wall Street Journal, neither company bills for the co-payments, gets billed for them, or otherwise comes into contact with them. The Wall Street Journal reported that Merck has not disclosed the actual co-payments charged and estimated that Merck and Merck-Medco may have artificially inflated their 2001 revenues by as much as $4.6 billion. As a result of defendants' false and misleading statements, investors were damaged, by purchasing the Company's common stock at artificially inflated levels during the class period. For more details, contact Frederic S. Fox, Joel B. Strauss, Donald R. Hall by Mail: 805 Third Avenue, 22nd Floor, New York, NY 10022 by Phone: 800-290-1952 or 212-687-1980 by Fax: 415-772-4707 by E-mail: mail@kaplanfox.com or visit the firm's Website: http://mail.kaplanfox.com MERRILL LYNCH: Bernard Gross Launches Securities Fraud Suit in S.D. NY ---------------------------------------------------------------------- The Law Offices of Bernard M. Gross PC initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all purchasers of Merrill Lynch, Inc. (NYSE:MER) securities during the period from March 9, 2000 through April 11, 2002. The suit asserts claims against the Company and its Chief Executive Officer for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder by the Securities Exchange Commission for failure to disclose material adverse information and participating in a scheme to defraud investors. Specifically, the suit alleges that throughout the class period, the Company's Internet Research Group suffered from improper conflicts of interest because their compensation was related to the performance of the Company's investment banking group whose clients and potential clients were the subject of misleading research reports disseminated by the Internet Research Group. The suit alleges that the Internet Research Group issued research reports that were contrary to their actual opinions of the subject companies in order to develop business for the Company's investment bankers. Many of the allegations of the suit are supported by an affidavit that was made publicly available by the New York Attorney General in April of this year at the conclusion of an investigation that began in June 2001. The suit further alleges that the defendants failed to disclose the existence of the investigation and the existence of internal Merrill Lynch documents demonstrating that the Internet research group had acted improperly subjecting the Company to significant liability. The suit alleges that as a consequence of their scheme to defraud and the undisclosed facts, the price for Company securities was artificially inflated throughout the class period, resulting in damages to the putative class. For more details, contact Susan Gross or Deborah Gross by Mail: 1515 Locust Street, 2nd Floor, Philadelphia, PA 19102 by Phone: 215-561-3600, 800-849-3120(toll-free) or 866-561-3600 (toll-free) or by E-mail: susang@bernardmgross.com. MERRILL LYNCH: Kirby McInerney Commences Securities Suit in S.D. NY ------------------------------------------------------------------- Kirby McInerney & Squire, LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf all persons who purchased the common stock of Merrill Lynch & Co., Inc. (NYSE:MER), in the period between July 3, 1999 and April 8, 2002. The suit names as defendants Merrill Lynch & Co., Inc. and: (1) Merrill Lynch, Pierce, Fenner & Smith, Inc., (2) David H. Komansky, Chairman and Chief Executive Officer, and (3) Henry Blodget, former Senior Internet and e-commerce analyst The suit charges the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The action further charges Mr. Komansky with violation of Section 20(a) of the 1934 Act. The violations stem from the materially false and misleading statements made by the defendants during the class period that misrepresented the quality of the Company's securities analysts and caused its stock to trade at artificially inflated prices. The complaint alleges that during the class period, the Company publicly touted the objectivity and integrity of its securities analysts. In fact, the complaint alleges, many of the analysts' recommendations were simply part of a quid pro quo offered by the Company in an effort to obtain lucrative investment banking business from the companies it covered. As a result, the complaint alleges, Company shares traded at inflated prices. When evidence of conflicts and other misconduct by the Company's analysts were revealed by New York Attorney General Eliot Spitzer on April 8, 2002, its shares lost nearly 30% of their value, falling from $53.45 per share on April 8 to close below $38.00 a few weeks later. For more details, contact Ira M. Press or Orie Braun by Mail: 830 Third Avenue, 10th Floor, New York, New York 10022 by Phone: 212-317-2300 or 888-529-4787 by E-Mail: obraun@kmslaw.com or visit the firm's Website: http://www.kmslaw.com MH MEYERSON: Brian Barry Commences Securities Fraud Suit in New Jersey ---------------------------------------------------------------------- The Law Office of Brian Barry initiated a securities class action in the United States District Court for District of New Jersey on behalf of purchasers of M.H. Meyerson & Co., Inc. (Nasdaq: MHMY) publicly traded securities during the period from February 28, 2000 through April 9, 2002, inclusive. The suit alleges that the Company and certain of its officers and directors violated federal securities laws by issuing a series of materially false and misleading statements to the market. Specifically, the suit alleges that the Company failed to disclose that it was a defendant in numerous lawsuits, including a pending arbitration claim against it that ultimately resulted in a $5.0 million award against the Company. The complaint further alleges that the Company misrepresented that it was the 50% owner of a financial software company, TradinGear.com, Inc. when, in fact, it never held more than 5% of TradinGear's stock. Moreover, the suit alleges that the Company returned the 5% to TradinGear pursuant to the settlement of a lawsuit brought by TradeinGear against Meyerson as a result of Meyerson's attempted misappropriation of TradeinGear software. The lawsuit and the settlement with TradinGear were never disclosed. Finally, the complaint alleges that the Company concealed the fact that it was well behind in its plans to launch the Emeyerson online business, which was ultimately folded into another failing e-commerce venture. Plaintiff claims that defendants' material omissions and the dissemination of materially false and misleading statements regarding the nature of the Company's financial statements caused the Company's stock price to become artificially inflated, inflicting damages on investors. For more details, contact the Law Firm of Brian Barry by Mail: 1801 Avenue of the Stars, Suite 307, Los Angeles, California 90067 or by Phone: 310-788-0831 SEEBEYOND TECHNOLOGY: Glancy & Binkow Commences Securities Suit in CA --------------------------------------------------------------------- Glancy & Binkow LLP initiated a securities class action in the United States District Court for the Central District of California on behalf of a class (the "Class") consisting of all persons who purchased securities of SeeBeyond Technology Corporation (Nasdaq:SBYN) between April 23, 2001, and April 22, 2002, inclusive. The suit charges the Company and certain of its officers and directors with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and the dissemination of materially false and misleading statements regarding the Company's business prospects, revenue and earnings caused the Company's stock price to become artificially inflated, inflicting damages on investors. The suit alleges that the Company overstated the demand for its software products and failed to disclose that the Company had improperly recognized certain revenues. For more details, contact Michael Goldberg or Lionel Z. Glancy by Mail: 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067 by Phone: 310-201-9150 or 888-773-9224 or by E-mail: info@glancylaw.com. TELLABS INC.: Brian Felgoise Commences Securities Fraud Suit in N.D. IL ----------------------------------------------------------------------- The Law Offices of Brian M. Felgoise, PC initiated a securities class action on behalf of shareholders who acquired Tellabs, Inc. (Nasdaq:TLAB) securities between December 11, 2000 and June 19, 2001, inclusive, in the United States District Court for the Northern District of Illinois, Eastern Division, against the Company and certain key officers and directors. The action charges that defendants violated the 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 Brian M. Felgoise by Mail: 230 South Broad Street, Suite 404, Philadelphia, Pennsylvania, 19102 by Phone: 215-735-6810 or by E-mail: BrianFLaw@yahoo.com UNIROYAL TECHNOLOGIES: Milberg Weiss Commences Securities Suit in FL -------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of Uniroyal Technology Corp. (NASDAQ: UTCI) between February 8, 2000 and May 13, 2002, inclusive. The suit is pending in the United States District Court for the Middle District of Florida against: (1) George Zulanas, Jr., Executive Vice President, Chief Financial Officer and Treasurer; and (2) Howard R. Curd, Chairman of the Board and Chief Executive Officer The suit charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between February 8, 2000 and May 13, 2002. According to the complaint, defendants issued a series of press releases touting its financial stability and its acquisition of Sterling Semiconductor, while strategically positioning the Company to increase its participation in the explosive compound semiconductor industry via internal growth. However, unbeknownst to the investing public that purchased Company stock during the class period: (i) the Company was not a financially stable company; (ii) its acquisition of Sterling was not lucrative at all; and (iii) it was not strategically positioning the Company to increase its participation in the explosive compound semiconductor industry via acquisition and internal growth. However, for the Company's financial support, Sterling would probably have been forced to seek protection under the bankruptcy laws. Sterling was a development stage company and not, as defendants touted, "a leading developer of silicon carbide technology and materials." Moreover, in order to materially inflate the Company's net worth and further foster the illusion of growth, defendants agreed to pay an inflated price for Sterling with materially overvalued stock serving as currency. On December 31, 2001, eighteen months after having acquired Sterling in exchange for stock, with a purported value of more than $40 million, the Company shocked the market by announcing that it recorded a write- down of Sterling goodwill of approximately $9,816,000. On January 2, 2002, Uniroyal stock closed at $1.69 down from $3.20 the previous day and substantially down from its class period high of $71.125 reached on February 23, 2000. For more details, contact Steven G. Schulman or Samuel H. Rudman by Mail: One Pennsylvania Plaza, 49th fl. New York, NY 10119-0165 by Phone: 800-320-5081 or contact Kenneth Vianale or Tara Isaacson by Mail: The Plaza 5355 Town Center Road Suite 900 Boca Raton, FL 33486 by Phone: 561-361-5000 by E-mail: UniroyalCase@milbergNY.com or visit the firm's Website: http://www.milberg.com WORLDCOM, INC.: Lockridge Grindal Commences Securities Suit in S.D. MS ---------------------------------------------------------------------- Lockridge Grindal Nauen PLLP initiated a securities class action on behalf of all persons who purchased or otherwise acquired the common stock of WorldCom, Inc. (Nasdaq:WCOM) between April 26, 2001 and June 25, 2002, in the United States District Court for the Southern District of Mississippi at Jackson. The action seeks remedies under the Securities Exchange Act of 1934 and names as defendants the Company and: (1) Bernard J. Ebbers, (2) Scott D. Sullivan and (3) Arthur Andersen, LLP. The complaint alleges that during the class period, the Company, the nation's second-largest long-distance carrier, overstated its cash flow by $3.8 billion during the last five quarters. As detailed in the complaint, instead of the $1.4 billion in profits the Company reported in 2001 and $130 million so far this year, the Company now admits it lost money during those periods but does not know how much. As further detailed in the complaint, the Company, under the guidance of Mr. Ebbers and Mr. Sullivan, booked basic operating costs, such as basic network maintenance, as capital investments, a fictitious practice that hid expenses, inflated cash flow and allowed the Company to falsely report profits instead of losses. This practice boosted cash flow because it improperly treated costs as an asset that could be written down over time, not immediately, a blatant violation of Generally Accepted Accounting Principles and Generally Accepted Accounting Standards. Absent this improper accounting practice, the Company would have reported a net loss for 2001, as well as the first quarter of 2002. Instead, the Company reported false profits of $1.4 billion for 2001 and $130 million for the first quarter of 2002. The complaint also alleges that Arthur Andersen also knew that this type of accounting practice was improper and, according to published reports, Andersen's audit reports "could not be relied upon for at least" the five quarters in question. As an experienced auditor charged with the responsibility of preparing disclosures to be filed with the SEC, Andersen knew the line cost transfers did not comport with GAAP and GAAS, but either intentionally or recklessly disregarded this pervasive fraud to the detriment of the class. Anderson, however, issued a March 7, 2002, "Report Of Independent Public Accountants" that was included in the Company's false 2001 Form 10-K that was filed with the SEC on March 13, 2002. Anderson's opinion letter falsely stated that it had properly audited the Company's 2001 balance sheet and that in Anderson's opinion "(w)e believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WorldCom, Inc. and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States." For more details, contact Karen M. Hanson by Mail: 100 Washington Avenue South Suite 2200 Minneapolis, MN 55401 by Phone: 612-339-6900 by E-mail: kmhanson@locklaw.com WORLDCOM INC.: Marc Henzel Commences Securities Fraud Suit in S.D. NY --------------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Southern District of New York, on behalf of persons who purchased, converted, exchanged or otherwise acquired the common stock of WorldCom, Inc. (NASDAQ: WCOM) between January 3, 2000 and April 29, 2002, inclusive against the Company and: (1) Bernard J. Ebbers, President and Chief Executive Officer, (2) James C. Allen, director, (3) Max E. Bobbitt, director, (4) Francisco Galesi, director and (5) Arthur Andersen, LLP. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder, as well as pendant state law claims for fraud, negligent misrepresentation, and intentional deceit and seeks to recover damages. The complaint alleges that defendants violated the federal securities laws by making misrepresentations and/or omissions in connection with false and/or misleading financial statements. The complaint specifically alleges that defendants misrepresented the Company's earnings in its public filings with the SEC and elsewhere as a result of failing to record write-downs of goodwill and other intangible assets associated with WorldCom's acquisition of numerous telecommunications companies at premium prices. The complaint further alleges that the defendants affirmatively misstated the value of goodwill and other intangible assets associated with the Company's acquisition of numerous telecommunications companies at premium prices and carrying such assets on the Company's balance sheet at the cost of acquiring them long after it had become apparent that WorldCom had overpaid to acquire such assets. Additionally, defendants failed to disclose that the Company's goodwill and other intangible assets associated with the Company's acquisitions of numerous telecommunications companies at premium prices were being carried at unrealistically and misleadingly high values on the Company's balance sheet. For more details, contact Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202 Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or 888-643-6735 by Fax: 610-660-8080 by E-mail: mhenzel182@aol.com or visit the firm's Website: http://members.aol.com/mhenzel182 ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2002. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re- mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *