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/raid1/www/Hosts/bankrupt/CAR_Public/021213.mbx C L A S S A C T I O N R E P O R T E R Friday, December 13, 2002, Vol. 4, No. 246 Headlines AIRLINE LITIGATION: Rules Expanded as Consumer Fraud Lawsuits Commence ALLEGHENY ENERGY: NY Securities Fraud Suits Aim To Hit Parent Company BAYER INC.: Consumers File Personal Injury Suit Over Baycol in Canada COMPUCOM SYSTEMS: Plaintiffs Drop Firm as Defendant in Securities Suit FIRESTONE, NISSAN: Court Clears Way For Lawsuit Over Rollover Accident HEALTHSOUTH CORPORATION: Court Hears Arguments For Suit Certification HEALTHSOUTH CORPORATION: Status Conference in Lawsuit Set January 2003 HOME INTERIORS: Voluntarily Recalls 211T Tea Light Sets For Fire Hazard IMCLONE SYSTEMS: Plaintiffs File Amended Securities Lawsuit in S.D. NY KING POWER: Faces Several Securities Fraud Lawsuits In NV Federal Court MEASUREMENT SPECIALTIES: Plaintiffs File Consolidated Suit in NJ Court OVERSEAS PARTNERS: Plaintiffs Ask NY Court To Certify Consumer Lawsuit PACKAGING CORPORATION: Linerboard Antitrust Suit Trial Set April 2004 PARADYNE NETWORKS: FL Court Grants Certification To Securities Lawsuit PARADYNE NETWORKS: Shareholders Sue for Securities Act Violations in NY PERRINI CORPORATION: Plaintiffs File New Fiduciary Duty Lawsuit in MA PINNACLE SYSTEMS: Court Hears Arguments For Securities Suit Dismissal SEITEL INC.: TX Court Orders Plaintiffs To File Amended Securities Suit SEITEL INC.: Parties To Consolidate Federal Derivative Lawsuits in TX SIT INC.: Voluntarily Recalls 80,000 Plastic Chairs For Injury Hazard UNITED KINGDOM: Customs' Seizure Of Illicit Goods, Cars Could Be Legal WISCONSIN: State Inaction Over Legal Assistance For Poor Spurs Lawsuits Asbestos Alert ASBESTOS LITIGATION: Florida Drywall Worker Wins $1.8M Asbestos Verdict ASBESTOS LITIGATION: Firms Reveal Findings on Asbestos to Avoid Suits ASBESTOS ALERT: Boise Cascade Faces Asbestos Related Litigation ASBESTOS ALERT: CIRCOR, Subsidiaries Battle 10,000 Asbestos Claimants ASBESTOS ALERT: CONSOL Energy's Subsidiary Faces 21,000 Asbestos Suits ASBESTOS ALERT: Dalmine SPA Faces Lawsuits Over Asbestos Liabilities ASBESTOS ALERT: EnPro, Subsidiaries Reveal Asbestos Related Liabilities ASBESTOS ALERT: Special Metals, Subsidiary Face Asbestos Related Suits ASBESTOS ALERT: PEPCO Traces Background of Asbestos Related Litigation ASBESTOS ALERT: Tenneco Labels "Without Merit" Asbestos, Other Lawsuits ASBESTOS ALERT: TRW Inc. Labels Asbestos Related Lawsuits "Immaterial" New Securities Fraud Cases COLE NATIONAL: Strauss & Troy, Weisman Goldberg OH File Investor Suit SMARTFORCE PLC: Milberg Weiss Commences Securities Lawsuit in NH Court ********* AIRLINE LITIGATION: Rules Expanded as Consumer Fraud Lawsuits Commence ---------------------------------------------------------------------- Try looking closely at the full array of rules governing your airline ticket, and you could be reading for hours, the Wall Street Journal reports. Airlines have toughened rules on cheap tickets, paper tickets and excess baggage, among other things, and some of the lists of do's and don'ts top 60 pages. Violating the contract, as put forth in rules most travelers do not even see, can result in the airline confiscating the remaining portion of the ticket, deleting miles in a frequent-flier account or charging the passenger or travel agency for any fare difference that would have applied had the rules been followed. Some aviation-law experts question the legality of the airline rules. A group of travel agencies already has filed a class action against several airlines, challenging their rule changes. Other aviation lawyers are studying the murky legal world of airline ticket law. Airlines concede the complexity of ticketing rules "We try to synopsize the salient issues," said a vice-president of America West Airlines, Scott Bowers. And America West Holdings Corp.'s America West, spent three months last year trying to take the legalese out of its 63 pages of rules to make them more customer friendly The airline document is called a "contract of carriage," and when passengers buy tickets, they enter into a legally binding pact for transportation that governs everything from fish tanks to cancellation policy. United Airlines, even before parent UAL Corp. filed for bankruptcy protection this week, cracked down on travel agents and corporate clients who use back-to-back ticketing, which involves buying two overlapping discounted tickets for travelers going back and forth on the same route. The idea is to use the tickets out of order and avoid buying two full-fare, unrestricted tickets. "We are not getting the value of the product we are selling," said United's Senior Counsel Craig Busey, speaking of the back-to-back ticketing crackdown. The airline, he said, found a significant issuance of such tickets through an audit. However, Paul Rudin, an attorney for the American Society of Travel Agents, pointed out that the design of many airlines' fare structures encourage such behaviors. "If you went to a store and they said you have two of these for $100 or one of these for $120, what would you do? asked Mr. Rudin. At a time when airlines are losing money and are under fire for high business fares, ratcheting up rules is one more way to alienate passengers. "All of the changes that the airlines have adopted are customer unfriendly, and a number of them reduce the extent to which customers can find lower pricing," said UBS Warburg airline analyst Samuel Buttrick. Travel agents are taking action on rule changes geared toward them. A court in North Carolina granted class action status, in September, to a lawsuit filed in that state against a long list of airlines, by Sarah Hall, owner of Travel Specialist in Wilmington, Delaware. The class action alleges the airlines have illegally conspired to cut, cap or eliminate commissions they pay to travel agents. Other ticketing issues reside in a gray area of legality because the contract of carriage has rarely been challenged, some of the lawyers have said. The latest rules changes raise the questions whether passenger freedoms have become too restricted and whether rules are too ambiguous or little known to be enforceable. Limited rule disclosure, frequent rule changes and inconsistent enforcement may have weakened the airlines' legal grounds for their own rules, other lawyers have said. ALLEGHENY ENERGY: NY Securities Fraud Suits Aim To Hit Parent Company --------------------------------------------------------------------- Financial problems at the parent company of Allegheny Power, Allegheny Energy Inc., have spawned at least 16 class actions since November 4, when the utility and power company said it would delay filing its third-quarter earnings report, the Centre Daily Times reports. Pittsburgh lawyer Alfred Yates Jr., recently announced the latest lawsuit, filed in United States District Court for the Southern District of New York, which accuses parent company Allegheny Energy of harming investors with a series of misleading financial statements that artificially inflated the company's stock price. The lawsuits focus on the period between April 23, 2001, and October 8 or November 4, 2002, depending on when the lawyers filed their legal proceedings. The lawsuits seek damages for violations of federal securities laws on behalf of investors who bought Allegheny Energy stock during the period when the company and certain executives allegedly were making the misleading comments. According to Mr. Yates, the Company issued numerous news releases during the period that reported record quarterly results. The Company allegedly said that it expected strong earnings during 2002, even though the US economy and power markets were struggling. Mr. Yates claims that Allegheny Energy artificially inflated its revenue by relying on "round-trip" or "wash" energy transactions made by its subsidiary, Global Energy Markets, with Enron Corp., the Houston energy company that filed for bankruptcy protection last year. Round- trip trades are the simultaneous purchase and sale of energy at the same quantity and price between the same two companies. Allegheny Energy's financial performance began to slide early this year, following record earnings in 2001. Blaming weak energy markets and sluggish economic conditions, the company reported a second-quarter loss of $32.3 million. It also blamed the Enron bankruptcy. On September 25, Allegheny Energy sued Merrill Lynch and Co., from which it had bought Global Energy Markets in 2001, alleging that Merrill Lynch did not reveal that Global Energy had inflated its revenues by engaging in round-trip trades with Enron. On October 1, Moody's Investors Services downgraded Allegheny Energy's unsecured credit rating to what Mr. Yates said was a "junk" rating. A week later, the company issued a statement saying it had defaulted on its principal credit agreements after lenders demanded additional collateral because of the downgrade. In response, the Company's stock price fell 49 percent to $3.80 per share, triggering the first wave of lawsuits. On November 4, Allegheny Energy said it would not file its third-quarter earnings statement because a review of prior-quarter earnings had revealed errors. The disclosure unleashed a second round of lawsuits, including the one announced by Mr. Yates. BAYER INC.: Consumers File Personal Injury Suit Over Baycol in Canada --------------------------------------------------------------------- Bayer Inc. faces a class action filed in the Court of Queen's Bench for Saskatchewan on behalf of Saskatchewan, Alberta and Manitoba residents who were injured by the cholesterol-reducing drug, Baycol. The suit was filed by Mr. Ervin Lamb of Dundurn, Saskatchewan, who suffered extensive muscle pain and fever, and Mr. Michael Coholan of Medicine Hat, Alberta, who is the representative plaintiff for Alberta and Manitoba residents (provinces without class action legislation) who suffered extensive muscle pain and liver problems. According to the Statement of Claim filed today in Regina, Saskatchewan, "Baycol was a defective product. It caused serious and potentially life-threatening side effects including rhabdomyolysis, myopathy and myosistis." Baycol was taken off the market in August 2001 but not before 100 deaths worldwide were attributed to it. In extreme cases rhabdomyolysis, a condition in which muscle tissue breaks down and passes into the blood stream causing kidney failure and eventually death, has occurred. More than one million prescriptions for Baycol were written in Canada. It appears that Bayer may have learned of the serious side effects of Baycol long before the drug's recall. Bayer's parent company, Bayer AG received a report that the drug may have been a secondary cause in the death of a patient who had taken Baycol over a year and a half before it was introduced to the market. The lawsuit was filed on behalf of Lamb and Coholan by Clint Docken, Q.C. of Docken & Company of Calgary and class action lawyer David Klein of Klein Lyons of Vancouver. According to Mr. Klein "Bayer knew, or should have known, prior to marketing Baycol that based on the limited clinical studies conducted that the drug was unsafe and lacked efficacy." Clint Docken, commented that "pharmaceutical companies must be held accountable for the pain and suffering caused by the harmful products they market to the unquestioning public." For more details, contact Clint Docken of Docken & Company by Mail: 6th Avenue, Calgary, AB by Phone: (403) 269-3612 or contact David Klein of Klein Lyons by Mail: 1333 W. Broadway, Suite 1100, Vancouver, B.C. by Phone: (604) 874-7171 COMPUCOM SYSTEMS: Plaintiffs Drop Firm as Defendant in Securities Suit ---------------------------------------------------------------------- Plaintiffs in the securities class action filed against Compucom Systems and Safeguard Scientifics, Inc. dropped them as defendants in their second amended lawsuit, filed in the United States District Court for the Southern District of New York. The suit followed the initial public offering of OPUS 360 Corporation (OPUS), whereby the plaintiffs alleged material misrepresentations and/or omissions in connection with the OPUS stock offering. On October 2, 2002, the court dismissed plaintiffs' claims against the Company, Safeguard and the other defendants with leave to amend their complaint in part. The court explicitly granted plaintiffs leave to amend their pleadings with respect to misrepresentations and omissions in the initial public offering registration statement but did not do so with respect to the claims dismissed as against Safeguard and the Company. On October 30, 2002, plaintiffs served their second amended suit, which did not name Safeguard or the Company as defendants, so there is no presently pending action as against them. There remains a possibility that plaintiffs could seek an appeal of the dismissal of their claims against Safeguard and the Company in the near term or attempt to do so at the conclusion of the still-pending action against the remaining defendants. FIRESTONE, NISSAN: Court Clears Way For Lawsuit Over Rollover Accident ---------------------------------------------------------------------- Bridgestone Corp.'s Firestone unit and Nissan Motor Co. must face a lawsuit over a rollover accident, a Georgia appeals court has ruled, according to a report by the Atlanta Journal-Constitution. A panel of the Georgia Court of Appeals acknowledged that some of the plaintiff's actions were "troubling," but still denied the companies' bid to dismiss the lawsuit. The man who is suing disposed of the vehicle and tire after initially deciding not to sue. He does, however, have photos he took of them. Georgia resident, Ross Campbell, claims the companies are responsible for the brain injury he suffered in 1998, when a Firestone Firehawk tire on his Nissan Pathfinder failed and the vehicle overturned. HEALTHSOUTH CORPORATION: Court Hears Arguments For Suit Certification --------------------------------------------------------------------- The United States District Court for the Northern District of Alabama briefed the plaintiffs' motion for class certification of a consolidated securities suit against Healthsouth Corporation and certain of its current and former officers and directors. Several lawsuits were commenced in September 1998 under the federal and Alabama securities laws. These lawsuits were filed following a decline in the Company's stock price at the end of the third quarter of 1998. The suits were later consolidated. The suits, alleged that, during the period April 24, 1997 through September 30, 1998, the defendants misrepresented or failed to disclose certain material facts concerning the Company's business and financial condition and the impact of the Balanced Budget Act of 1997 on Company operations in order to artificially inflate the price of its common stock and issued or sold shares of such stock during the purported class period, all allegedly in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Certain of the named plaintiffs in the consolidated amended complaint also purport to represent separate subclasses consisting of former stockholders of Horizon/CMS Healthcare Corporation and National Surgery Centers, Inc. who received shares of the Company's common stock in connection with its acquisition of those entities and assert additional claims under Section 11 of the Securities Act of 1933 with respect to the registration of securities issued in those acquisitions. The Company filed a motion to dismiss the consolidated amended complaint in late June 1999. In September 2000, the magistrate judge issued his report and recommendation, recommending that the court dismiss the amended complaint in its entirety, with leave to amend. In December 2000, without oral argument, the court issued an order rejecting the magistrate judge's report and recommendation and denying the Company's motion to dismiss. The Company believes that the December 20, 2000 order failed to follow the standards required under the Private Securities Litigation Reform Act of 1995 and Rule 9(b) of the Federal Rules of Civil Procedure, and filed a motion asking the court to reconsider that order or to certify it for an interlocutory appeal to the United States Eleventh Circuit Court of Appeals. Oral argument on that motion was held on March 2, 2001, and the court denied that motion on March 12, 2001. Accordingly, the Company filed its answer to the consolidated amended complaint on March 26, 2001. The court held a hearing on the plaintiffs' motion for class certification on April 23, 2002, and requested further briefing on various issues. Those issues have now been briefed, and the Company is awaiting the court's ruling on class certification, although it does not know when the court will issue its ruling. The Company believes that all claims asserted in the above suits are without merit. As these suits remain at an early stage, the Company cannot currently predict the outcome of any such suits or the magnitude of any potential loss if its defense is unsuccessful. Another suit was filed in the Circuit Court for Jefferson County, Alabama, alleging that during the period July 16, 1996 through September 30, 1998 the defendants misrepresented or failed to disclose certain material facts concerning the Company's business and financial condition, allegedly in violation of Sections 8-6-17 and 8-6-19 of the Alabama Securities Act. This complaint was voluntarily dismissed by the plaintiff without prejudice in January 1999. Additionally, a suit was filed in the Circuit Court for Jefferson County, Alabama, purportedly as a derivative action on behalf of the Company. That suit largely replicates the allegations originally set forth in the individual complaints filed in the federal actions and alleges that the Company's then-current directors, certain of its former directors and certain of its officers breached their fiduciary duties to the Company and engaged in other allegedly tortious conduct. The plaintiff in that case has forborne pursuing its claim thus far pending further developments in the federal action, and the defendants have not yet been required to file a responsive pleading in the case. HEALTHSOUTH CORPORATION: Status Conference in Lawsuit Set January 2003 ---------------------------------------------------------------------- The United States District Court for the Northern District of Alabama set for January 3,2003 the status conference and lead plaintiff selection for the consolidated securities class action filed against HealthSouth Corporation and certain of its officers and directors. The suit came from several lawsuits were filed following a decline in the Company's stock price after a public announcement it made on August 27, 2002, concerning its current assessment of the impact on its business of changes in Medicare reimbursement policy for outpatient physical therapy and occupational therapy. Those suits were later consolidated for administrative purposes. The suit alleges that, during the period January 14, 2002 through August 27, 2002, the defendants misrepresented or failed to disclose certain material facts concerning the Company's business and financial condition and the impact of the changes in Medicare reimbursement for outpatient therapy services on our operations in order to artificially inflate the price of the Company's common stock, and that some of the individual defendants sold shares of such stock during the purported class period, all allegedly in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Company filed answers, motions to dismiss and motions for judgment on the pleadings in the individual cases. On November 6, 2002, the court stayed consideration of such motions and any other dispositive matters until a determination of lead counsel in the consolidated cases. The Company believes that all claims asserted in the suit are without merit. Because such suits remain at an early stage, the Company cannot currently predict the outcome of any such suits or the magnitude of any potential loss if its defense is unsuccessful. Additionally, beginning August 28, 2002, the Company and some of its officers and directors (along with third parties in one case) were served with lawsuits purporting to be derivative actions on behalf of the Company. Four of such lawsuits were filed in the Circuit Court of Jefferson County Alabama and one of such lawsuits was filed in the United States District Court for the Northern District of Alabama. While the specific allegations vary, in general these cases involve the same allegations as are raised in the federal cases described above and allege that certain of the Company's directors and officers breached their fiduciary duties to the Company and engaged in other allegedly tortuous conduct. Because these cases all purport to assert claims derivatively on behalf of the Company, it established a Special Litigation Committee of our Board of Directors to investigate the allegations made in them and determine what, if any, of the claims asserted should appropriately be pursued on behalf of the Company. The Company is seeking to have the relevant courts stay further proceedings in these actions pending the determinations of the Special Litigation Committee. Subject to the determinations of the Special Litigation Committee, the Company believes that all claims asserted in the above suits are without merit. HOME INTERIORS: Voluntarily Recalls 211T Tea Light Sets For Fire Hazard ----------------------------------------------------------------------- Home Interiors and Gifts, Inc. is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling about 211,000 sets of tea lights. Flames from the tea lights can flare, and the excessive heat can cause the plastic holders to melt, posing a fire hazard. The Company has received 22 reports of the tea lights flaring up and melting their plastic holders. These incidents have resulted in minor property damage. No injuries have been reported. The recalled tea lights are packaged 12 candles per box with "Home Interiors" written on the top of the box. Each tea light candle has a clear plastic base and is either red or ivory in color. The tea light candles are imported from Hong Kong. Home Interiors' direct sales associates exclusively sold the recalled tea lights from September 2002 through November 2002 for about $5 per box. For more details, contact the Company by Mail: 2901 Trade Center Drive, Suite 100, Carrollton, TX 75007. Consumers should include their return address information to receive a retail gift certificate from Home Interiors for the full purchase cost and shipping cost of the tea lights. For more information, consumers can contact the Company by Phone: (800) 749-4545 between 9 am and 5 pm CT Monday through Friday. IMCLONE SYSTEMS: Plaintiffs File Amended Securities Lawsuit in S.D. NY ---------------------------------------------------------------------- Plaintiffs in the securities class actions against Imclone Systems, Inc. filed an amended consolidated lawsuit in the United States District Court for the Southern District of New York. Beginning in January 2002, a number of lawsuits asserting claims under the federal securities laws against the Company and certain of its directors and officers were filed, naming as defendants the Company and: (1) Dr. Samuel D. Waksal, former chief executive officer, (2) Dr. Harlan W. Waksal, current chief executive officer, (3) Robert Goldhammer, the chairman of the board of directors, and (4) Richard Barth, (5) David Kies, (6) Paul Kopperl, (7) John Mendelsohn, (8) William Miller, (9) John Landes, former general counsel, and (10) Ronald Martell, vice president for marketing and sales, The complaint asserts claims for securities fraud under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, on behalf of a purported class of persons who purchased the Company's publicly traded securities between March 27, 2001 and January 25, 2002. The complaint also asserts claims against Dr. Samuel D. Waksal under section 20A of the Exchange Act on behalf of a separate purported sub- class of purchasers of our securities between December 27, 2001 and December 28, 2001. The complaint generally alleges that: (i) various public statements made by or on behalf of the Company or the other defendants during 2001 and early 2002 regarding the prospects for FDA approval of ERBITUX were false or misleading when made; (ii) the individual defendants were allegedly aware of material non-public information regarding the actual prospects for ERBITUX at the time that they engaged in transactions in the Company's common stock; and (iii) members of the purported stockholder class suffered damages when the market price of the Company's common stock declined following disclosure of the information that allegedly had not been previously disclosed. The complaint seeks to proceed on behalf of the alleged class described above, seeks monetary damages in an unspecified amount and seeks recovery of plaintiffs' costs and attorneys' fees. Under the existing schedule in that action, defendants' response to the consolidated amended complaint is due in late November 2002. KING POWER: Faces Several Securities Fraud Lawsuits In NV Federal Court ----------------------------------------------------------------------- King Power International Group Co., Ltd. faces several securities class actions relating to a merger transaction in which the Company will be taken private by shareholders Vichai Raksriaksorn, Viratana Suntaranond, Aimon Raksriaksorn and Niphon Raksriaksorn and certain other shareholders who collectively hold approximately 88.6% of the Company's common shares. On August 27, 2002, the Company was served with the first suit brought in the District Court of Clark County, Nevada, by Pennsylvania Avenue Partners, LLC against the Company and each of its directors. The complaint alleged, among other things, that the directors of the Company had breached their fiduciary duties in pursuing the proposed merger transaction in which the Company would be taken private by certain shareholders and in allegedly failing to obtain the highest price per share. The lawsuit seeks to enjoin the proposed merger transaction and seeks payment of fees of plaintiff's counsel and experts. On September 16, 2002, another suit was filed in the same court by Sean Collins, making the same allegations. On September 26, 2002, the Company was served with an identical complaint in the same court by Byron Mikalson. The board has authorized and empowered a Special Committee, consisting of independent directors and acting in the interest of shareholders other than those certain shareholders taking the Company private under the proposed merger transaction, to review and negotiate the merger consideration and terms of the proposed merger and to make a recommendation to the full Board of Directors and the Company's shareholders. The Special Committee is also advised by its own independent financial advisor and legal counsel. The Company believes that each of the lawsuits is without merit. With respect to the first complaint brought by Pennsylvania Avenue Partners, LLC, on October 30, 2002, the Company filed a motion to dismiss for failure to state a claim. MEASUREMENT SPECIALTIES: Plaintiffs File Consolidated Suit in NJ Court ---------------------------------------------------------------------- Plaintiffs in the securities class actions pending against Measurement Specialties, Inc. and certain of its present and former officers and directors filed a consolidated suit in the United States District Court for the District of New Jersey. The suit was subsequently amended to include the underwriters in the Company's August 2001 public offering and the Company's former auditors. The lawsuit alleges violations of the federal securities laws including, among other things, that the registration statement related to the Company's August 2001 public offering and the Company's periodic SEC filings misrepresented or omitted material facts and that certain of the Company's officers made false or misleading statements of material fact. The lawsuit seeks an unspecified award of money damages. The Company must file a responsive pleading by December 2002. The underwriters have made a claim for indemnification under the underwriting agreement. The Company is currently in the process of responding to the claims made in the suit. The Company intends to defend the foregoing lawsuit vigorously, but cannot predict the outcome and is not currently able to evaluate the likelihood of success or the range of potential loss, if any. OVERSEAS PARTNERS: Plaintiffs Ask NY Court To Certify Consumer Lawsuit ---------------------------------------------------------------------- Plaintiffs asked the United States District Court for the Southern District of New York to certify as a class action the lawsuit pending against Overseas Partners Limited on behalf of UPS customers. In November 1999 and January 2000, two suits were filed against the Company in Montgomery County, Ohio Court and Butler County, Ohio Court, respectively. The lawsuits allege, amongst other things, that UPS told its customers that they were purchasing insurance for coverage of loss or damage to goods shipped by UPS. The lawsuits further allege that UPS wrongfully enriched itself with the monies paid by its customers to purchase such insurance. The November 19, 1999 and January 27, 2000 actions were removed to federal court and thereafter transferred to the United States District Court for the Southern District of New York and consolidated in a multi-district litigation for pretrial discovery purposes with other actions asserting claims against UPS. Plaintiffs subsequently amended those claims against all defendants to join a Racketeer Influenced and Corrupt Organizations (RICO) claim as well. In August 2000, the Company and its wholly owned subsidiary, Overseas Partners Capital Corporation (OPCC), were added as defendants in a third class action, also consolidated in the multi-district litigation, which alleges violations of United States antitrust laws, and state unfair trade practice and consumer protection laws. The allegations in the lawsuits are drawn from an opinion by the United States Tax Court that found that the insurance program, as offered through UPS, by domestic insurance companies, and ultimately reinsured by the Company, should not be recognized for federal income tax purposes. In June 2001, the Tax Court opinion was reversed by the United States Court of Appeals for the Eleventh Circuit and remanded to the Tax Court for further consideration. The parties to the Tax Court action filed Supplemental Briefs on remand on March 18, 2002. The Company is not a party to the Tax Court action. The Company filed or joined in motions to dismiss all of the consolidated actions on a number of grounds, including that the antitrust claim fails to state a claim upon which relief can be granted, and that the remaining claims are preempted by federal law. In orders dated July 30, 2002, the court granted in part and denied in part the motions to dismiss. Pursuant to the court's orders, the claims remaining against the Company are RICO, antitrust, and common law interference with contract claims. On November 8, 2002, the parties presented to the court a stipulation and proposed order certifying a nationwide class with respect to certain of the claims brought by the plaintiffs, including the RICO and interference with contract claims against the Company. The court indicated that it would sign the stipulation and proposed order. The stipulation does not certify the antitrust claims brought against the Company. The Company believes that it has meritorious defenses to all claims asserted against it. There can be no assurance, however, that an adverse determination of the lawsuits would not have a material effect on the Company. PACKAGING CORPORATION: Linerboard Antitrust Suit Trial Set April 2004 --------------------------------------------------------------------- Trial in the consolidated antitrust class action pending against Packaging Corporation of America and nine other linerboard manufacturers is set for April 2004. The suit, commenced in May 1999, alleges a civil violation of Section 1 of the Sherman Act. The suit names the Company as a defendant based solely on the allegation that the Company is successor to the interests of Tenneco Packaging, Inc. and Tenneco, Inc., both of which were also named as defendants in the suit, along with nine other linerboard manufacturers. The complaint alleges that the defendants, during the period October 1, 1993 through November 30, 1995, conspired to limit the supply of linerboard, and that the purpose and effect of the alleged conspiracy was artificially to increase prices of corrugated containers. The plaintiffs moved to certify a class of all persons in the United States who purchased corrugated containers directly from any defendant during the above period, and seek treble damages and attorneys' fees on behalf of the purported class. The court granted plaintiffs' motion in September 2001, but modified the proposed class to exclude those purchasers who purchased corrugated containers pursuant to contracts in which the price was "not tied to the price of linerboard." The court's class certification decision was affirmed by the Court of Appeals for the Third Circuit on September 5, 2002. The Company believes that the plaintiffs' allegations have no merit and does not believe that the outcome of this litigation will have a material adverse effect on its financial position, results of operations, or cash flow. PARADYNE NETWORKS: FL Court Grants Certification To Securities Lawsuit ---------------------------------------------------------------------- The United States District Court for the Middle District of Florida, Tampa Division certified as a class action the securities lawsuit pending against Paradyne Networks, Inc. and certain of its officers and directors: (1) Andrew May, Chief Executive Officer and President at the time, (2) Patrick Murphy, Chief Financial Officer and Senior Vice President, (3) Thomas Epley, then Chairman of the Board (4) Sean E. Belanger, current President, Chief Executive Officer and Chairman of the Board The amended consolidated complaint alleges violations by the defendants of the securities anti-fraud provisions of the federal securities laws, specifically Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. It further alleges that the individual Defendants are liable under Section 20(a) of the Securities Exchange Act as "control persons of the Company." The plaintiffs purport to represent a class of investors during a purported class period of September 28, 1999 through September 28, 2000 and allege, in effect, that the defendants during that time, through material misrepresentations and omissions, fraudulently or recklessly inflated the market price of the Company's stock by allegedly erroneously reporting that the Company was performing well, that its inventories were properly stated, and that its customer base and product demand were solid. The defendants filed a motion in May, asking the court to dismiss the complaint, with prejudice, after which the plaintiffs filed a memorandum of law in opposition to the motion. The court denied the dismissal motion in April 2002. By order dated October 24, 2002, the court granted plaintiffs' motion to certify a class, but accepted defendants' arguments that the class should begin no earlier than March 20, 2000, instead of September 28, 1999 as plaintiffs had proposed. The defendants believe the claims are without merit, although they cannot predict the outcome. PARADYNE NETWORKS: Shareholders Sue for Securities Act Violations in NY ----------------------------------------------------------------------- Paradyne Networks, Inc. faces a securities class action filed in the United States District Court in the Southern District of New York against the Company, some of the Company's executive officers and the former Chairman of the Board, and the underwriters of the Company's initial public offering. That action alleges that defendants, during the period from July 15, 1999 through December 6, 2000, violated federal securities laws by allocating shares of the initial public offering to favored customers in exchange for their promise to purchase shares in the secondary market at escalating prices. The Company believes the claims are without merit, although they cannot predict the outcome. PERRINI CORPORATION: Plaintiffs File New Fiduciary Duty Lawsuit in MA --------------------------------------------------------------------- Plaintiffs in the securities class actions pending against Perrini Corporation filed a new action for breach of fiduciary duty against the Company's directors in the United States District Court for the District of Massachusetts. In May 2001 the Company, including several of its current and former directors was served with a complaint filed Supreme Court of the State of New York, County of New York. Each plaintiff was a holder of the Company's $21.25 Convertible Exchangeable Preferred Stock. One plaintiff is a current Director of the Company and one plaintiff is a former Director of the Company. Plaintiffs purported to bring the action individually and on behalf of the entire class of holders of the $21.25 Preferred Stock. The plaintiffs asserted claims for: (1) breach of contract, (2) breach of fiduciary duty, (3) fraud and (4) negligent misrepresentation The plaintiffs principally alleged that the Company and its defendant directors improperly authorized the exchange of Series B Preferred Stock for Common Stock without first paying all accrued dividends on the $21.25 Preferred Stock. More specifically, plaintiffs alleged that the Company and its defendant directors violated the terms of the $21.25 Preferred Stock when, in March 2000, the Company authorized the exchange of Series B Preferred Stock for Common Stock. The plaintiffs further alleged that the Company and its directors issued a false and misleading prospectus in 1987 relating to the issuance of the $21.25 Preferred Stock. The plaintiffs sought payment of accrued dividends, claiming they were owed approximately $11.7 million as of May 3, 2001, and other unspecified punitive and exemplary damages. On May 23, 2001, the Company and the directors removed the action from the Supreme Court of New York to the United States District Court for the Southern District of New York. On June 26, 2001, the plaintiffs filed an amended complaint whereby the plaintiffs limited their suit to an action for breach of contract against the Company and an action for breach of fiduciary duty against the directors. The Company and the defendant directors moved to dismiss all of the plaintiffs' claims. On March 12, 2002, the court dismissed all claims against the Company and the defendant directors. In April 2002, the plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. The Company and the directors are preparing a motion to dismiss all of the claims in the new suit. PINNACLE SYSTEMS: Court Hears Arguments For Securities Suit Dismissal --------------------------------------------------------------------- The United States District Court for the Northern District of California heard oral arguments on Pinnacle Systems, Inc.'s motion to dismiss the consolidated securities class action filed against it and certain of its officers and directors. The suit alleges that defendants violated the federal securities laws by making false and misleading statements concerning the Company's business during a putative class period of April 18, 2000 through July 10, 2000. Plaintiffs seek unspecified damages. Plaintiffs filed a consolidated amended complaint in December 2000, and defendants thereafter moved to dismiss that complaint. In a written order dated May 7, 2001, the court dismissed the consolidated amended complaint and permitted plaintiffs to file an amended complaint. Plaintiffs filed a second amended complaint in June 2001. Defendants thereafter moved to dismiss that complaint. In a written order dated January 25, 2002, the court dismissed the second amended complaint and granted plaintiffs leave to amend. On March 22, 2002, plaintiffs filed a third consolidated amended complaint. The court heard the defendants' motions to dismiss the plaintiffs' third consolidated amended complaint on November 15, 2002. The Company is defending the case vigorously. The Company has not accrued any liability related to this contingency since a liability cannot be reasonably estimated. SEITEL INC.: TX Court Orders Plaintiffs To File Amended Securities Suit ----------------------------------------------------------------------- The United States District Court for the Southern District of Texas ordered plaintiffs in the consolidated securities class actions pending against Seitel, Inc. to file an amended suit by December 6,2002. The Company and certain of its former and current officers and directors were named as defendants in eleven lawsuits alleging violations of the federal securities laws, all of which were consolidated by an order entered August 7, 2002. The suit generally alleges that during the proposed class periods of May 5, 2000 through May 3, 2002 or July 13, 2000 through April 1, 2002, the defendants violated sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, by overstating revenues in violation of generally accepted accounting principles. The suit alleges that defendants improperly recognized revenue and net income during fiscal years 2000 and 2001 by recording revenue on data licensing contracts, prior to specific data being selected by and delivered to its customers, according to an earlier Class Action Reporter story. The suit further alleges that top insiders profited illegally from insider trading in the Company's common stock and earned exorbitant commissions and bonuses that were tied to reported revenue and earnings. The court has appointed a lead plaintiff and lead counsel for plaintiffs. No discovery has been conducted. SEITEL INC.: Parties To Consolidate Federal Derivative Lawsuits in TX --------------------------------------------------------------------- Parties in the federal shareholder derivative lawsuits pending against Seitel, Inc. and its directors and officers have moved to consolidate the suits. The Company has been named as a nominal defendant in seven stockholder derivative actions filed in various courts: (1) Almekinder v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., United States District Court for the Southern District of Texas, (2) Basser v. Frame, Valice, Kendrick, Pearlman, Fiur, Zeidman, Stieglitz, Craig, Lerner, and Seitel, Inc., United States District Court for the Southern District of Texas, (3) Berger v. Frame, Pearlman, Valice, Craig, Stieglitz, Lerner, Zeidman, Fiur, and Seitel, Inc., the Court of Chancery, State of Delaware, Castle County, (4) Chemical Valley & North Central West Virginia Carpenters Pension Plan v. Frame, Valice, Hoffman, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Fuir, and Seitel, Inc., United States District Court for the Southern District of Texas, (5) Couture v. Frame, Valice, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., the 80th Judicial District Court, Harris County, Texas, (6) Talley v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., 151st Judicial District Court, Harris County, Texas and (7) Zambie v. Frame, Pearlman, Valice, Craig, Zeidman, Lerner, Stieglitz, Fiur, Ernst & Young, LLP, and Seitel, Inc., the 333rd Judicial District Court, Harris County, Texas. The plaintiffs generally allege that the defendants breached and conspired to breach fiduciary duties to the Company's shareholders by failing to maintain adequate accounting controls and by using improper accounting and auditing practices and procedures. Certain of the plaintiffs also assert causes of action for mismanagement, waste of corporate assets and unjust enrichment. The Zambie case also alleges professional negligence against Ernst & Young LLP. The Company's Board of Directors has appointed a special litigation committee, which is conducting an independent investigation of the allegations asserted in the derivative lawsuits, which it expects to be completed in December 2002. No discovery has been conducted. The parties have agreed to stay the Delaware case pending completion of the investigation. The parties have agreed to stay the Texas state court cases pending the outcome of the Texas federal court derivative cases. The parties have moved to consolidate the federal-court derivative cases, which the defendants have moved to stay pending completion of the investigation. SIT INC.: Voluntarily Recalls 80,000 Plastic Chairs For Injury Hazard --------------------------------------------------------------------- S.I.T., Inc. is cooperating with the United States Consumer Product Safety Commission (CPSC) by voluntarily recalling about 80,000 plastic stack chairs. The chairs can collapse during use, causing the consumer to suffer injuries from falls. The Company has received two reports of the chairs collapsing. No injuries have been reported. This recall involves "Cometa" green and white plastic stack chairs. UPC numbers 0-82294-319754 (white) and 0-82294-319785 (green) are located on a label on the front of the chair. "Made in Italy" and "Not Recommended for Use on Polished or Smooth Surfaces" are also printed on the label. Drug stores sold the plastic stack chairs nationwide from April 2000 through September 2002, for between $4 and $6. For more information, contact the Company by Phone: (800) 611-4664 between 9 am and 5 pm ET Monday through Friday. UNITED KINGDOM: Customs' Seizure Of Illicit Goods, Cars Could Be Legal ---------------------------------------------------------------------- The seizure of illicit goods and cars from hundreds of cross-Channel shoppers could have been legal, even though Custom officials treated travellers in a heavy-handed manner and the "stops" were invalid, the Financial Times reports. UK officials have been experiencing some concern that large compensation claims may be lodged against Customs for the seizures, or if not for the seizures generally, then for seizing individuals' goods destined for personal, not commercial, use. Hundreds of cases have been in limbo following a lower court ruling which criticized the manner in which Custom officials have been pursuing suspected smugglers traveling across the Channel to shop. It has been unclear whether, if the "random" stops by Customs were unlawful, the seizure was also illegal. A Court of Appeal's recent ruling, however, has cleared the way for a backlog of cases to proceed by Customs and for destruction of the contraband goods to be sought. The three appeal court judges said the divisional court had been wrong to conclude that "if the stop and check were invalid, then so, necessarily, was the ensuing seizure." Customs will, however, need to show that it was more likely than not that the passenger was bringing in the goods for commercial purposes, rather than personal use. Nonetheless, Customs & Excise welcomed the appeal court's ruling, adding that it should also "mean an end to speculation about large compensation claims against Customs for the seizure of goods and vehicles." However, lawyers suggested that Customs might still be potentially liable to compensate some shoppers, who simply had been unable to persuade officials that their seized goods were not for commercial use. "It would not surprise me, given the number of individuals involved, if Customs & Excise do not end up facing a class-action lawsuit over this issue," said Sally Saltissi at the Dechert law firm. WISCONSIN: State Inaction Over Legal Assistance For Poor Spurs Lawsuits ----------------------------------------------------------------------- Attorney General-elect Peggy Lautenschlager said the U.S. Constitution leaves little choice but for the state to change its outdated qualifications of who can obtain state-paid legal counsel, Associated Press Newswires reports. "It's the law," said Ms. Lautenschlager. "Obviously, it is very serious. It impacts the entire criminal justice system, and puts the state at risk for a class-action lawsuit. It presents problems, including ethical dilemmas for prosecutors and problems for judges. I think in the long run, not only does it delay the system, but it costs taxpayers more money." The Milwaukee Journal-Sentinel has reported that poor people accused of crimes in Wisconsin are being denied their constitutional right to legal counsel because the guidelines for qualifying for public defenders in Wisconsin have not been raised in 15 years. A single person living on as little as $248 a month does not qualify for state- funded assistance, the newspaper's investigation found. That figure is nearly $500 per month below the current federal poverty line. The American Civil Liberties Union of Wisconsin said it would review the situation. The constitution mandates that people who face incarceration and want counsel but cannot afford it, must be given an attorney at government expense. The fact that the guidelines still are tabbed at 80 percent of the 1987 poverty level is a mistake in itself, said Senator Albert Darling, R- River Hills, and co-chairwoman of the Senate Joint Finance Committee. "We have to analyze where other states are. Constitutional rights are extremely important," the Senator said. However, Governor-elect James Doyle, while expressing sympathy for those denied the representation required by the law of the land, stopped short of backing any specific remedy. "Here you see hard- working people, perhaps totally innocent, accused of a crime, who are not provided with any kind of legal services. There is always a balance of what the law requires and what you can afford. I hope maybe working with the (office of the state) public defender and the State Bar, we can figure out some ways, maybe, to organize things a little differently." According to a current state public defender's office budget proposal, an additional 11,000 poor people charged with crimes would qualify for public defenders if appropriate guidelines were adopted. That proposal will be sitting on Governor Doyle's desk when he takes office in January. It would cost Wisconsin taxpayers $4.3 million yearly. Senate Majority Leader-elect Mary Panzer, R-West Bend, said it would be premature to comment on whether she thinks there is political will in the Legislature to raise the guidelines. The Legislature first needs to analyze the issue, she said. Asbestos Alert ASBESTOS LITIGATION: Florida Drywall Worker Wins $1.8M Asbestos Verdict ----------------------------------------------------------------------- A jury of three women and three men in Broward County Circuit Court awarded Yves Lagueux, a 52-year-old Hollywood, Florida drywall worker, a US$1.8 million verdict against Union Carbide Corporation for on-the- job exposure in the 1970s to a drywall tape joint compound containing harmful asbestos extracted from the company's former King City, California mine. The case was brought to trial by the Miami-based personal injury law firm of Ferraro & Associates and its Cleveland office, Kelley & Ferraro. As a result of his exposure to asbestos in the ready mix joint compound manufactured by Georgia Pacific, Mr. Lagueux was diagnosed in August 2000, with asbestosis. "While the verdict is meaningful, it does not replace the pain and suffering caused by Union Carbide to Mr. Lagueux," says James L. Ferraro, managing partner of Ferraro & Associates. "Moreover, the $1,500 offered by Union Carbide to settle the case was disgraceful and insulting to Mr. Lagueux." The jury, which deliberated less than three hours, awarded Mr. Lagueux $36,000 for past pain and suffering and $1.764 million for anticipated future pain and suffering. According to testimony in the four-week trial before Judge O. Edgar Williams, Jr. in Hollywood, Mr. Lagueux, who emigrated to the United States from Canada at age 17, was exposed to the harmful asbestos- containing drywall paste while working as a dry wall finisher in Connecticut and later in Florida. His duties included applying the joint compound between drywall sections and then sanding the compound after it hardened. According to testimony, this process caused him to breathe in the ready mix dust that contained Calidria asbestos. Joint compound products sold today no longer contain asbestos. "This is the first case in the country in which a jury has awarded damages against Union Carbide stemming from its Calidria products," says Michael V. Kelley, managing partner of Kelley & Ferraro. Mr. Lagueux worked as a drywall finisher for various home construction companies from 1969 until 1973 in Connecticut and until 1978 in Florida. Since then, he has also worked in other aspects of home construction in Florida. Asbestosis causes shortness of breath and scarring of the lungs. It becomes progressively worse and leads to a shortened life expectancy. The diagnosis of Mr. Lagueux, a Resident Alien, was complicated, because he also suffers from histoplasmosis, another lung disease, which is a fungal infection believed to be caused from the dust of bird droppings while working as a young man on a farm in his native Quebec. Handling the case for Ferraro & Associates was David A. Jagolinzer and, for Kelley & Ferraro, John A. Sivinski and Lori A. Luka. ASBESTOS LITIGATION: Firms Reveal Findings on Asbestos to Avoid Suits --------------------------------------------------------------------- Advance Auto Parts Inc. stated in its quarterly 10-Q report that its Western Auto subsidiary, "with other defendants including automobile manufacturers, automotive parts manufacturers and other retailers," had been named in a number of asbestos lawsuits. A week later, AutoZone Inc. issued a press release saying that it, too, had been named in asbestos lawsuits. Since it doesn't manufacture or install brakes, AutoZone said it "does not believe it has material liability in these cases, and will vigorously defend each case." Four hours after the AutoZone release, Pep Boys Inc. issued a statement acknowledging that it was involved in such litigation, but that the lawsuits weren't "material to the company's financial position or results of operations." Some disclosures are simply to reassure investors that the company has nothing to disclose. After another faucet company revealed it faced asbestos lawsuits, Masco Corp. of Taylor, Mich., hustled out a release Nov. 19 saying it didn't face any asbestos litigation. Another firm, Swedish-based Hoganas AB, said it had no asbestos claims confronting it. Furthermore, the metal-powder manufacturer said, "Hoganas' production facilities inside and outside Sweden are not and have not been engaged in any kind of operation involving asbestos." If there's nothing there, why even bring it up? Hoganas said it was responding to "queries received recently concerning asbestos-related claims for damages." All the denials sometimes do little good, at least in the short term. On the day AutoZone denied liability in asbestos lawsuits, its stock closed down $2.98, off 3.6 percent. Pep Boys' shares dropped 66 cents, down 5.7 percent. Advance Auto Parts, which started the spate of auto-part disclosures, fell 58 cents, down 1.2 percent, on Nov. 19, even though its shares had climbed 50 cents a week earlier when it filed its quarterly report. "Some courts have interpreted that to mean that 'Well, if you say something or you don't say something and the stock price changes, clearly a reasonable investor would have wanted to know that ahead of time,' " said Mr. Sokobin, the SEC economist. Mr. Steinberg, the former SEC attorney who is now a law professor at Southern Methodist University, said a lot of the additional disclosures won't be important to investors. However, it's important that investors have the maximum amount of information to make investment decisions, with everyone on a level playing field, he said. ASBESTOS ALERT: Boise Cascade Faces Asbestos Related Litigation ---------------------------------------------------------------- Boise Cascade Corporation (NYSE: BCC) has been named a defendant in a number of cases where the plaintiffs allege asbestos-related injuries from exposure to asbestos products or exposure to asbestos while working at a job site over the past several years, and continuing in the third quarter of 2002. The claims vary widely and often are not specific about the plaintiff's contacts with Boise or with any of its facilities. None of the claims seek damages individually, and Boise is generally one of numerous defendants. Most of the cases filed have been voluntarily dismissed, although Boise has settled some cases for a nominal amount. The settlements paid have been covered largely by insurance, and Boise believes any future settlements or judgments would be similarly covered. To date, no asbestos case against the Company has gone to trial, and the nature of these cases makes any prediction as to the outcome of pending litigation inherently subjective. At this time, however, the Company believes its involvement in asbestos litigation is not material to either its financial position or its results of operations. COMPANY PROFILE Boise Cascade Corporation (NYSE: BCC) 1111 W. Jefferson St. Boise, ID 83728-0001 Phone: 208-384-6161 Fax: 208-384-7189 http://www.bc.com Employees : 24,168 Revenue : $7,422,200,000 Net Income : $(42,500,000) Assets : $4,934,000,000 Liabilities : $3,355,700,000 (As of December 31, 2001) Description: With more than two million acres of US timberlands, Boise Cascade distributes office products and produces paper and building materials. Boise operates about 25 building-products mills, five paper mills, and nearly 30 wholesale building-material distribution centers. Its Boise Office Solutions subsidiary distributes office supplies through about 65 distribution centers and more than 100 retail outlets in Australia, Canada, New Zealand, and the US. Building and paper products include plywood, particleboard, newsprint, market pulp, containerboard, and uncoated free sheet paper. ASBESTOS ALERT: CIRCOR, Subsidiaries Battle 10,000 Asbestos Claimants --------------------------------------------------------------------- CIRCOR International and its subsidiaries, Leslie Controls, Inc., Spence Engineering Company, Inc., and Hoke, Inc., collectively have been named as defendants or third-party defendants in asbestos related claims brought on behalf of around 10,000 plaintiffs against anywhere from 50 to 400 defendants. In some instances, CIRCOR also has been named as successor in interest to one or more of these subsidiaries. The cases brought on behalf of the vast majority of claimants seek unspecified compensatory and punitive damages against all defendants in the aggregate. However, with respect to the complaints filed on behalf of approximately 121 plaintiffs in New York, each plaintiff seeks $5.0 million compensatory damages and $5.0 million punitive damages against the aggregate of defendants under each of six causes of action. Similarly, with respect to the complaints filed in California on behalf of eleven claimants, each plaintiff seeks approximately $400,000 compensatory damages and $2.5 million punitive damages against the aggregate of defendants. COMPANY PROFILE CIRCOR International, Inc. (NYSE: CIR) 35 Corporate Dr. Burlington, MA 01803 Phone: 781-270-1200 Fax: 781-270-1299 http://www.circor.com Employees : 1,900 Revenue : $343,100,000 Net Income : $15,600,000 Assets : $386,100,000 Liabilities : $163,700,000 (As of December 31, 2001) Description: CIRCOR makes instrumentation and fluid regulation products, including precision valves, tube and pipe fittings, and regulators for hydraulic, pneumatic, cryogenic, and steam systems. CIRCOR's remaining sales come from making valves and other products for the oil and gas industry. The company's products are sold through distributors in some 90 countries to the aerospace, oil, pharmaceuticals, and power industries. US customers account for two- thirds of sales. CIRCOR was spun off from Watts Industries in 1999. Timothy Horne, a CIRCOR director and CEO of Watts, and his family own about 29% of the company. ASBESTOS ALERT: CONSOL Energy's Subsidiary Faces 21,000 Asbestos Suits ---------------------------------------------------------------------- One of CONSOL Energy's subsidiaries, Fairmont Supply Company, which distributes industrial supplies, currently is defending against approximately 21,000 asbestos claims in state courts in Pennsylvania, Ohio, West Virginia and Mississippi. Because a very small percentage of products manufactured by third parties and supplied by Fairmont in the past may have contained asbestos and many of the pending claims are part of mass complaints filed by hundreds of plaintiffs against a hundred or more defendants, it has been difficult for Fairmont to determine how many of the cases actually involve valid claims or plaintiffs who were actually exposed to asbestos-containing products supplied by Fairmont. In addition, while Fairmont may be entitled to indemnity or contribution in certain jurisdictions from manufacturers of identified products, the availability of such indemnity or contribution is unclear at this time and, in recent years, some of the manufacturers named as defendants in these actions have sought protection from these claims under bankruptcy laws. Fairmont has no insurance coverage with respect to these asbestos cases. To date, payments by Fairmont with respect to asbestos cases have not been material. However, there cannot be any assurance that payments in the future with respect to pending or future asbestos cases will not be material to the financial position, results of operations or cash flows of CONSOL Energy. COMPANY PROFILE CONSOL Energy Inc. (NYSE: CNX) Consol Plaza, 1800 Washington Rd. Pittsburgh, PA 15241-1421 Phone: 412-831-4000 Fax: 412-831-4103 http://www.consolenergy.com/ Employees : 7,523 Revenue : $1,050,000,000 Net Income : $1,100,000,000 Assets : $4,297,600,000 Liabilities : $4,026,100,000 (As of December 31, 2001) Description: CONSOL is one of the US's three largest coal mining companies, along with Peabody and Arch Coal. The company primarily mines bituminous coal, which burns cleaner than lower grades. Customers include electric utilities, steel mills, and trading companies. CONSOL's Buchanan Production and Pocahontas Gas subsidiaries recover coalbed methane, an increasingly popular fuel for producing electricity. Another subsidiary, Fairmont Supply, distributes mining and industrial supplies throughout the US. Germany-based conglomerate RWE owns 74% of the company. ASBESTOS ALERT: Dalmine SPA Faces Lawsuits Over Asbestos Liabilities -------------------------------------------------------------------- Three of Dalmine SPA's former managers have been named as defendants in a criminal proceeding, arising from the death of, or, in some cases, injuries to certain employees, before the Court of Bergamo, Italy, based on alleged negligence in having omitted to inform the employees working in a specific area of the mill of the risks connected with the use of asbestos and for having omitted to take any measures to prevent the risks connected with the use of asbestos in certain areas of Dalmine's manufacturing facilities from 1960 to the early 1980s. If its former managers are held responsible, Dalmine will be liable for damages to the 20 affected employees or their respective estates, as applicable. Dalmine is also a defendant in two civil proceedings for work-related injuries arising from its use of asbestos. The first of these proceedings was instituted on February 14, 2001, before the Court of Bergamo, Italy, by the estate of Luigi Pedruzzi, for damages in an aggregate amount of approximately E640,000. The other proceeding was instituted on June 5, 2001, before the Commissione Provinciale di Conciliazione of Bergamo, Italy, the mediation commission for the province of Bergamo, by the estate of Elio Biffi for an aggregate amount of approximately E770,000. In addition, some other asbestos-related out-of-court claims have been forwarded to Dalmine. The aggregate relief currently sought in out-of- court claims is approximately E3.8 million, although damages have not yet been specified in some cases. Of the 39 claims (inclusive of the 20 claims of the affected employees relating to the criminal proceeding and the out-of-court claims), 16 incidents have already been settled, either by Dalmine or by Dalmine's insurer. Dalmine estimates that its potential liability in connection with the remaining cases not yet settled or covered by insurance is approximately E6.3 million. This amount was recognized as a provision for liabilities and expenses as of June 30, 2002. While Dalmine may be subject to additional asbestos-related claims in the future, Tenaris, based on recent trends at Dalmine, does not believe that asbestos-related liabilities arising from claims already filed against Dalmine or from future asbestos-related claims are reasonably likely to be, individually or in the aggregate, material to its results of operations, liquidity and financial condition. COMPANY PROFILE Dalmine S.p.A. Piazza Caduti, 6 Luglio 1944, 1 Dalmine, Bergamo, Italy Phone: +39-035-56-0111 Fax: +39-035-5603827 http://www.dalmine.it Employees : 3,272 Revenue : $905,200,000 Net Income : $(2,800,000) Assets : $860,200,000 Liabilities : $667,800,000 (As of December 31, 2001) Description: Dalmine produces drawn carbon steel pipes, fiberglass pipes, welded and seamless stainless steel pipes, and gas cylinders from seamless tubes. Customers include automobile makers, gas and water companies, bearing makers, industrial and medical gas companies, and power producers. Seamless pipe, the company's principal product, is made in sizes ranging from 12 mm to 711 mm in diameter. Seamless pipe, the company's principal product, is made in sizes ranging from 12 mm to 711 mm in diameter. Technit, the Netherlands-based holding company, owns about 47% of Dalmine. ASBESTOS ALERT: EnPro, Subsidiaries Reveal Asbestos Related Liabilities ----------------------------------------------------------------------- Certain of the EnPro Industries Inc.'s subsidiaries, primarily Garlock Sealing Technologies, LLC and The Anchor Packing Company, have been among a number of defendants (typically 15 to 40 and often more than 100) in actions filed in various jurisdictions by plaintiffs alleging injury or death as a result of exposure to asbestos fibers. Except for claims against Garlock and Anchor, the number of claims to date has not been significant. Among the products at issue in those actions are industrial sealing products, predominantly gaskets and packing products, manufactured and/or sold by Garlock or Anchor. The damages claimed vary from action to action and in some cases plaintiffs seek both compensatory and punitive damages. To date, neither Garlock nor Anchor has been required to pay any punitive damage awards, although there can be no assurance that they will not be required to do so in the future. Liability for compensatory damages has historically been allocated among all responsible defendants, thus limiting the potential monetary impact of a particular judgment or settlement on any individual defendant. Since the first asbestos-related lawsuits were filed against Garlock in 1975, Garlock and Anchor have processed approximately 500,000 asbestos claims to conclusion and, together with their insurers, have paid approximately $780 million in settlements and judgments at a cost in fees and expenses of approximately $265 million. Of those claims resolved, approximately 2% have been claims of plaintiffs alleging the disease mesothelioma, approximately 6% have been claims of plaintiffs with lung or other cancers, and approximately 92% have been claims of plaintiffs alleging asbestosis, pleural plaques or other impairment of the respiratory system of varying degree. Because the more serious disease cases tend to work through the system more quickly than the non-malignancy cases and the cases filed by those who are not impaired, the Company believes that the disease mix in its current open caseload, on a percentage basis, is even more skewed toward pleural plaques and includes a large number of claims made by plaintiffs who have suffered no disease and have no measurable impairment of any kind. In fact, while there are many cases in its current open caseload about which it has no disease information, the Company is only aware of around 7,000 that involve a claimant with mesothelioma, lung cancer or some other cancer. The Company believes that Garlock and Anchor are in a favorable position compared to many other asbestos defendants because, among other things, the asbestos-containing products formerly sold by Garlock and Anchor were encapsulated, which means the asbestos fibers were incorporated into the product during the manufacturing process and sealed in a binder. They are also non-friable, which means they cannot be crumbled by hand pressure. The Occupational Safety and Health Administration, which began generally requiring warnings on asbestos-containing products in 1972, has never required that a warning be placed on products such as Garlock's gaskets. Notwithstanding that no warning label has been required, Garlock included one on all of its asbestos-containing products beginning in 1978. Further, gaskets such as those previously manufactured and sold by Garlock are one of the few asbestos-containing products still permitted to be manufactured under regulations of the Environmental Protection Agency. Since the mid-1980s, US sales of asbestos-containing industrial sealing products have not been a material part of Garlock's sales and those sales have been predominantly to sophisticated purchasers such as the U.S. Navy and large petrochemical facilities. These purchasers generally have extensive health and safety procedures and are familiar with the risks associated with the use and handling of industrial sealing products that contain asbestos. Garlock discontinued distributing asbestos-containing products in the US during 2000 and worldwide in mid-2001. Garlock settles and disposes of actions on a regular basis. In addition, some actions are disposed of at trial. Garlock's historical settlement strategy has been to try to match the timing of payments with recoveries received from insurance which, as described later, are currently limited to $80million per year. However, in 1999 and 2000, Garlock implemented a short-term aggressive settlement strategy. The purpose of this short-term strategy was to achieve a permanent reduction in the number of overall asbestos claims through the settlement of a larger than normal number of claims, including some claims not yet filed as lawsuits. Mainly due to this short-term aggressive settlement strategy, but also because of a significant overall increase in claims filings, the settlement amounts paid in 2001, 2000 and 1999 increased over prior periods. In 2001, Garlock resumed its historical settlement strategy. In fact, Garlock reduced new settlement commitments from $180million in 2000 to $94million in 2001 and is on pace to reduce new commitments further in 2002. However, because of commitments made in 1999 and 2000 that will be paid over a number of years, the settlement amounts that Garlock will pay in 2002 through 2005 will continue to include amounts for settlements made during 1999, 2000 and early 2001, when the short-term strategy was employed. Settlements are made without any admission of liability and are generally made on a group basis with payments made to individual claimants over a period of one to four years. Settlement amounts vary depending upon a number of factors, including the jurisdiction where the action was brought, the nature of the disease alleged and the associated medical evidence, the occupation of the plaintiff, the presence or absence of other possible causes of the plaintiff's alleged illness, the availability of legal defenses, such as the statute of limitations, and whether the action is an individual one or part of a group. Garlock's allocable portion of the total settlement amount for an action typically has ranged from 1% to 2% of the total amount paid by all defendants in the action. Before any payment on a settled claim is made, the claimant is required to submit a medical report acceptable to Garlock substantiating the asbestos-related illness and meeting specific criteria of disability. In addition, sworn testimony that the claimant worked with or around Garlock asbestos-containing products is required. Generally, the claimant is also required to sign a full and unconditional release of Garlock, its subsidiaries, parent, officers, directors, affiliates and related parties from any liability for asbestos-related injuries or claims. When a settlement demand is not reasonable given the totality of the circumstances, Garlock generally will try the case. Garlock has been successful in winning a substantial majority of the cases it has tried to verdict. Garlock's share of adverse verdicts in these cases in the first nine months of 2002, together with the years 2001 and 2000, totaled approximately $5million in the aggregate, and some of those verdicts are on appeal. The insurance coverage available to Garlock is substantial. As of September30, 2002, Garlock had available $938million of insurance coverage from carriers that we believe to be solvent. Garlock classifies $61million of otherwise available insurance as insolvent. Of the solvent insurance, $690million (74%) is with US-based carriers whose credit rating by S&P is investment grade (BBB)or better, $115million (12%) is with other solvent US carriers and $133million (14%) is with various solvent London market carriers. Of the $938million, $147million is allocated to claims that have been paid by Garlock and submitted to its insurance companies for reimbursement and $122million has been committed to claim settlements not yet paid by Garlock. Thus, at September30, 2002, $669 million remained available for future asbestos-related payments. Arrangements with Garlock's insurance carriers limit the amount that can be received by it in any one year. The amount of insurance available to cover asbestos-related payments by Garlock currently is limited to $80million per year. This limit automatically increases by 8% every three years, and the next scheduled increase is in 2003. Amounts paid by Garlock in excess of this annual limit that would otherwise be recoverable from insurance may be collected from the insurance companies in subsequent years so long as insurance is available, subject to the annual limit available in each subsequent year. As a result, Garlock is required to pay out of its own cash any amounts paid to settle or dispose of asbestos-related claims in excess of the annual limit and collect these amounts from its insurance carriers in subsequent years. Anchor is an inactive and insolvent subsidiary of Coltec. The insurance coverage available to Anchor of approximately $9 million as of September30, 2002 is fully committed. Anchor continues to pay settlement amounts covered by its insurance but has not committed to settle any further actions since 1998. As cases reach the trial stage, Anchor is typically dismissed without payment. EnPro is pursuing various options, such as raising the annual limit and commuting policies at discounted values, to ensure as close a match as possible between payments by Garlock and recoveries received from insurance carriers. There can be no assurance that Garlock will be successful as to any or all of these options. Insurance coverage for asbestos claims is not available to cover exposures initially occurring on and after July1, 1984. Garlock and Anchor continue to be named as defendants in new actions, a few of which allege initial exposure after July1, 1984. To date, no payments with respect to these claims, pursuant to a settlement or otherwise, have been made. In addition, Garlock and Anchor believe that they have substantial defenses to these claims and therefore automatically reject them for settlement. However, there can be no assurance that any or all of these defenses will be successful in the future. In accordance with internal procedures for the processing of asbestos product liability actions and due to the proximity to trial or settlement, certain outstanding actions against Garlock and Anchor have progressed to a stage where the cost to dispose of these actions can reasonably be estimated. These actions are classified as actions in advanced stages and are included in the table as such below. With respect to outstanding actions against Garlock and Anchor that are in preliminary procedural stages, as well as any actions that may be filed in the future, EnPro believes that insufficient information exists upon which judgments can be made as to the validity or ultimate disposition of such actions. Therefore, EnPro believes that it is impossible to estimate with any degree of accuracy or reasonableness what, if any, potential liability or costs may be incurred. COMPANY PROFILE EnPro Industries, Inc. (NYSE: NPO) 5605 Carnegie Blvd. Charlotte, NC 28209-4674 Phone: 704-731-1500 Fax: 704-731-1511 http://www.enproindustries.com Employees : 4,500 Revenue : $174,200,000 Net Income : $(500,000) Assets : $996,800,000 Liabilities : $590,100,000 (As of quarter end September 30, 2002) Description: EnPro Industries, once a subsidiary of Goodrich Corporation, was created with Goodrich's acquisition of Coltec Industries. EnPro manufactures products for a wide variety of customers in the agricultural, home heating, automotive, heavy-duty vehicle, and marine propulsion industries. Its products include industrial sealing systems (seals and gaskets), air compressors, wheel-end systems for large trucks and trailers, large diesel engines (used in naval ships, locomotives, and electric power plants), self-lubricated bearings, and sealing components for reciprocating compressors. EnPro was spun off from Goodrich in 2002. ASBESTOS ALERT: Special Metals, Subsidiary Face Asbestos Related Suits ---------------------------------------------------------------------- Huntington Alloys, a domestic subsidiary of the Special Metals Corp., is a co-defendant in various consolidated and unconsolidated actions by plaintiffs, including former employees of Special Metals Corp and former employees of contractors to Special Metals, alleging exposure to asbestos at its West Virginia facility. Plaintiffs' counsel has also informed Huntington that they intend to add similar claims by additional plaintiffs. Insurance coverage is available for some of these proceedings. To date, no asbestos claims have gone to trial, and as a result of the Bankruptcy filing all claims against Huntington have been stayed. Jurisdiction over all asbestos cases pending in the State of West Virginia has been transferred to the Mass Litigation Panel, a panel established by the West Virginia Supreme Court of Appeals to streamline the processes and procedures for resolving asbestos cases. Because the courts permitted Huntington to engage in only limited discovery with respect to the merits of the claims asserted against it, the Company is not able to reasonably estimate what the ultimate loss, if any, will be with respect to these matters. However, the damages sought by plaintiffs in these actions, if the company was required to pay them, could have a material adverse effect on the business, financial condition, results of operations or cash flows of the Company. COMPANY PROFILE Special Metals Corporation (OTC: SMCXQ) 4317 Middle Settlement Rd. New Hartford, NY 13413-5392 Phone: 315-798-2900 Fax: 315-798-6823 Toll Free: 800-334-8351 http://www.specialmetals.com Employees : 3,188 Revenue : $729,300,000 Net Income : $(55,600,000) Assets : $700,600,000 Liabilities : $679,200,000 (As of December 31, 2001) Description: Special Metals makes nickel-based alloys and superalloys for aircraft engine rotating components and other high-performance systems. The company's products are designed to withstand extreme heat, stress, and corrosion. They are available as billet, plate, and tube; extruded shapes; and wire and welding consumables. Special Metals' Premium Alloys Division makes wrought superalloys and superalloy powders. The company sells primarily to the aerospace industry. It has plants in the US and Europe. French specialty metals maker Eramet owns about 39% of Special Metals. With its sales weakened by a sagging US economy and imports, in early 2002 Special Metals filed Chapter 11; it was delisted from the NASDAQ that April. ASBESTOS ALERT: PEPCO Traces Background of Asbestos Related Litigation --------------------------------------------------------------------- During 1993, Pepco Holdings, Inc. was served with amended complaints filed in three jurisdictions (Prince George's County, Baltimore City and Baltimore County), in separate ongoing, consolidated proceedings each denominated, "In re: Personal Injury Asbestos Case." Pepco (and other defendants) were brought into these cases on a theory of premises liability under which plaintiffs argue that Pepco was negligent in not providing a safe work environment for employees of its contractors who allegedly were exposed to asbestos while working on Pepco's property. Initially, a total of approximately 448 individual plaintiffs added Pepco to their Complaints. While the pleadings are not entirely clear, it appears that each plaintiff seeks $2 million in compensatory damages and $4 million in punitive damages from each defendant. In a related proceeding in the Baltimore City case, Pepco was served, in September 1993, with a third-party complaint by Owens Corning Fiberglass, Inc. (Owens Corning) alleging that Owens Corning was in the process of settling approximately 700 individual asbestos-related cases and seeking a judgment for contribution against Pepco on the same theory of alleged negligence set forth above in the plaintiffs' case. Subsequently, Pittsburgh Corning Corp. (Pittsburgh Corning) filed a third-party complaint against Pepco, seeking contribution for the same plaintiffs involved in the Owens Corning third-party complaint. Since the initial filings in 1993, approximately 90 additional individual suits have been filed against Pepco. The third-party complaints involving Pittsburgh Corning and Owens Corning were dismissed by the Baltimore City Court during 1994 without any payment by Pepco. While the aggregate amount specified in the remaining suits would exceed $400 million, Pepco believes the amounts are greatly exaggerated, as were the claims already disposed of. The amount of total liability, if any, and any related insurance recovery cannot be precisely determined at this time; however, based on information and relevant circumstances known at this time, Pepco does not believe these suits will have a material adverse effect on its financial position. However, an unfavorable decision rendered against Pepco could have a material adverse effect on results of operations in the year in which a decision is rendered. On October 24, 2000, the City of Vineland, New Jersey (City), filed an action in a New Jersey Superior Court to acquire ACE electric distribution facilities located within the City limits by eminent domain. On March 13, 2002, ACE and the City signed an agreement that provides for ACE to sell the electric distribution facilities within the City limits, and the related customer accounts, for $23.9 million. The proceeds are being received in installments as milestones are met, and are proceeding on schedule. The remaining proceeds should be received in the second quarter of 2004, when the final milestones will be completed. At that time the assets and customers will be transferred to the City and the sale will be recorded by ACE. The Company, through its subsidiaries, is involved in other legal and administrative (including environmental) proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Management is of the opinion that the final disposition of these proceedings will not have a material adverse effect on the Company's financial position or results of operations. COMPANY PROFILE Pepco Holdings, Inc. (NYSE: POM) 701 9th St. Northwest Washington, DC 20068 Phone: 202-872-2000 Fax: 202-331-6750 http://www.pepcoholdings.com Employees : 2,449 Revenue : $2,502,900,000 Net Income : $168,400,000 Assets : $5,285,900,000 Liabilities : $3,377,900,000 (As of December 31 2001) Description: Pepco Holdings (formerly Potomac Electric Power) has more power than any politician in the populace of the US capital. The holding company distributes electricity to more than 700,000 customers in Washington, DC, and Maryland through subsidiary Potomac Electric Power. Pepco Holdings has expanded its distribution territory by buying Conectiv, which serves 1.1 million electric and natural gas customers in four northeastern states. Deregulation has taken effect in the region, and the utilities have sold most of their power generation assets. Pepco Holding's non-regulated subsidiaries market electricity and gas and provide energy management and telecom services. The company also has international energy interests. ASBESTOS ALERT: Tenneco Labels "Without Merit" Asbestos, Other Lawsuits ----------------------------------------------------------------------- Tenneco Automotive Inc (NYSE: TEN) from time to time is involved in legal proceedings or claims that are incidental to the operation of its businesses including injuries due to product failure, design or warnings issues, asbestos exposure, or other product liability related matters). Tenneco will continue to vigorously defend itself from all of these claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including its assessment of the merits of the particular claim, Tenneco does not expect that these legal proceedings or claims will have any material adverse impact on its consolidated financial condition or results of operations. COMPANY PROFILE Tenneco Automotive Inc. (NYSE: TEN) 500 North Field Dr. Lake Forest, IL 60045 Phone: 847-482-5000 Fax: 847-482-5940 http://www.tenneco-automotive.com Employees : 20,145 Revenue : $3,364,000,000 Net Income : $(130,000,000) Assets : $2,681,000,000 Liabilities : $2,607,000,000 (As of December 31 2001) Description: Tenneco Automotive is the result of a split decision by onetime conglomerate Tenneco to divide its last two businesses -- auto parts and packaging -- into independent firms. The auto parts company makes Walker exhaust systems and Monroe ride-control equipment (shocks, struts) for vehicle manufacturers and the replacement market. Tenneco Automotive's product line also includes vibration-control systems, steering stabilizers, catalytic converters, engine mounts, and various exhaust system accessories. The company has 75 factories operating in 21 countries. Tenneco Automotive's sister business has become packaging company Pactiv Corporation. ASBESTOS ALERT: TRW Inc. Labels Asbestos Related Lawsuits "Immaterial" ---------------------------------------------------------------------- TRW Inc and certain of its subsidiaries have been subject in recent years to some asbestos-related claims. Management believes that these claims will not have a material adverse effect on the Company's financial condition or results of operations. In general, these claims seek damages for illnesses alleged to have resulted from exposure to asbestos used in certain components sold by the Company and/or its subsidiaries. The vast majority of these claims name as defendants numerous manufacturers and suppliers of a wide variety of products allegedly containing asbestos. Management believes that, to the extent that any of the products sold by the Company's automotive-related subsidiaries and at issue in these cases contained asbestos, the asbestos was encapsulated. Based upon several years of experience with such claims, management believes that only a small proportion of the claimants has or will ever develop any asbestos-related impairment. Total annual settlement costs in connection with asbestos-related claims over the last five years as well as legal fees and expenses to defend these cases have been immaterial. These claims are strongly disputed and it has been the Company's policy to defend against them aggressively. The Company and its subsidiaries have been successful in obtaining dismissal of many cases without any payment whatsoever. Moreover, there is significant insurance coverage with solvent carriers with respect to these claims. COMPANY PROFILE TRW Inc. (NYSE: TRW) 1900 Richmond Rd. Cleveland, OH 44124-2760 Phone: 216-291-7000 Fax: 216-291-7629 http://www.trw.com Employees : 93,700 Revenue : $16,383,000,000 Net Income : $68,000,000 Assets : $14,444,000,000 Liabilities : $12,258,000,000 (As of December 31, 2001) Description: TRW is being acquired by Northrop Grumman, but not for its biggest unit. TRW's Automotive unit (62% of sales) makes airbags, antilock brake and traction-control systems, seat belt systems, and steering and suspension systems. Northrop's targets? The company's Space and Electronics unit, which makes defense satellites, communications equipment, and high-energy lasers, and its Systems unit, which deals in computer systems. Northrop Grumman has agreed to buy TRW for $7.8 billion in stock. If the deal is approved, Northrop will spin off or sell TRW's Automotive unit. TRW's Aeronautical Systems unit has already been sold to Goodrich Corp. for $1.5 billion. New Securities Fraud Cases COLE NATIONAL: Strauss & Troy, Weisman Goldberg OH File Investor Suit --------------------------------------------------------------------- Strauss & Troy and Weisman, Goldberg & Weisman initiated a securities class action in the United States District Court for the Northern District of Ohio, Eastern Division, on behalf of all persons who purchased the common stock of Cole National Corporation (NYSE: CNJ) between March 23, 1999, and November 26, 2002. The suit alleges that during the class period, the Company and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing materially false and misleading statements concerning the Company's reported revenues and earnings. Specifically, the suit alleges: (1) that the Company's revenues from optical warranties and net income for 1998, 1999, 2000, 2001 and for the two quarters of 2002 have been overstated; (2) because of these problems, the value of the Company's balance sheet and income statement were materially overstated; and (3) the Company's financial statements did not comply with GAAP. On November 26, 2002, the Company revealed that: (i) the Company would conduct a re-audit of the financial statement for fiscal years 1998, 1999, 2000, 2001 and 2002 previously audited by Arthur Andersen LLP; (ii) re-audits would likely result in the restatement of the Company's financial statement; (iii) the Company was advised to recognize the revenues earned on the sale of the optical warranties at the time of sale; and (iv) as a result of these adjustments, material changes are likely in the timing of the recognition of the revenue and operating profits associated with these sales. Further, the Company reported that the filing of its Form 10-Q for the third quarter of 2002 will be delayed and most likely the required restatements will be available at the time of the filing of its form 10-K for its fiscal year ending February 1, 2003. The Company also stated that the investors should not rely on its previous financial statements. In response to the news reported on November 26, 2002 Cole National's shares fell $1.25 or approximately 10% per share to close at $11.09 on November 26, 2002. For more details, contact Richard S. Wayne or William K. Flynn of Strauss & Troy by Mail: 150 East Fourth Street, Cincinnati, Ohio 45202 by Phone: 800-669-9341 or (513) 621-2120 or by E-mail: classactions@strauss-troy.com or contact R. Eric Kennedy or Dan Goetz of Weisman, Goldberg & Weisman by Mail: 1600 Midland Bldg., 101 Prospect Ave., W., Cleveland, Ohio 44115 or by Phone: (216) 781-1111. SMARTFORCE PLC: Milberg Weiss Commences Securities Lawsuit in NH Court ---------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action filed on behalf of: (1) purchasers of the American Depositary Shares (ADSs) of SmartForce, plc d/b/a Skillsoft, (NASDAQ:SKIL) between January 18, 2000 and September 6, 2002; (2) purchasers of Skillsoft ADSs between September 6, 2002 and November 18, 2002; and (3) all persons who acquired SmartForce ADSs pursuant to the merger between SmartForce plc and Skillsoft Corporation completed on or around September 6, 2002. The action is pending in the United States District Court, District of New Hampshire, against the Company and: (i) Gregory M. Priest, (ii) William G. McCabe, (iii) David C. Drummond, (iv) John M. Grillos, (v) John P. Hayes and (vi) Patrick E. Murphy 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 January 18, 2000 and November 18, 2002, thereby artificially inflating the price of Company securities. Throughout the class period, as alleged in the Complaint, defendants issued numerous statements and filed quarterly and annual reports with the SEC which 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 the following adverse facts, among others: (a) that the Company had improperly accelerated the recognition of revenue on the sale of its software; (b) that the Company had materially understated its bad debt reserves; (c) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (d) that as a result, the value of the Company's revenues and financial results were materially overstated at all relevant times. On November 19, 2002, before the market opened for trading, SmartForce d/b/a Skillsoft shocked the market by announcing that it intends to restate the historical financial statements of SmartForce for 1999, 2000, 2001 and the first two quarters of 2002. According to the press release, the restatement related to the improper acceleration of the recognition of revenue on the sale of the Company's software and the understatement of the Company's bad debt reserves. Following this announcement, shares of SkillSoft fell $1.56 per share, or 33.7%, to close at $3.07 per share, on extraordinary volume of 7.2 million shares traded. 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 by E-mail: Skillsoftcase@milbergNY.com or visit the firm's Website: http://www.milberg.com ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2002. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re- mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. 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 * * *