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/raid1/www/Hosts/bankrupt/CAR_Public/030717.mbx C L A S S A C T I O N R E P O R T E R Thursday, July 17, 2003, Vol. 5, No. 140 Headlines AMERICASH-INC.COM: FL Court Enters Investment Suit Judgment CYBERGUARD CORPORATION: Discovery Proceeds in Securities Lawsuit DISCOVER CAPITAL: SEC Launches Action To Block Fraudulent Scheme DYNACQ INTERNATIONAL: Asks TX Court To Dismiss Securities Suit ENROTEK LTD.: SEC Charges Robert Clawson With Securities Fraud GUNTHER INTERNATIONAL: Reaches Securities Lawsuit Settlement INTERNATIONAL PAPER: Court Orders Insurers To Cover Settlement JP MORGAN: Nears Securities Pact As Investors Express Concern KEVIN KIRKPATRICK: Court Enters Permanent Injunction Over Fraud LYSINE ANTITRUST: Suppliers Ink Out-of Court Settlement For Suit MINIMED INC.: CA Court Grants Certification To Stockholder Suit MODELING AGENCIES: NY Court Certifies Model's Antitrust Lawsuit PRESIDENT CASINOS: Plaintiffs Appeal Class Certification Denial PRUDENTIAL SECURITIES: Faces Actions Over Mutual Funds Policy SOLECTRON CORPORATION: CA Court Orders Stock Suits Consolidated SOLECTRON CORPORATION: Derivative Suits Consolidated in CA Court STANSBURY HOLDINGS: Common Stock Registration Revoked Over Fraud UNITED STATES: Vanderbilt Law Professor Supports New Bill UNITED STATES: Legal Reform Group Supports New Bill VITAMIN ANTITRUST: Australian Court Allows Lawsuit To Proceed WD40 CO.: Consumers Sue Over Toilet Bowl Cleaners in FL Court WINNEBAGO INDUSTRIES: Plaintiffs Appeal Denial of Certification New Securities Fraud Cases CIT GROUP: Marc Henzel Lodges Securities Fraud Suit in S.D. NY CORE LABORATORIES: Marc Henzel Lodges Securities Suit in S.D. NY COSI INC.: Marc Henzel Lodges Securities Fraud Suit in S.D. NY CREE INC.: Bernstein Liebhard Lodges Securities Suit in M.D. NC CREE INC.: Abbey Gardy Launches Securities Fraud Suit in M.D. NC CRYO-CELL INTERNATIONAL: Emerson Poynter Lodges Stock Suit in FL EDISON SCHOOLS: Wechsler Harwood Lodges Securities Lawsuit in DE SINGING MACHINE: Milberg Weiss Lodges Securities Suit in S.D. FL ********* AMERICASH-INC.COM: FL Court Enters Investment Suit Judgment ----------------------------------------------------------- The United States District Court for the Southern District of Florida, entered a final judgment of permanent injunction against Norman Benjamin, the president and director of Americash-Inc.Com, Inc., a Florida corporation. The final judgment, entered by his consent and without admitting or denying the allegations of the United States Securities and Exchange Commission's complaint, enjoins Mr. Benjamin from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition to enjoining Mr. Benjamin, the final judgment orders him to pay disgorgement in the amount $65,365.40 plus prejudgment interest thereon, but partially waives disgorgement and does not impose a civil penalty based on Benjamin's Sworn Statement of Financial Condition and other supporting documents. The SEC earlier filed an emergency civil action against Americash-Inc.com, Inc., National Business Concepts, Inc. d/b/a Americash and Norman Benjamin and relief defendant World Business Systems LLC, d/b/a World Business Systems, Inc. The SEC alleged that the defendants, through a boiler room, raised approximately $1.2 million from more than 45 investors to fund a purported "payday advance" business. In raising money for this enterprise from investors, the defendants falsely represented that the investment was low risk, that a 36% return was guaranteed and that all monies were lent out to Americash customers. According to the SEC complaint, Americash in fact operated as a Ponzi scheme, paying interest to existing investors with new investor monies, and spending investor funds on salaries, commissions, and expenses to operate its boiler room. CYBERGUARD CORPORATION: Discovery Proceeds in Securities Lawsuit ---------------------------------------------------------------- Discovery is proceeding in the consolidated securities class action filed against Cyberguard Corporation and certain of its former officers and directors in the United States District Court, Southern District of Florida. This action seeks damages purportedly on behalf of all persons who purchased or otherwise acquired the Company's common stock during various periods from November 7, 1996 through August 24, 1998. The complaint alleges, among other things, that as a result of accounting irregularities relating to the Company's revenue recognition policies, the Company's previously issued financial statements were materially false and misleading and that the defendants knowingly or recklessly published these financial statements which caused the Company's common stock prices to rise artificially. The action alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act. Subsequently, the defendants, including the Company, filed their respective motions to dismiss the consolidated suit. The court denied the Company's and Robert L. Carberry's (the Company's CEO from June 1996 through August 1998) motions to dismiss. The court granted the motions to dismiss with prejudice for defendants: (1) William D. Murray (the Company's CFO from November 1997 through August 1998), (2) Patrick O. Wheeler (the Company's CFO from April 1996 through October 1997), (3) C. Shelton James (the Company's former Audit Committee Chairman), and (4) KPMG Peat Marwick LLP On August 14, 2000, the plaintiffs filed a motion for reconsideration of that order. The Court ruled on the plaintiffs' motion for reconsideration that the previously dismissed defendants William D. Murray, Patrick O. Wheeler and C. Shelton James should not have been dismissed from the action and shall be defendants in this action under the control person liability claims under Section 20(a) of the Exchange Act, and that the plaintiffs may amend the consolidated suit to bring claims against C. Shelton James under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. The plaintiffs then filed their second consolidated and amended class action to include amended claims against C. Shelton James. The Company answered the suit and filed affirmative defenses. On August 14, 2002, the court granted the plaintiffs' motion for class certification and certified the class to include all investors who acquired the Company's common stock between November 7, 1996 and August 24, 1998 and were damaged by the purchase of such stock. The trial is scheduled for March 2004. DISCOVER CAPITAL: SEC Launches Action To Block Fraudulent Scheme ---------------------------------------------------------------- The United States Securities and Exchange Commission brought an emergency action in the United States District Court for the District of Columbia to halt an ongoing fraudulent scheme largely aimed at retirees who were customers of brokerages that have gone out of business. The Commission's request for a temporary restraining order was granted by the Honorable Judge Rosemary M. Collyer, who also froze $1.1 million of the assets of two of the defendants, Discover Capital Holdings Corporation and Indianapolis Securities, Inc., pending a preliminary hearing. The Commission alleges that the defendants, Eli Dinov, his brother Ari Dinov, and David Rubinov used spam e-mail touts and misleading, high pressure sales calls to raise more than one million dollars through the sale of private placement shares of Uniondale, New York-based Discover Capital Holdings Corporation, a company controlled by the individual defendants, through Discover's wholly-owned broker-dealer subsidiary, Indianapolis Securities, Inc. Eli Dinov is Discover's president, Ari Dinov is Indianapolis Securities' secretary and treasurer, and Mr. Rubinov is a 27- year-old securities law recidivist previously barred from association with any broker or dealer. All three reside in Brooklyn, New York. In its complaint, the Commission alleges that the defendants attained customer accounts from defunct brokerages and used the firms' customer lists to identify potential victims. Having already bilked mostly elder or retired investors in Florida, Michigan and Wisconsin, the defendants were targeting customers from a recently bankrupt Colorado firm when stopped by the court's order. In particular, the Commission alleges that: (1) the defendants orchestrated a fraudulent, multi-front sales campaign. In addition to a mass email misleadingly touting Discover to the general public, the defendants made use of traditional boiler room sales techniques, including misleading sales calls targeting new customers culled from client lists acquired from small, defunct broker-dealers; sales visits to the homes of some investors; and sponsorship of an investment "seminar" pitching the private placement; (2) the defendants failed to disclose to investors the significant role played at Discover by Mr. Rubinov, who is barred from association with any broker or dealer and permanently enjoined from violating the anti-fraud provisions of the federal securities laws in connection with prior allegations by the Commission that he engaged in fraudulent sales practices; (3) the defendants created and supported the public market for Discover's common shares, creating an artificial price which they highlighted for investors, claiming that purchasers of the preferred shares would effectively make a 150% profit, instantly. Specifically, the complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks, against each, civil penalties, disgorgement of all ill-gotten gains plus prejudgment interest, and preliminary and permanent injunctions barring future violations of the anti-fraud provisions of the federal securities laws. DYNACQ INTERNATIONAL: Asks TX Court To Dismiss Securities Suit -------------------------------------------------------------- Dynacq International, Inc. asked the United States District Court for the Southern District of Texas to dismiss the consolidated securities class action filed on behalf of persons who purchased the Company's shares between November 29,1999 and January 16,2002. The suit also names as defendants two of the Company's officers. The suit alleges violations of federal securities laws and regulations. The suit further claims that the Company violated Sections 10(b) and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934 by making materially false or misleading statements or omissions regarding revenues and receivables and regarding whether our operations complied with various federal regulations. The Company and the officers moved to dismiss the complaint on February 25, 2003. Plaintiffs have responded to the Motion, and it is now submitted to the Court for decision. Because no discovery can take place unless and until the case survives the motion to dismiss, this action remains at an early stage. ENROTEK LTD.: SEC Charges Robert Clawson With Securities Fraud -------------------------------------------------------------- The United States Securities and Exchange Commission found that Robert Thomas Clawson willfully violated Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5 by failing to disclose that he anticipated receiving payments from an issuer in return for his sales to customers. Mr. Clawson was associated with Cruttenden Roth, Inc., a broker- dealer. He was a long-time acquaintance of Kevin Woodbridge. Mr. Woodbridge had been retained by Enrotek Ltd. to raise Enrotek's price to $5 per share. Enrotek had no revenue and its sole asset was undeveloped Portugese land. To induce salespersons to sell Enrotek stock to their customers, Mr. Woodbridge and others made undisclosed payments to salespersons at various firms throughout the United States to sell Enrotek to their customers. The Commission found that Mr. Clawson anticipated receiving these payments when he made sales to his customers. The Commission found that Mr. Clawson knew that Mr. Woodbridge was promoting Enrotek and knew that he could receive payments from Enrotek for his sales. Mr. Clawson recommended Enrotek to his customers although he knew it was speculative. When Cruttenden prohibited its salespersons from soliciting any further sales of Enrotek, Mr. Clawson nonetheless recommended that one of his customers continue purchasing Enrotek and opened an account for that customer at another broker-dealer, which would normally mean that Mr. Clawson would not receive compensation for his customer's transactions. After a trip to Canada to meet with Enrotek's management, Mr. Clawson sent a bill to Enrotek seeking payment for his sales. While the record did not demonstrate that Mr. Clawson actually received payment from Enrotek, the Commission found that he violated the antifraud provisions of the securities laws by failing to disclose that he anticipated receiving such payments. The Commission has previously held that, when a salesperson recommends a security, the salesperson must disclose any self- interest that could influence the salesperson's recommendations. The Commission barred from associating with a broker-dealer or participating in a penny stock transaction Mr. Clawson and ordered him to pay a $100,000 civil money penalty. GUNTHER INTERNATIONAL: Reaches Securities Lawsuit Settlement ------------------------------------------------------------ The class action litigation filed against Gunther International, Ltd., its then-current chief executive officer and its then- current chief financial officer in the United States District Court for the District of Connecticut. The suit asserts claims under the federal securities laws. Among other things, the complaint alleged that the Company's financial statements for the first three quarters of fiscal 1998 were materially false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. The plaintiffs were seeking compensatory damages and reimbursement for the reasonable costs and expenses, including attorneys' fees, incurred in connection with the action. In February 2001, the Company reached an out-of-court settlement, which the court approved in May 2001. Under the terms of the settlement, the Company and the other defendants agreed to pay $595,000 to the plaintiffs, $380,000 of which was paid by the Company's directors' and officers' liability insurance carrier and $215,000 of which was paid by the Company. In April 2001, prior to the entry of the final order approving the settlement of the purported class action, the Company commenced separate legal proceedings against Arthur Andersen, LLP, its former auditor, in the Superior Court for the Judicial7 District of New London, Connecticut. The Malpractice Proceedings sought damages sustained by the Company as a result of Andersen's failure to comply with professional standards in the conduct of certain of its audits of the Company's financial statements. In May 2001, Andersen removed the case to the United States District Court for the District of Connecticut, but the court remanded the complaint to the state court upon the motion of the Company. The Company asserted in the Malpractice Proceedings that Andersen breached its duties to the Company by, among other things, negligently and/or intentionally misrepresenting the Company's true financial condition to the Company, its Board of Directors and its Audit Committee. Andersen vigorously denied any wrongdoing and filed a counterclaim against the Company alleging claims for fraud, negligence, breach of contract, interpleader and indemnification. In addition, Andersen asserted that the class action final order interposed an effective bar against any recovery in the Malpractice Proceedings. On June 7, 2001, the Company filed a motion to amend the class action final order to clarify that it has no application to the Malpractice Proceedings. The court granted the Company's motion, and Andersen appealed the court's decision. In February 2003, the Clerk of the United States Court of Appeals for the Second District entered an Order Voluntarily Dismissing that appeal with Prejudice. INTERNATIONAL PAPER: Court Orders Insurers To Cover Settlement -------------------------------------------------------------- A California Superior Court jury has returned a favorable decision in a lawsuit brought by International Paper against 22 insurers, which seeks indemnification from these insurers for payments resolving property owners' claims under the 1998 Judy Naef v. Masonite and International Paper class action settlement. That settlement relates to certain exterior siding products manufactured by International Paper's formerly owned business, Masonite Corporation. International Paper has paid approximately $485 million in exterior siding claims through June 30, 2003 under the class action settlement. Of this $485 million, approximately $470 million was at issue in the California trial. The jury determined that $383 million of International Paper's payments to settle these claims are covered by its insurance policies. The next phase of the case will determine how much of the $383 million will be allocated to the policies issued by insurance companies that are defendants in this case. The company is unable at this time to estimate the amount it will ultimately recover from the defendants in the California lawsuit, but is pleased with the results in the first phases of the case. The company anticipates that the California court will also make a determination about indemnification for future claims, based on this verdict. In addition, the company will be pursuing indemnification from other insurance carriers in arbitration proceedings as required by the policies. The company cannot predict at this time the amount it will ultimately recover in connection with arbitration proceedings with these insurance carriers. To date, the company has received $94 million from nine insurance companies other than the defendants in this case, and one of those insurance companies has agreed to pay International Paper an additional $10 million in 2004. In 2001, Masonite's exterior siding business was closed, and International Paper subsequently sold Masonite Corporation to Premdor Inc. International Paper retained liability for claims under the Naef class action settlement. JP MORGAN: Nears Securities Pact As Investors Express Concern ------------------------------------------------------------- JP Morgan Chase & Co. is close to reaching two separate settlements with regulators. The second-largest bank in the United States is negotiating with Manhattan District Attorney Robert Morgenthau and the Securities and Exchange Commission (SEC), and is ready to pay as much as $175 million to these regulators in order to resolve allegations that the bank wrongly helped Enron Corp. enhance its finances, The Wall Street Journal reports. These cases have been a source of concern to the bank's investors, who have privately expressed particular concerns about the criminal inquiry by Mr. Morgenthau's office. Signs that the bank appears to have averted criminal charges will come as a relief to investors, who have watched the bank's stock surge 49 percent so far this year amid rising hopes for a global economic rebound. A criminal indictment would have been devastating for the bank, because it would have banned JP Morgan from acting as a fiduciary for its clients, a role that is crucial to vast aspects of the bank's operations. Mr. Morgenthau's office has been seeking to apply a 1921 New York New York State law known as the Martin Act, which can hold a party liable for misleading the investing public, even absent any proof of intent to deceive. This is the same law New York Attorney General Eliot Spitzer used to pursue an inquiry into the analysts' coverage of stock performance at Merrill Lynch. However, a person involved in negotiating the JP Morgan settlement said Mr. Morgenthau decided against charging the bank with a felony, or even a misdemeanor, so as to avoid grave harm to the firm, its employees and its investors. A settlement like this protects JP Morgan from having to pay out potentially large damages in a series of separate class actions it faces in connection with Enron, because it is not admitting criminal guilt. However, it still could be found liable for damages on the basis of other evidence. A particular deal between Enron Corporation and JP Morgan, which came to light soon after Enron filed for bankruptcy protection, involved the bank's helping to finance Enron through a series of so-called gas prepay contracts. That particular deal caused months of grief for JP Morgan. The US Senate conducted high- profile hearings into the trades, and that same deal also has sparked a series of civil cases, including a class-action lawsuit naming JP Morgan and other banks as defendants. Those cases are still pending. Mr. Morgenthau's office impaneled a grand jury months ago as part of an inquiry into the role JP Morgan played in allegedly helping Enron conceal debt and otherwise burnish its financial statements before the company filed for Chapter 11 bankruptcy court protection in December 2001. The deal that came to light, as indicated above, was the bank's involvement in the gas prepay contracts. Using these contracts, the bank channeled money to Enron, which returned those payments through the future delivery of gas through a series of off shore vehicles, including one with the name Mahonia Ltd. The bank defrayed the risk of financing Enron with the help of insurance companies that issued surety bonds to guarantee the delivery of the gas. When Enron failed, the insurers refused to pay, saying the gas trades were a ruse to disguise loans, thereby leading to a lawsuit in which the sides settled in January, just days before a jury was to begin its deliberations. The exact structure of the settlement between the bank and the Manhattan District attorney is still being negotiated. People familiar with the matter say it could involve a payment of roughly $25 million to avoid prosecution; a portion of money would likely go to a restitution fund for defrauded investors, and some portion would be paid to New York State and New York City. The settlement also is expected to include promises by J.P. Morgan to change its business practices. The proposed settlement would be reviewed by the bank's board and could be announced by the end of the month. In separate negotiations, JP Morgan also is nearing a considerably larger settlement with the SEC, over the same Enron transactions, however, people close to the negotiations say. The SEC settlement is likely to be somewhere between $100 million and $150 million. Earlier this year, JP Morgan set aside nearly $600 million to help defray the cost of settling with regulators and with Enron investors who have sued JP Morgan and other financial institutions for their role in Enron's failure. KEVIN KIRKPATRICK: Court Enters Permanent Injunction Over Fraud --------------------------------------------------------------- Honorable Tena Campbell, the United States District Judge for the District of Utah, Central Division, entered a judgment of permanent injunction as to Kevin Kirkpatrick of Salt Lake City, Utah. The United States Securities and Exchange Commission filed the complaint, which alleged that Mr. Kirkpatrick, then a trader at a brokerage firm in Salt Lake City, engaged in a scheme with other defendants from July through November 2000 to manipulate the public trading market for stock issued by Freedom Surf, Inc. The complaint alleged that Mr. Kirkpatrick, Allen Wolfson and other defendants participated in a scheme to artificially run up the price of Freedom Surf stock. Mr. Kirkpatrick and others advanced the bid quotation in Freedom Surf stock without relation to genuine market demand or worth of the company. Further, Mr. Kirkpatrick and other defendants made arranged purchases and sales among brokerage accounts that Mr. Wolfson controlled. The complaint also alleged that Mr. Kirkpatrick made unregistered sales of securities. The judgment against Mr. Kirkpatrick enjoins him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The judgment also orders that the Court will retain jurisdiction to decide the appropriate amount, if any, of disgorgement, prejudgment interest and penalties against Mr. Kirkpatrick. LYSINE ANTITRUST: Suppliers Ink Out-of Court Settlement For Suit ---------------------------------------------------------------- Several major suppliers of Lysine, an amino acid feed additive, in Canada negotiated an out-of-court settlement for the class action charging them with conspiring to fix lysine prices, porknet.com reports. The suit charges the firms with violations of the country's Competition Act. Under the settlement, Canadians who purchased Lysine in any form or products derived from animals that consumed Lysine between June 1, 1992 and June 27, 1995 will receive compensation. Charles Wright, a partner with Siskinds, says the settlement, which has been approved by the courts, effectively resolves all claims in Canada. "The total settlement is 5.25 million dollars. The majority of it is being paid out by Archer Daniels Midland Company which had the greatest market share in Canada but other defendants in the case who settled included Ajinomoto, a Japanese company, and their American subsidiary was Heartland lysine and a company by the name of Kyowa Hakko and their sales into Canada would have been through their American subsidiary Biokyowa," Mr. Siskinds told porknet.com. "For those who bought lysine or feed containing lysine between '92 and '95 are eligible to file claims, both those at the feed mill level or if you are a chicken or hog or other farmer and you bought product containing lysine you are eligible to file a claim for compensation." To receive compensation eligible distributors, feed mills, and farmers must complete their claim forms and submit certain required supporting documentation by September 6, 2003. The deadline for opting out of the class action is July 23, 2003. For more details, visit the Website: http://www.classaction.ca. MINIMED INC.: CA Court Grants Certification To Stockholder Suit --------------------------------------------------------------- The Superior Court of the State of California for the County of Los Angeles granted class certification to a lawsuit filed against MiniMed, Inc. and its directors on behalf of a class of MiniMed's stockholders. The suit asserts claims in connection with Medtronic, Inc.'s acquisition of the Company, alleging violation of fiduciary duties owed by the Company and its directors to its stockholders. Among other things, the complaint sought preliminary and permanent injunctive relief to prevent completion of the acquisition. In August 2001, the court denied the plaintiffs' request for injunctive relief to prevent completion of the acquisition. Plaintiffs have amended their complaint. The class is defined as holders of record of MiniMed common stock on July 16, 2001, excluding any such shareholders who were also shareholders of a related company, MRG, on that date. The court has under consideration defendants' motion for summary judgment. MODELING AGENCIES: NY Court Certifies Model's Antitrust Lawsuit --------------------------------------------------------------- The United States District Court in Manhattan, New York granted class certification to a lawsuit filed against top modeling agencies, including Elite Model Management and Ford Models, Inc., charging them with conspiring to cheat models by charging inflated commission fees and expenses, Reuters reports. Judge Harold Baer's ruling allowed thousands of models to take part in the suit, which alleges that the agencies fixed models' commission rates at 20 percent, twice the 10 percent allowed by state law for employment agencies. The defendants also allegedly conspired to evade state pricing regulations by calling themselves model management companies. The defendant companies argued against class certification on several grounds, including that the plaintiffs did not allegedly suffer the same impact and that a class action would not be the best way to proceed, Reuters reports. However, Judge Baer ruled, "All of the class members share a common interest in proving the existence, scope and effect of the defendants' ongoing price fixing, which allegedly led to inflated and unlawful commission rates and expenses." PRESIDENT CASINOS: Plaintiffs Appeal Class Certification Denial --------------------------------------------------------------- Plaintiffs appealed the United States District Court for the Middle District of Florida's decision refusing class certification to a lawsuit filed against President Casinos, Inc., thirty-seven (37) other casino operators, and certain suppliers and distributors of video poker and electronic slot machines. The consolidated suit alleges that the defendants fraudulently marketed and operated casino video poker machines and electronic slot machines, and asserting common law fraud and deceit, unjust enrichment and negligent misrepresentation. Various motions were filed by the defendants seeking to have this new complaint dismissed or otherwise limited. The court, in general, ruled on all motions in favor of the plaintiffs on all pending motions. The plaintiffs then filed a motion seeking class certification and the defendants opposed it. On June 21, 2002, the court entered an order holding the action could not proceed as a class action. The decision has been appealed to the 9th Circuit Court of Appeals. The last briefs are scheduled to be filed July 14, 2003. Extensive paper discovery has occurred. A motion to stay pending the Company's bankruptcy proceedings has been filed. Although the outcome of litigation is inherently uncertain, management, after consultation with counsel, the Company believes the action will not have a material adverse effect on the Company's financial position or results of operations. PRUDENTIAL SECURITIES: Faces Actions Over Mutual Funds Policy -------------------------------------------------------------- The United States Securities and Exchange Commission filed two enforcement actions - one settled and one unsettled - involving sales of mutual fund shares by Prudential Securities, Inc. In the settled action, the Commission found that from 1998 to 2000, Prudential, a registered broker-dealer, had inadequate systems in place to effectively monitor and enforce its policies and procedures relating to sales of different classes of mutual funds. In resolving the matter, Prudential agreed, without admitting or denying the Commission's findings, to pay disgorgement and prejudgment interest totaling $82,000, which will be returned to investors harmed by the conduct described in the actions, and a civil penalty in the amount of $300,000. The respondents in the unsettled action are two former employees of Prudential. In multi-class mutual funds, the primary differences among the classes of shares are the type and amount of fees charged to investors. In the actions, the SEC's Division of Enforcement alleges that a former Prudential registered representative sold Class "B" shares to his customers, while failing to disclose that if they purchased Class "A" shares, they were eligible for breakpoint discounts based on the size of their mutual fund purchases. The Division further alleges that the respondents stood to make more money through sales of Class B shares than they would from sales of Class A shares. Mutual fund breakpoints are sales charge discounts available to customers who purchase large amounts of certain classes of shares in mutual funds that charge commissions. "Mutual fund offerings have diversified with the industry's dramatic growth," said Stephen M. Cutler, Director of the SEC's Division of Enforcement. "Unfortunately, in some circumstances, abusive sales practices have accompanied the increasing sales of the various classes of mutual fund shares. Brokerage firms have a duty to ensure that the information they give their customers about different classes of mutual fund shares is complete and accurate, and that their recommendations are made for the benefit of customers, not themselves." In the unsettled action, the Commission issued an administrative order instituting proceedings against Robert Ostrowski, a former Prudential registered representative, and Rees T. Harris, a former Prudential branch office manager. The Division alleges that on at least 42 occasions, Mr. Ostrowski, a registered representative in Prudential's Wilkes- Barre, Pennsylvania branch office and a top seller of Prudential mutual funds, violated the antifraud provisions of the federal securities laws in connection with sales of mutual funds to his customers. Specifically, the Division alleges that on each of these occasions, Mr. Ostrowski sold his customers more than $100,000 of Class B shares in certain Prudential proprietary mutual funds without disclosing the existence of multiple classes of shares within the same fund, the fact that he had decided to purchase Class B shares for their accounts, and the existence of breakpoint discounts available with the purchase of Class A shares of the same funds. These discounts would have made large purchases of the funds' Class A shares less expensive investments for these customers than the same level of investment in Class B shares, which do not offer breakpoints. The Division alleges that Mr. Ostrowski received approximately $51,500 in excess commissions from his improper sales and that Prudential received approximately $63,000 in excess commissions. "Prudential's settlement of the Commission's charges is a positive and constructive response to a serious supervisory failure," said Arthur S. Gabinet, District Administrator of the SEC's Philadelphia District Office. "The Division of Enforcement has alleged that Mr. Ostrowski was one of Prudential's top mutual fund salesmen, but his customers suffered because he maximized his own returns rather than providing accurate and appropriate information to his customers." The Division also alleges that Mr. Harris failed reasonably to supervise Mr. Ostrowski by failing to monitor his compliance with Prudential's policies and procedures regarding the sale of mutual fund shares. Mr. Harris approved all 42 of Mr. Ostrowski's sales of Class B shares in amounts exceeding $100,000 despite policies and procedures that specifically required him to ensure that registered representatives under his supervision discussed with customers, among other things, the availability of multiple classes of mutual fund shares and the various sales charges prior to a sale. A hearing will be scheduled before an administrative law judge in the action against Mr. Ostrowski and Mr. Harris to determine whether the allegations contained in the order are true, to provide Mr. Ostrowski and Mr. Harris an opportunity to respond to them, and to determine whether any remedial action should be ordered, or penalties imposed, by the Commission. In the settled action, the Commission's order found that, although Prudential had policies and procedures prohibiting the type of sales practices that Mr. Ostrowski utilized, it did not have any systems in place to effectively monitor and enforce those policies and procedures above the branch office manager's level. As a result, when Mr. Harris failed in his supervisory responsibilities, Prudential had inadequate means to detect his failure. The Commission found that, as a result, Prudential failed reasonably to supervise Mr. Ostrowski with a view to preventing his violations. In July 2001, following completion of an internal review, Prudential revised and enhanced its mutual fund policies and procedures, including those related to the sales of Class B mutual fund shares, and implemented systems to monitor compliance with them. In addition to paying $82,000 in disgorgement and prejudgment interest and a $300,000 civil penalty, the Commission ordered that Prudential be censured and that it comply with its undertakings to, among other things, maintain the revised policies, procedures and systems that it has implemented. SOLECTRON CORPORATION: CA Court Orders Stock Suits Consolidated --------------------------------------------------------------- The United States District Court for the Northern District of California ordered plaintiffs in the securities class actions pending against Solectron Corporation and certain of its officers to file an amended consolidated suit. The suits uniformly allege claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The complaint alleged that the defendants issued false and misleading statements in certain press releases and SEC filings issued between September 17, 2001 and September 26, 2002. In particular, plaintiff alleged that the defendants failed to disclose and to properly account for excess and obsolete inventory in the Technology Solutions business unit during the relevant time period. The lawsuit seeks an unspecified amount of damages on behalf of the putative class. On June 2, 2003, the court appointed lead counsel and plaintiffs to represent the putative class in a single consolidated action. A consolidated amended complaint filing is anticipated within the next few weeks. SOLECTRON CORPORATION: Derivative Suits Consolidated in CA Court ---------------------------------------------------------------- Plaintiffs filed a consolidated shareholder derivative lawsuit against Solectron Corporation, all of the current members of its Board of Directors, and two former officers, in the Santa Clara County, California Superior Court. The plaintiff alleged that he should be permitted to pursue litigation, purportedly for the benefit of Solectron, against the individual director and officer defendants for alleged mismanagement and waste of corporate assets during the period from May 2001 to the present, purported breaches of fiduciary duty, "constructive fraud," "abuse of control," and alleged violations of the California Corporations Code by certain of the individual defendants who sold some of their Solectron stockholdings during the period from September 2001 through September 2002. The complaint seeks an unspecified amount of compensatory and punitive damages, and the relinquishment of all profits realized by those individual defendants who sold Solectron stock during the relevant period, together with statutory penalties under California Corporations Code section 25402 which plaintiff alleges to be applicable to those sales of Solectron stock. On May 19, 2003, Solectron and the individual defendants moved to dismiss the complaint. In the meantime, two substantively identical derivative lawsuits were filed in the same Court on May 14 and May 15, respectively. Counsel for the plaintiffs in all three suits subsequently advised the Court that they would be filing a consolidated amended complaint, and accordingly, defendants' motion to dismiss was taken off calendar pending the filing of the consolidated amended complaint combining the three lawsuits. On June 27, 2003, the plaintiffs served their consolidated amended complaint now alleging that "since January of 1999," all of the current members of Solectron's Board of Directors, as well as three former officers, purportedly breached their fiduciary duties and participated in or permitted "constructive fraud," "unjust enrichment," and alleged violations of the California Corporations Code. Solectron does not believe plaintiffs have adequately alleged a basis for plaintiffs to appropriate for themselves the duties of Solectron's Board of Directors under applicable Delaware law, and believes that the consolidated amended complaint contains various factual errors and legal deficiencies. Solectron intends to seek dismissal of the consolidated amended complaint. The Company may be forced to incur substantial litigation expenses in defending this litigation. STANSBURY HOLDINGS: Common Stock Registration Revoked Over Fraud ---------------------------------------------------------------- An Administrative Law Judge has revoked the registration of the common stock of Stansbury Holdings Corporation in Administrative Proceeding No. 3-11108, In the Matter of Stansbury Holdings Corporation. The initial decision concludes that Stansbury violated Section 13(a) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 thereunder by failing to file its annual report for the fiscal year ending June 30, 2002, and its quarterly reports for the periods ending September 30, 2002, and December 31, 2002, and by failing to file within the time permitted its annual report for the fiscal year ending June 30, 2001. The initial decision also concludes that Stansbury violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder by failing to disclose material facts in certain annual and quarterly reports. UNITED STATES: Vanderbilt Professor Supports New Bill ----------------------------------------------------- A Vanderbilt professor says that the Class Action Fairness Act currently pending in the US Senate would go a long way toward curbing rampant systemic abuse by both plaintiffs' attorneys and defendants. The Class Action Fairness Act would make it easier to bring into federal court class action lawsuits originally filed in state courts, he said. Richard A. Nagareda, professor of law at Vanderbilt University Law School, asserted in a statement, "The bill proceeds from the common-sense idea that class actions directed at nationwide wrongdoing should be handled primarily by federal, not state, courts. The Class Action Fairness Act won't solve everything, but it would make a solid start toward curbing the worst sorts of abuses in class action litigation-abuses by both plaintiffs' lawyers and defendants." He continued, "The most important part of the bill would make it more difficult for the attorneys on both sides to stick class members nationwide with an inadequate settlement agreement by having it rubber-stamped by a friendly judge in some obscure state court. Too many times, lawyers get enormous fees, defendants shed their liabilities and plaintiffs get almost nothing." Mr. Nagareda is available to talk about the reforms embodied in the proposed legislation and the likelihood it will survive the battle it faces in the Senate. UNITED STATES: Legal Reform Group Supports New Bill --------------------------------------------------- The United States Chamber Institute for Legal Reforms issued statements supporting the Class Action Fairness Act and refuting advocacy group Public Citizen's opposition to it. In the statement, the Chamber asserted that the act will help ensure that citizens will get fair settlements, unlike under the current system, where most of the money goes to the lawyers who bring the lawsuits. Under the proposed legislation, citizens will continue to be able to file class action lawsuits against out of state companies, the only difference is that the case will likely be decided by a federal judge, the statement asserts. The Chamber also stated that, "Under the current system, lawyers in other states file national class action cases involving Montana residents in states where they know the judges will assure the lawyers get large fees. This system results in abusive class action settlements like the Blockbuster case in which class members received coupons for free movie rentals and the class action lawyers received $9.25 million in fees. In another national class action case filed in Alabama against a bank, class members from around the country ended up losing money because an Alabama judge ruled that they each had to pay $75 to $100 for plaintiff lawyers' fees." The Chamber said Public Citizen didn't tell the full story about the few settlement examples that they cite. The Chamber stated as examples the Tennessee plastic pipe settlement, which was highly criticized as confusing to consumers. The Chamber asserts, "Nor do they mention that the lawyers in that case received $45 million in fees -- over $2,000 per hour." VITAMIN ANTITRUST: Australian Court Allows Lawsuit To Proceed ------------------------------------------------------------- The Federal Court in Melbourne, Australia rejected an appeal by major vitamin companies, seeking to have an antitrust class action filed against them dismissed, the NutraIngredients.com reports. Vitamin firms Roche, BASF Corporation and Aventis asked the court to dismiss the suit, asserting that Australian courts do not have jurisdiction over international companies. The companies have already faced fines in the US and the European Union. The suit, which charges the firms with price-fixing of animal grade vitamins in the 1990s, will now proceed to trial. Law firm Maurice Blackburn Cashman will spearhead the suit. In 2001 the EU fined eight companies EUR855.2 million for fixing vitamin prices. This year Roche set aside an extra US$810 million for customers in the US impacted by the continuing price fixing cases, NutraIngredients.com reports. WD 40 CO.: Consumers Sue Over Toilet Bowl Cleaners in FL Court -------------------------------------------------------------- WD 40 Co. faces a class action filed in the State of Florida for damage claims arising out of the use of the automatic toilet bowl cleaners (ATBCs) sold by the Company under the brand names, 2000 Flushes and X-14. The plaintiff seeks to certify a class of plaintiffs consisting of consumers in the state of Florida who, since September 1, 1998, have purchased and used ATBCs sold by the Company and who, at the time of the first use of these products, had a product warranty for a toilet in which the products were used. The plaintiff alleges that the product warranty for a toilet may have been voided by the use of the Company's ATBC. In addition to damages attributed to the value of the lost product warranty, plaintiff seeks damages for the purchase price of the ATBC, which is allegedly unfit for its intended purpose. The legal action includes allegations of negligent omission of information concerning the potential loss of product warranties and alleged violations of the Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. 501.201 & 501.213) for failing to inform consumers of the potential loss of product warranties. The plaintiff seeks punitive and/or treble damages in addition to actual or compensatory damages, as well as costs and attorneys fees as may be provided for by Florida law. If class certification is granted, it is reasonably possible that the outcome of the suit could have a material adverse effect on the operating results of the Company. The plaintiff has not quantified the amount of damages. There is not sufficient information to estimate the Company's exposure at this time. WINNEBAGO INDUSTRIES: Plaintiffs Appeal Denial of Certification --------------------------------------------------------------- Plaintiffs in the lawsuit filed against Winnebago Industries, Inc. asked the United States District Court for the Northern District of Iowa to reconsider its decision denying class certification for the suit. The suit names as defendants: (1) Winnebago Industries, Inc. Deferred Compensation Plan, (2) Winnebago Industries, Inc. Deferred Incentive Formula Bonus Plan and (3) Winnebago Industries, Inc. Deferred Compensation Plan and Deferred Bonus Plan Trust The suit alleges a class consisting of participants in the Winnebago Industries, Inc. Deferred Compensation Plan and the Winnebago Industries, Inc. Deferred Incentive Formula Bonus Plan and alleges 23 separate causes of action including declaratory and injunctive relief, federal common law unjust enrichment, breach of fiduciary duty and violation of Employee Retirement Income Security Act (ERISA) vesting provisions and ERISA funding requirements, according to an earlier Class Action Reporter story. The suit asks to negate certain amendments made to the Plans in 1994, which reduced the benefits some participants would receive under the Plans. The plaintiffs filed a motion for class certification on January 31, 2003 and the Company filed a Resistance thereto. Chief Judge Mark W. Bennett later entered a memorandum opinion and order regarding Plaintiffs' Motion for Class Certification on May 7, 2003 in which he denied certification because the plaintiff failed to demonstrate that the proposed class met the numerosity requirements of Federal Rule of Civil Procedure 23(a)(1). The plaintiffs thereafter on May 12, 2003 filed a motion for amendment of order denying class certification in which they in effect request that Judge Bennett reconsider his decision. The company opposed the motion. The parties are currently awaiting Judge Bennett's decision thereon. New Securities Fraud Cases CIT GROUP: Marc Henzel Lodges Securities Fraud Suit in S.D. NY -------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Southern District of New York, on behalf of persons who purchased the common stock of CIT Group Inc. (NYSE: CIT) in or traceable to the Company's initial public offering (the "IPO" or "Offering") commenced on or about July 1, 2002, and who have been damaged thereby. The action is pending against the Company and: (1) Albert R. Gamper, Jr. (CEO and President) and (2) Joseph M. Leone (CFO) The complaint charges that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 because CIT's IPO registration statement and prospectus contained materially false and misleading statements of fact. The complaint alleges, among other things, that the Prospectus falsely represented that CIT's reserves for losses in its telecommunications finance portfolio were "adequate" despite recent declines in the sector, which were expected to continue. In addition, the Prospectus further characterized as adequate its reserves for credit losses in general. According to the complaint, these statements were materially false and misleading when made because, among other reasons, they failed to disclose that the Company's loan loss reserves for its finance portfolio in the telecommunications industry, and its loan portfolio in general, were materially deficient in light of material credit losses that had already been incurred. The complaint further alleges that the Company's assets and shareholders' equity were overstated in the Prospectus by reason of the foregoing. On July 23, 2003, CIT announced that it took a $200 million charge to strengthen the telecommunications loan reserves that it represented were adequate only three weeks previously. On April 8, 2003, the price of CIT common stock closed at $17.40 per share, which is 24% lower than the IPO price of $23 per share. For more details, contact Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or 888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com CORE LABORATORIES: Marc Henzel Lodges Securities Suit in S.D. NY ---------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all purchasers of the common stock of Core Laboratories, N.V. (NYSE: CLB) from May 6, 2002 through March 31, 2003, inclusive. The complaint 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 May 6, 2002, and March 31, 2003, thereby artificially inflating the price of Core common stock. Throughout the Class Period, as alleged in the Complaint, defendants issued numerous statements and filed quarterly reports with the SEC describing the Company's increasing financial performance. The Complaint alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the Company had materially overstated its net income and earnings per share; (2) that the Company had overstated its ability to collect on certain accounts receivable; (3) that the Company had improperly delayed the booking of expenses and foreign exchange translation losses from certain field locations; (4) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (5) that as a result, the value of the Company's net income and financial results was materially overstated at all relevant times. On March 31, 2003, after the markets had closed trading for the day, the Company shocked the market by announcing that it would be restating its financial results for prior 2002 quarterly operating results because of: (i) the issuance of duplicate invoices in the Company's Mexico operations; (ii) the need for higher provisions for doubtful accounts receivables; (iii) the need for timely booking of expenses and foreign exchange translation losses from certain field locations; (iv) changes in the estimated life of certain assets; and (v) consolidation costs of two Nigerian offices Following this announcement, shares of Core common stock fell $1.31 per share, or more than 12.5%, to close at $9.09 per share, on volume of 515,300 shares traded, or almost four times the average daily volume. For more details, contact Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or 888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com COSI INC.: Marc Henzel Lodges Securities Fraud Suit in S.D. NY -------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Southern District of New York on behalf of purchasers of the common stock of Cosi, Inc. (NASDAQ: COSI) between November 22, 2002 to February 4, 2003 inclusive and who were damaged thereby. The action, is pending against the Company and: (1) Andrew M. Stenzler (CEO and Chairman), (2) Jonathan M. Wainwright, Jr. (President) and (3) Kenneth S. Betuker (CFO) The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between November 22, 2002 to February 4, 2003. As alleged in the complaint, the Registration Statement and Prospectus for the Company's November 22, 2002 IPO contained several sections which discussed the Company's plans for growth and described how the proceeds raised from the IPO would enable the Company to implement these plans. The complaint further alleges Mr. Stenzler made similar representations in an interview broadcast on CNN. These statements were materially false and misleading, according to the complaint, because: (i) they failed to disclose that the funds raised by the IPO would be insufficient to implement the Company's expansion plan, contrary to defendants' Class Period representations; and (ii) at the time of the IPO, defendants should have known that the costs of expansion would be greater than the cash available to the Company (which included working capital and proceeds from the IPO), making it highly improbable that the Company would be able to successfully continue to open numerous new stores at such a rapid pace. For more details, contact Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or 888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com CREE INC.: Bernstein Liebhard Lodges Securities Suit in M.D. NC --------------------------------------------------------------- Bernstein Liebhard & Lifshitz LLP initiated a securities class action in the United States District Court for the Middle District of North Carolina, on behalf of all persons who purchased or acquired Cree, Inc. (NasdaqNM:CREE) securities between August 19, 1998 and June 13, 2003, inclusive. During the class period, defendants issued statements that failed to disclose and/or misrepresented the following adverse facts, among others: (1) defendants artificially boosted Cree's operating income through an undisclosed agreement with defendant Fred Neal Hunter's brother, Jeff Hunter, the then chairman of C3 Corporation (C3), that required C3 to accept shipments of silicon carbide (SiC) crystals for the manufacture of moissanite gemstones far in excess of market demand; (2) defendants failed to disclose that Cree would invest $5 million of its offering proceeds in World Theatre, Inc., a speculative start-up company in which C. Eric Hunter, a brother of the Company's Chairman and Chief Executive Officer, was a substantial shareholder; and (2) defendants falsely told the market that its UltraRF division, purchased from Spectrian Corporation (Spectrian), would be accretive to earnings and that, as part of the acquisition, Spectrian would enter into a 2-year supply agreement requiring it to buy semiconductor parts from Cree, when Spectrian was required to purchase, however, only if Cree sold product to it at the lowest available commercial price, a fact that Cree did not disclose. For more details, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or (212) 779-1414 or by E-mail: CREE@bernlieb.com. CREE INC.: Abbey Gardy Launches Securities Fraud Suit in M.D. NC ---------------------------------------------------------------- Abbey Gardy, LLP initiated a securities class action on behalf of all persons who purchased securities of Cree Inc. (Nasdaq: CREE) between January 14, 2000 and June 13, 2003 inclusive, in the United States District Court in the Middle District of North Carolina. The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market during the class period thereby artificially inflating the price of Cree securities. The complaint alleges that defendants artificially inflated Cree's stock price by making false statements to the marketplace during the class period. Starting on January 14, 2000 Cree filed a prospectus and registration statement in connection with the offering of 2,860,000 shares of common stock. The "Use Of Proceeds" section of the prospectus failed to disclose that Cree would invest $5 million of the offering proceeds in World Theatre, Inc., a speculative start-up company in which C. Eric Hunter, a brother of the Company's Chairman and Chief Executive Officer, was a substantial shareholder. In addition, in December 2000, Cree bought the UltraRF division from Spectrian Corporation for approximately 908,000 shares of Cree common stock and $30 million in cash. Cree misrepresented that UltraRF would be accretive to earnings and that, as part of the acquisition, Spectrian would enter into a 2-year supply agreement requiring it to buy semiconductor parts from Cree. However, defendants failed to disclose that Spectrian was required to purchase only if Cree sold product to it at the lowest available commercial price. On June 13, 2003, Cree disclosed that Eric Hunter had sued it. The lawsuit revealed that Cree had falsified its books to allow certain executives to receive higher compensation and had intentionally oversold product to C3 Corporation to artificially inflate Cree's income and stock price. Cree's stock dropped nearly 19% on the news. For more details, contact Nancy Kaboolian by Phone: (212) 889-3700 or 800-889-3701 or by E-mail: nkaboolian@abbeygardy.com. CRYO-CELL INTERNATIONAL: Emerson Poynter Lodges Stock Suit in FL ---------------------------------------------------------------- Emerson Poynter LLP initiated a securities class action on behalf of one of its clients against Cryo-Cell International and certain other individual defendants. The action was filed in the United States District Court for the Middle District of Florida, Tampa Division, on behalf of all persons or entities who purchased or otherwise acquired Cryo-Cell securities (NasdaqSC:CCCEC) during the period March 16, 1999 to May 20, 2003. On April 15, 2003, the Company issued a press release wherein it disclosed that it may be necessary to restate its financial results for fiscal years 2001 and 2002 because of improper recognition of revenue. Shortly thereafter, on May 20, 2003, the Company issued a press release announcing the resignation of its auditor, Ernst & Young LLP and the Company's continued assessment of certain revenue recognition accounting policies. On news of this, Cryo-Cell shares fell 14%. The complaint alleges that defendants violated section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission. In particular, the complaint alleges that defendants failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the Company had materially overstated its earnings, net income, and earnings per share; (2) that the Company continually recognized revenue in violation of generally accepted accounting principles (GAAP) and the Company's own internal accounting principles with respect to related-party transactions, revenue sharing agreements and revenue recognition for the Sale Area Licenses; (3) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (4) that as a result, the Company's financial results were materially overstated at all relevant times. For more details, contact Ms. Tanya Autry of the Emerson Poynter LLP Investor Relations Department by Phone: (800) 663-9817 by Fax: (281) 488-8867 or by E-mail: shareholder@emersonfirm.com EDISON SCHOOLS: Wechsler Harwood Lodges Securities Lawsuit in DE ---------------------------------------------------------------- The Law Firm of Wechsler Harwood LLP initiated a class action in the Chancery Court of Delaware in and for New Castle County on behalf of holders of shares of Edison Schools, Inc. The complaint names as defendants the directors of Edison and Liberty Partners. The complaint alleges that Liberty, together with H. Christopher Whittle, Edison's CEO and founder, is seeking to take the Company private at the inadequate price of $1.76 cash per share. The complaint further alleges that the Company has entered into a definitive agreement with Liberty and Whittle to effect the proposed transaction. For more details, contact David Leifer by Mail: Wechsler Harwood LLP, 488 Madison Avenue, 8th Floor, New York, New York 10022 by Phone: (212) 935-7400 or (877) 935-7400 or by E-mail: dleifer@whesq.com SINGING MACHINE: Milberg Weiss Lodges Securities Suit in S.D. FL ---------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of The Singing Machine, Inc. (AMEX:SMD) between February 14, 2001 and July 14, 2003, inclusive, seeking to pursue remedies under the Securities Exchange Act of 1934. The action is pending in the United States District Court for the Southern District of Florida, Ft. Lauderdale Division, against the Company and: (1) Salberg & Company, P.A (the Company's auditors), (2) Edward Steele, (3) John F. Klecha, and (4) April Green The complaint 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 February 14, 2001 and July 14, 2003. The complaint alleges that Singing Machine emerged from bankruptcy in 1998, and issued a series of press releases emphasizing "record" net income to foster the impression that the Company had profitably emerged from bankruptcy and had successfully completed its corporate turnaround. In response to the Company's barrage of press release and public filings reporting strong financial results, Singing Machine's stock price soared to over $26 per share in March 2002. On June 27, 2003, Singing Machine shocked the market by announcing it would restate 2002 and possibly 2001 financial results, and would not be able to timely file its Annual Report on Form 10-K for the fiscal year ended March 31, 2003 in order to properly account for income tax provisions for fiscal 2003, and to report an inventory reserve for fiscal 2003. As a result, defendants revealed that net income for fiscal 2003 will be significantly below prior expectations. Singing Machine announced that the restatement will have the effect of reducing net income for fiscal 2002 and possibly fiscal 2001. On June 27, 2003, in late afternoon trading alone Singing Machine stock lost over 30% of its value on enormous trading volumes of over 460,000 shares traded -- in contrast to average trading volumes of around 50,000 shares. On July 14, 2003, defendants issued a press release revealing additional information about the restatement, and revealed that the Company's auditors had expressed "substantial doubt" about Singing Machine's ability to continue as a going concern. In response, on July 15, 2003, Singing Machine declined over 22% in morning trading alone. As now revealed, at all times during the Class Period, defendants issued false and misleading financial statements and press releases concerning Singing Machine's financial results. The financial statements of the Company made during the class Period, all of which implicitly and/or expressly were prepared in conformity with generally accepted accounting principles (GAAP), were materially false and misleading because the Company materially overstated its net income in its publicly issued financial statements. As a result of the Company's misrepresentations, Singing Machine investors have sustained tremendous losses. For more details, contact Steven G. Schulman by Mail: One Pennsylvania Plaza, 49th fl., New York, NY, 10119-0165 by Phone: (800) 320-5081 or by E-mail: singingmachinecase@milbergNY.com ********* A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the Class Action Reporter. Submissions via e-mail to carconf@beard.com are encouraged. Each Friday's edition of the CAR includes a section featuring news on asbestos-related litigation and profiles of target asbestos defendants that, according to independent researches, collectively face billions of dollars in asbestos-related liabilities. The Asbestos Defendant Profiles is backed by an online database created to respond to custom searches. Go to http://litigationdatasource.com/asbestos_defendant_profiles.html ********* 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. 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