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/raid1/www/Hosts/bankrupt/CAR_Public/031215.mbx C L A S S A C T I O N R E P O R T E R Monday, December 15, 2003, Vol. 5, No. 247 Headlines ALASKA COMMUNICATIONS: Trial in Consumer Suit Set September 2004 AMTRAK: Judge Rejects Union Walkout Request Over 'Underfunding' BLUE RHINO: Plaintiffs File Consolidated Securities Suit in CA BLUEBERRY GROWERS: Maine Agriculture Head Wants to Hear Concerns CANADA: Judge Approves $100M Injury Suit V. Prominent Surgeon CLEARONE COMMUNICATIONS: Utah Court Issues Permanent Injunction COMPUTER ASSOCIATES: Court Approves Pact In Shareholder Lawsuit ENRON CORPORATION: Attorneys Fear Losing Resources Before Trial FEN-PHEN LITIGATION: Plaintiff Asks for Decrease In Jury Award FINISAR CORPORATION: Reaches Settlement For NY Securities Suit GLOBAL CROSSING: Former Execs Sued For Hiding Financial Status GOLDMAN SACHS: SEC Files Administrative Proceedings V. Ex-Trader GREAT AMERICAN: SC Court Indicts 2 Traders For Investment Fraud HEARTLAND ADVISORS: Charged With Fraud Over "Insider Trading" HOTJOBS.COM: SEC Initiates Securities Fraud Complaint V. Couple LUCENT TECHNOLOGIES: Fairness Hearing Set For December 12, 2003 MUTUAL FUNDS: 3 More States Join Massachusetts In Funds Probe NATIONAL CENTURY: SEC Lodges Suit V. Exec Over Financial Fraud PHILIP MORRIS: Appeals $10.1 Billion Smokers Injury Suit Verdict REED SLATKIN: CA AG Charges Janu With Obstruction of Justice RHODE ISLAND: Three Charged Over February Station Nightclub Fire ROADHOUSE GRILL: FL Court Hears Motion For Stock Suit Dismissal UNITED RETAIL: Former Employees File Wage Violations Suit in CA WORLDCOM INC.: Fund Wants Out Of Milberg-Led Bond Suit Coalition ZALE CORPORATION: Final Approval Granted To Consumer Suit Pact ZION CAPITAL: SEC Imposes Sanctions Due To Securities Violations New Securities Fraud Cases BIOVAIL COPRORATION: Scott + Scott Files NY Securities Lawsuit FRED ALGER: Stull Stull Launches Securities Lawsuit in S.D. NY NASDAQ STOCK: Wechsler Harwood Commences Securities Suit in NY PMA CAPITAL: Bernstein Liebhard Lodges Securities Lawsuit in PA ********* ALASKA COMMUNICATIONS: Trial in Consumer Suit Set September 2004 ---------------------------------------------------------------- Trial in the consumer class action filed against Alaska Communications Systems Group, Inc. is set for September 2004 in the Superior Court for the State of Alaska. The litigation alleges various contract and tort claims concerning the Company's decision to terminate its Infinite Minutes long distance plan. In October 2000, Alaska Communications Systems Long Distance, Inc. and the Company offered and marketed a long distance calling plan that provided unlimited long distance service for a twenty-dollar monthly fee. After the plan attracted thousands of customers, ACS canceled the calling plan in May 2001, citing unexpected high costs, unforeseen regulation requirements, and customer abuses of the plan. ACS did continue to provide a twenty-dollar monthly long distance plan, but that plan was limited to 600 monthly minutes. Dewana G. Turner, Bonita H. Hixson, and Yolanda P. Monroe, three former subscribers, sued on behalf of the approximately 30,000 subscribers to the plan, claiming among other things, that ACSs unilateral elimination of the most material element of the long distance contract was a breach, that ACS violated the Alaska Unfair Trade Practices and Consumer Protection Act by making misleading statements about the plan, and that ACS fraudulently concealed material facts, including the Company's inability to maintain the plan for anything longer than a promotional period. The Company believes this suit is without merit. AMTRAK: Judge Rejects Union Walkout Request Over 'Underfunding' --------------------------------------------------------------- U.S. District Judge James Robertson rejected Amtrak's request to block a threatened one-day walkout by railroad unions to protest what they say is chronic underfunding of passenger rail, AP news reports. Unions representing 8,000 of Amtrak's 21,000 employees had planned the work stoppage for October 3 but agreed to postpone any action until the court ruled. Though the unions can proceed, they have not said whether or when they will do so. The stalemate over federal funding they hoped to address with their one-day protest has been broken, at least for this year. Calls to leaders of the two unions organizing the walkout were not immediately returned, the Associated Press states. The Transportation Communications Union, which represents about half of Amtrak's unionized employees, previously said it wouldn't participate in a stoppage. Judge Robertson, in his ruling issued Wednesday and posted Thursday, denied Amtrak's request for an injunction. The passenger railroad failed to prove that the union was planning an "unlawful act," the judge wrote. Amtrak already has appealed to the U.S. Court of Appeals, railway spokesman Cliff Black told AP. Amtrak claims the railroad has a legal and public service obligation to provide intercity passenger rail service every day. Mr. Black said a walkout would do more harm than good. He noted that last month, while the court case was pending, congressional and White House bargainers agreed to give Amtrak more than $1.2 billion for the federal budget year that began October 1, a $180 million increase from the previous year. Amtrak had requested $1.8 billion, but Mr. Black said $1.2 billion is enough to keep the railroad chugging another year. "The motivation for a strike is moot," Mr. Black said. He added a one-day walkout would likely shut down Amtrak's nationwide system and undermine the railroad's support in Congress. BLUE RHINO: Plaintiffs File Consolidated Securities Suit in CA -------------------------------------------------------------- Plaintiffs filed a consolidated securities class action against Blue Rhino Corporation in the United States District Court for the Central District of California. The suit also names four of its officers and directors as defendants. Andy Lee, Charles Anderberg and Steven Lendeman have been designated as lead plaintiffs in the suit, filed on behalf of investors who purchased the Company's publicly-traded securities between August 2002 and February 2003. The plaintiffs allege violations 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. In particular, the plaintiffs have alleged that the Company and the individual defendants violated the federal securities laws by, among other things: (1) improperly failing to consolidate distributors Ark and Platinum for financial reporting purposes prior to the date of their being acquired by the Company, (2) making materially false and misleading statements and/or failing to disclose material facts related to the financial performance and prospects of the Company and distributors Ark and Platinum, and (3) making materially false and misleading statements and/or failing to disclose material facts relating to the Company's acquisition of Ark and Platinum. The complaint seeks unspecified damages, plus reasonable costs and expenses, including attorneys' fees and experts' fees. On May 22, 2003, Richard Marcoux filed a shareholder derivative action in the Superior Court of California, Los Angeles County, naming all directors and certain officers of the Company as individual defendants and the Company as a nominal defendant. On June 19, 2003, Randy Gish filed a substantially similar derivative action in the same court. Both the Marcoux and Gish actions were removed to the U.S. District Court for the Central District of California. The Marcoux case was subsequently remanded to Los Angeles Superior Court, but has been stayed pending resolution of the federal actions. The derivative actions arise out of substantially similar facts and circumstances as the securities class actions, and allege violations of the California Corporations Code, breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. The Company believes that all of the foregoing securities class actions and derivative actions are without merit. BLUEBERRY GROWERS: Maine Agriculture Head Wants to Hear Concerns ---------------------------------------------------------------- Growers of wild blueberries concerned about the industry in Maine have two chances next week to meet with state Agriculture Commissioner Robert Spear, Knight-Ridder / Tribune Business News reports. Mr. Spear on Tuesday announced that he has scheduled two public meetings. The first will be at 6 p.m. Wednesday, December 17, at Columbia Falls Elementary School in Washington County. The second will be at 6 p.m. Thursday, December 18, at the University of Maine's Hutchinson Center on Route 3 in Belfast. "There is unrest out there among the growers who are wondering what is going to happen," Mr. Spear said in announcing the meetings. He said he and Gov. John Baldacci are concerned about the industry, "and I wanted to call this meeting just to be able to listen. It's a chance for the growers to come together and let me know what they think about the whole thing," he said. The meetings will fall one month after a jury awarded $18.6 million in damages against three Down East blueberry processors in a class-action lawsuit brought by Maine's 500 growers. The case, heard over two weeks in Knox County Superior Court, was based on the growers' contention that the state's three largest processors conspired to fix prices from 1996 to 1999. The processors are Jasper Wyman & Son of Milbridge, Cherryfield Foods Inc. of Cherryfield, and Allen's Blueberry Freezer of Ellsworth. They have all denied fixing prices. Mr. Spear said he met last week with representatives of the processors in a fact-finding meeting. "This industry is very, very important to the state, the economy and Down East Maine," Mr. Spear said. "We are trying to figure out what we need to do, how as a state what we can do to help this industry along. This is quite an important time right now. We want to make sure they can continue . With a suit facing them like they have now, it's a very trying situation." CANADA: Judge Approves $100M Injury Suit V. Prominent Surgeon ------------------------------------------------------------- Ontario Superior Court Justice Maurice Cullity approved Thursday a $100 million class action against prominent Toronto dermatologist and cosmetic surgeon Dr. Sheldon Pollack, who allegedly injected more than 120 patients with a banned form of liquid silicone, AP news reports. Lead plaintiff Anna Barbiero alleges in her statement of claim that Dr. Pollack often used liquid silicone to smooth facial wrinkles, hide acne scars and plump up lips. The lawsuit clears the way for lawyers to notify potential class members of the legal action. Liquid silicone has been linked to a multitude of health problems and has never been approved for cosmetic use in either Canada or the U.S., said Douglas Elliott, Ms. Barbiero's lawyer. The allegations that it was used by one of Canada's leading dermatologists makes the case that much more disturbing, he added. "This isn't some kind of shady, back-alley operator by any stretch of the imagination," Mr. Elliott said. "Dr. Pollack certainly was one of the top men in his field." Ms. Barbiero alleges that the treatments are the reason she now suffers from a number of serious health problems, including hair loss, migraine headaches and a numbness in her legs. A statement of claim contains allegations that have not yet been proven in court. Accounting firm Ernst and Young has been appointed to examine Dr. Pollack's records to determine which of his patients may have received the injections so they can be told about the lawsuit, Mr. Elliott said. At that point, they'll have six months to decide whether to remain part of the class action, which Mr. Elliott described as one of the largest of its kind ever certified in Canada. At least 100 patients allegedly received silicone injections prior to May 1999, when Dr. Pollack, confronted by the College of Physicians and Surgeons of Ontario, told the regulatory body and Health Canada that he would discontinue its use. The college also alleges that at least 20 other patients received injections after that date, and that Dr. Pollack's clinical records show that in some cases he injected Artecoll, a wrinkle- smoothing substance approved in Canada, "when actually he had injected liquid silicone," Mr. Elliott said. Dr. Pollack has since been disciplined by the college, he added. The U.S. Food and Drug Administration has warned that silicone can migrate to other parts of the body, cause inflammation and discoloration of surrounding tissues, and form nodules of granulated or inflamed tissue. In a letter to the college dated June 2002, Dr. Pollack said it was "standard and usual practice, prior to using (silicone), to explain carefully to every patient the nature, risk and effect of possible complications of (silicone) as well as its status for sale and use in Canada." The letter also insists Ms. Barbiero was made aware "that the material was not for sale in Canada." Mr. Elliott said he intends to argue that Dr. Pollack's patients were unable to give their consent to the procedure because it involved a substance not approved for cosmetic use in Canada. "Because the product was illegal, there can be no consent to the administration of an illegal substance," he said. Health Canada only allows the use of liquid injectable silicone, or LIS, in a procedure for repairing detached retinas, Mr. Elliott said. Lawrence Thacker, Dr. Pollack's lawyer, did not immediately return phone calls Thursday, AP reports. CLEARONE COMMUNICATIONS: Utah Court Issues Permanent Injunction --------------------------------------------------------------- On December 4, 2003, the Honorable Dale A. Kimball, of the U.S. District Court, District of Utah ordered a permanent injunction against ClearOne Communications, Inc. The Securities and Exchange Commission's complaint was filed on January 15, 2003, and alleged that since the quarter and fiscal year ended June 30, 2001, ClearOne Communications, Inc.'s management engaged in a program of inflating the company's revenues and net income by engaging in improper revenue recognition. It was further alleged that this course of conduct, covering two annual reporting periods and four separate quarterly reporting periods, was effected primarily through a program of channel stuffing conceived and directed by Frances M. Flood, then ClearOne's Chairman, CEO and President. In addition, on December 11, 2001, while this conduct was ongoing, ClearOne closed a $25.5 million private placement of common stock. The complaint alleged that through this conduct ClearOne violated Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a) and 13(b) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder. ClearOne consented to the entry of final judgment without admitting or denying any of the allegations of the complaint. Litigation continues with respect Frances M. Flood and Susie Strohm. The suit is styled, "SEC v. Clearone Communications, Inc, et al., Docket No. 2:03 CV-0055 DAK, U.S.D.C., D.Ut." COMPUTER ASSOCIATES: Court Approves Pact In Shareholder Lawsuit --------------------------------------------------------------- Computer Associates International, Inc. announced that the United States District Court for the Eastern District of New York has approved the settlement of all outstanding litigation concerning past accounting issues including shareholder and ERISA class action suits and related derivative litigation. The company announced the settlements in August 2003. When all claims are processed, CA will issue 5.7 million shares of CA common stock to the shareholders represented in the three class actions. Plaintiffs' attorney fees will be covered by this stock issuance. If CA's share price is below $23.43 per share at the time of distribution, up to 2.2 million of the 5.7 million shares will be payable in cash at that price or a maximum of $51.546 million in cash. In that case, the stock portion of the settlement will be reduced to no less than 3.5 million shares. In its second quarter of fiscal 2004, CA took an after-tax charge of $97 million, or $0.17 per diluted common share, in connection with the settlements. Until the settlement shares are issued, the projected impact will be reviewed quarterly and the expense adjusted accordingly. The previously reported investigations by the Securities and Exchange Commission and the U.S. Attorney's Office for the Eastern District of New York remain ongoing. For more information, contact Bob Gordon, by Phone: 1-631-342 2391, or by E-mail: bobg@ca.com. ENRON CORPORATION: Attorneys Fear Losing Resources Before Trial --------------------------------------------------------------- Attorneys in the Enron civil class actions told U.S. District Judge Melinda Harmon they fear pre-trial maneuvering could eat up much of the insurance money available to pay off injured shareholders and employees if efficiencies aren't put into place, the Houston Chronicle reports. "We could deplete all our resources ... go crazy ... or both," said attorney Paul Howes, who represents lead shareholder lawsuit plaintiff University of California. Mr. Howes noted that there are the two would-be class actions before Judge Harmon and an assortment of other parallel lawsuits that cover the same issues and could cause duplicate depositions and discovery efforts. Judge Harmon gave the lawyers six weeks to try to agree on schedules and rules for discovery that will limit duplication. The consolidated shareholder lawsuit was filed in late 2001 and any discovery plan is still expected to take at least through the year 2004 and burn millions of dollars in legal fees. Trial would be 2005 if at all, but most involved expect the case to largely end in settlements once more facts are on the table. The lawyers were summoned to Judge Harmon's court last week to discuss whether the civil lawsuit lawyers could get documents from the bankruptcy examiner. The plaintiffs want the shortcut. But defendants, like the financial institutions, are leery of providing these same documents in the civil case. Enron's court-appointed bankruptcy examiner Neal Batson has produced 4,000 pages of reports outlining the tangled financial partnerships Enron used to mask its dwindling fiscal health. Mr. Batson has asked the bankruptcy judge for immunity from any and all subpoenas and permission to shred the documents he has collected. Bankruptcy Judge Arthur Gonzalez in New York has already granted a request from financial institutions that transcripts of their employee interviews with Batson be kept under wraps. The banks had argued the interviews were granted with agreements they'd be kept confidential. Lawyers in the Houston-based civil case were worried Judge Harmon would echo the bankruptcy judge today. However, Judge Harmon made no such ruling. Instead she gave all the lawyers until January 22 to try to iron out some agreement about how to keep duplication of work and thus legal fees to a minimum. Examiner Batson and his legal team have billed nearly $100 million in fees and expenses. At times he sent two, three, four or more lawyers, each billing in excess of $500 an hour, to conduct interviews related to the case, the Chronicle reports. In the civil cases the defendant legal fees are being charged to the sued banks, law firms, and individuals, and in most cases their insurance companies are footing the bill. Those bills will be subtracted from any pot the insurance companies consider paying out in settlements. The plaintiffs' lawyers so far have been paying their own expenses, though they expect to be reimbursed from any settlement proceeds. Fifteen million dollars has already been set aside for plaintiff legal expenses from a $40 million settlement with the international umbrella organization of Arthur Andersen. FEN-PHEN LITIGATION: Plaintiff Asks for Decrease In Jury Award -------------------------------------------------------------- Deborah Hayes, who was awarded more than $1.3 million by a jury last month for heart damage suffered after she used the weight- loss drug Fen-Phen, has asked her award be reduced by more than half, AP news reports. A motion by Ms. Hayes' attorney asks a state judge to lower her award to $588,480, on the grounds that the jury's award for future medical care exceeded the amount supported by the evidence. The jury had recommended Ms. Hayes be awarded $810,000 for future medical expenses and $500,000 for future mental anguish. "We asked the figure be adjusted to what the evidence showed," Ms. Hayes' attorney, Jim Morris Jr., said. "We would rather do it now than on appeal two years down the road. I can only keep an award that is supported by the evidence." Ms. Hayes, 46, sued Fen-Phen maker Wyeth-Ayerst Laboratories, claiming the combination of the drugs damaged a valve in her heart. The postal worker said she took Fen-Phen for 90 days over a six-month period in 1999. Doctors found plaque in her heart valve, a condition usually found in the elderly. Lowell Weiner, a spokesman for Wyeth, said the company believes the evidence in this case supported neither the verdict nor the November 6 jury award and intends to seek post trial relief and, if necessary, an appeal. Mr. Morris said his motion, which was filed last week, is not an attempt by him to persuade Wyeth to drop its plans for appeal and accept a more reasonable jury award. "It would have been counterproductive to my client to have an award entered that I know I can't hold on to on appeal," he said. "It just makes the thing cleaner when it does go up on appeal on other issues." Mr. Morris said that a state district judge is expected to decide by next month whether to accept Mr. Morris' request or go with the jury's original decision. Once the award issue is settled, the appeals process in the case could take several years. Ms. Hayes opted out of a pending class action suit against Wyeth. The St. Davids, Philadelphia-based company faces about 70,000 similar opt-out lawsuits. Wyeth has set aside $16.6 billion for Fen-Phen settlements, including $2 billion this year. FINISAR CORPORATION: Reaches Settlement For NY Securities Suit -------------------------------------------------------------- Finisar Corporation reached a settlement for the consolidated securities class action filed in the United States District Court for the Southern District of New York, purportedly on behalf of all persons who purchased the Company's common stock from November 17, 1999 through December 6, 2000. The complaint named as defendants the Company and: (1) Jerry S. Rawls, President and Chief Executive Officer, (2) Frank H. Levinson, Chairman of the Board and Chief Technical Officer, (3) Stephen K. Workman, Senior Vice President and Chief Financial Officer, and (4) an investment banking firm that served as an underwriter for the Company's initial public offering in November 1999 and a secondary offering in April 2000. The operative amended complaint alleges violations of Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectuses incorporated in the registration statements for the offerings failed to disclose, among other things, that: (i) the underwriter had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriter allocated to those investors material portions of the shares of the Company's stock sold in the offerings and (ii) the underwriter had entered into agreements with customers whereby the underwriter agreed to allocate shares of the Company's stock sold in the offerings to those customers in exchange for which the customers agreed to purchase additional shares of the Company's stock in the aftermarket at pre-determined prices. No specific damages are claimed. Similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000, all of which have been consolidated for pretrial purposes. In October 2002, all claims against the individual defendants were dismissed without prejudice. On February 19, 2003, the Company's motion to dismiss was denied. The Company and most of the other issuer defendants in the consolidated cases have agreed to settle. Under the terms of the settlement, the plaintiffs will dismiss and release all claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the issuers, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay the amount, if any, by which $1 billion exceeds the aggregate amount ultimately collected by the plaintiffs from the underwriter defendants in all the cases. If the plaintiffs fail to recover $1 billion and payment is required under the guaranty, the Company would be responsible to pay its pro rata portion of the shortfall, up to the amount of the self-insured retention under its insurance policy, which is $2 million. The timing and amount of payments that the Company could be required to make under the proposed settlement will depend on several factors, principally the timing and amount of any payment by the insurers pursuant to the $1 billion guaranty. The settlement is subject to approval of the Court, which cannot be assured. If the settlement is not approved by the Court, the Company intends to defend the lawsuit vigorously. However, the litigation is in the preliminary stage, and the Company cannot predict its outcome. The litigation process is inherently uncertain. If the outcome of the litigation is adverse to the Company and if the Company is required to pay significant monetary damages, the Company's business would be significantly harmed. GLOBAL CROSSING: Former Execs Sued For Hiding Financial Status -------------------------------------------------------------- Prominent investment firm J.P. Morgan Chase & Co. filed a suit against 23 former officers and directors of Global Crossing Ltd., accusing them of hiding important financial details, The Los Angeles Times report. J.P. Morgan invested a total of $12.4 billion into the Company, along with several other creditors and bondholders before the telecommunications company filed for Chapter 11 bankruptcy protection almost two years ago. The suit seeks $1.7 billion dollars, and alleges that Global Crossing founder Gary Winnick and others "devised, directed and controlled" a fraudulent scheme to hide the Company's weakening financial situation so the Company could obtain $2.25 billion in loans, the Associated Press reports. The suit however did not name the Company as a defendant. Global Crossing emerged last week from bankruptcy. It moved its headquarters to Florham Park, N.J., and slashed long-term debt to just $200 million from $11 billion. GOLDMAN SACHS: SEC Files Administrative Proceedings V. Ex-Trader ---------------------------------------------------------------- The Securities and Exchange Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Sections 15(b)(6), 15B(c)(4), and 15C(c)(1)(C) of the Securities Exchange Act of 1934, and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions against John M. Youngdahl, Jr. Simultaneously, the Commission accepted Mr. Youngdahl's Offer of Settlement in which he agreed to be barred from association with any broker-dealer, municipal securities dealer, government securities dealer, or investment adviser. The Order finds that from at least May 1983 through June 17, 2003, Mr. Youngdahl, an economist, was associated with Goldman Sachs & Co., a registered broker-dealer, municipal securities dealer, government securities dealer, and investment adviser, at its offices located in New York, New York. The Order finds that on September 4, 2003, the Commission filed a Complaint in the United States District Court for the Southern District of New York in an action captioned Securities and Exchange Commission v. Peter J. Davis, Jr., et al., Civil Action 03-CV-6672, charging Mr. Youngdahl with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Order also finds that on November 20, 2003, a Final Judgment was entered by consent against Mr. Youngdahl, permanently enjoining him from directly or indirectly violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission's complaint in SEC v. Davis alleged, among other things, the following: While a Vice President and Senior Economist at Goldman Sachs, Mr. Youngdahl agreed in a series of July 2001 e-mails that Peter J. Davis, Jr., a Washington, D.C.- based consultant whom Goldman Sachs hired, would attend the U.S. Treasury Department's quarterly refunding press conferences and that Davis would provide Youngdahl with embargoed information from these press conferences. On October 31, 2001, Mr. Davis attended the Treasury refunding press conference in which Treasury officials announced that the Treasury would suspend issuance of the 30-year bond. Treasury officials also instructed the attendees of the press conference that the information conveyed during the conference was subject to a press embargo. Mr. Davis, in violation of the refunding conference press embargo, called Mr. Youngdahl and told him that the Treasury was suspending issuance of the 30-year bond. Mr. Youngdahl knew that Davis was providing embargoed information on the morning of October 31, 2001. After Mr. receiving Davis' call on the morning of October 31, 2001, Mr. Youngdahl tipped traders on Goldman Sachs' U.S. Treasury Desk to the news about the Treasury's decision to cease issuance of the 30-year bond. While the news was still nonpublic, the traders purchased $84 million worth of 30-year bonds for Goldman Sachs' own accounts, generating profits of over $1.5 million. Based on these and other allegations, the Complaint alleged, Mr. Youngdahl engaged in illegal insider trading in 30-year bonds. GREAT AMERICAN: SC Court Indicts 2 Traders For Investment Fraud --------------------------------------------------------------- On December 2, 2003, the Honorable Joseph F. Anderson, Jr. of the United States District Court for the District of South Carolina Columbia Division sentenced Paul Noe and Clif Goldstein to prison terms of 78 months and 46 months, respectively, followed by three years supervised release. Mr. Noe and Mr. Goldstein were also jointly and severally ordered to pay $645,708.20 in restitution to 21 victims. Mr. Noe was convicted in a jury trial of five counts of wire fraud, one count of transportation of stolen securities, and one count of conspiracy to defraud. Mr. Goldstein pleaded guilty to one count of conspiracy to commit wire fraud. The criminal case was prosecuted by the U.S. Attorney's office for the District of South Carolina. On February 14, 2002, the SEC charged Mr. Goldstein, Mr. Noe, Carolyn Kaplan, Nuell Paschal, Noel Alelov, Great American Trust Company and Great American Trust Corporation with fraudulently raising not less than $1.1 million in a prime bank scheme. According to the Commission's complaint filed in the federal district court for the District of South Carolina, the Commission alleges that the defendants targeted both cash-poor companies unable to obtain funding through conventional means, and individual investors who desired to earn high investment returns quickly. Mr. Goldstein and Mr. Noe and their Great American Trust companies served as the primary offerors of the investment programs that comprised the fraudulent scheme, while the other defendants served as "finders" or selling agents, locating and luring potential investors to Mr. Goldstein and Mr. Noe and receiving finders' fees. The programs, which were promoted via the Internet and an intricate network of so-called consultants or finders, featured the use of purported prime bank instruments, wholly fictional securities allegedly traded on an equally fictitious secondary market. HEARTLAND ADVISORS: Charged With Fraud Over "Insider Trading" ------------------------------------------------------------- U.S. regulators on Thursday charged Heartland Advisors Inc. with fraud in a case marking the first charges involving insider trading and bond funds in the wave of scandals in the $7 trillion mutual fund industry, Reuters reports. The Securities and Exchange Commission said the charges stemmed from a sudden, $93 million decline in the values of Heartland municipal junk bond funds in 2000, "when Heartland sought to correct months of deliberate mispricing." Wrapping up a probe that predates recent revelations about market timing and late trading in fund shares, the SEC filed a complaint in a Wisconsin court against Milwaukee-based Heartland and its Chief Executive William Nasgovitz. Other current and former company officials, an independent pricing service and fund directors were also implicated, Reuters states. Heartland, which also runs stock funds unaffected by the case, said in a statement, "We are extremely disappointed that the Securities and Exchange Commission has elected to litigate this three-year-old matter related to our discontinued bond funds. We will vigorously contest these allegations." The SEC said it brought civil fraud charges against CEO Nasgovitz, Chief Operating Officer Paul Beste, General Counsel Jilaine Bauer, Senior Vice President of Trading Kevin Clark, Treasurer Kenneth Della and portfolio manager Thomas Conlin in connection with "fraudulently pricing bonds in the funds." The SEC said it charged Nasgovitz, Bauer, Della, portfolio manager Gregory Winston, and Raymond Krueger, a friend and client of Nasgovitz, with insider trading in fund shares. It also accused Heartland funds' directors of failing to follow up and resolve concerns about pricing in the funds. Scandals sweeping through the mutual fund business so far have centered mainly on market timing and late trading. Along those lines, Massachusetts securities regulator William Galvin on Thursday separately charged Prudential Securities with allowing "widespread" late trading of mutual funds by hedge funds. Prudential Securities is jointly owned by Wachovia Corporation and Prudential Financial Inc. However, the Heartland case resulted from an SEC probe that began long before late trading and market timing abuses started coming to light in early September due to investigations launched by New York Attorney General Eliot Spitzer. Junk, or high-yield, bonds are rated below investment grade due to their greater risk of default, but pay higher yields than safer bonds. Some mutual funds specialize in junk bonds. Some funds hold junk bonds that are seldom traded. If the bonds' values are not regularly adjusted, or "fair valued," for market changes, then the prices of shares in the funds that hold them become "stale" and can be exploited by arbitrageurs. Heartland "refused or failed to adjust" the values of shares in its municipal junk bond funds, despite signs the bonds held in the funds were overvalued, the SEC said. The SEC said while Heartland kept its fund investors in the dark about these problems, CEO Nasgovitz tipped off his friend Krueger and he sold his shares in one of the funds. The SEC also accused Winston, Bauer and Della of insider trading. "The specific allegation of insider trading with respect to Bill Nasgovitz is completely untrue," Heartland said. On October 13, 2000, Heartland slashed the net asset values of its High-Yield Municipal Bond Fund by 70 percent and its Short Duration High-Yield Municipal Fund by 44 percent. The funds held a wide range of illiquid and defaulted bonds that proved to be worth less than both fund managers and a mutual fund pricing service had said. The NAV reductions led to the SEC seizing the two funds and spawned lawsuits. The SEC said it levied a $125,000 civil penalty against pricing service FT Interactive Data Corporation. The SEC said the service, which neither admitted nor denying wrongdoing, agreed to an SEC order finding it had aided and abetted in Heartland's fraud and fund mispricing. HOTJOBS.COM: SEC Initiates Securities Fraud Complaint V. Couple --------------------------------------------------------------- The Securities and Exchange Commission filed a complaint against Lianne and Stanley Gulkin of West Caldwell, New Jersey for illegally trading on inside information concerning a then- impending acquisition of Hotjobs.com, Inc. by TMP Worldwide, Inc. The Commission alleged that the Gulkins learned of the merger negotiations and bought the stock before the public announcement in June 2001. After the announcement, the Gulkins sold their stock and gained a total of $16,357 in illicit profits. The Commission also announced that it has reached a settlement with the Gulkins. The Gulkins have consented, without admitting or denying the allegations of the Commission's complaint, to the entry of a final judgment that: (1) permanently enjoins them from future violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; (2) orders them to disgorge $16,357 in profits and to pay prejudgment interest in the sum of $1,963.19; and (3) orders the Gulkins to pay civil penalties amounting to $16,357. The Commission has submitted the proposed final consent judgment to the United States District Court for the Southern District of New York. According to the complaint, on June 8, 2001, an individual with whom the Gulkins shared a relationship of trust and confidence learned material nonpublic information that Hotjobs.com was involved in confidential negotiations to be acquired by TMP Worldwide. During one or more conversations with that individual between June 8 and June 29, 2001, when TMP Worldwide's acquisition of Hotjobs.com was publicly announced, the Gulkins learned about the takeover plans. Lianne and Stanley Gulkin bought shares of Hotjobs.com on June 18, 2001, and Stanley Gulkin made two more purchases on June 26 and June 29, 2001, prior to the public announcement. In all, the Gulkins bought 5,000 shares of Hotjobs.com while in possession of material, nonpublic information that they misappropriated from the individual, anticipating a price increase in the stock upon the public announcement of the takeover. On June 29, 2001, TMP Worldwide announced its plans to acquire Hotjobs.com, causing the stock price to jump approximately 19 percent. The Gulkins sold their shares and realized a profit of $16,357 in their two accounts. By these actions, the Gulkins violated the antifraud provisions of the Exchange Act. LUCENT TECHNOLOGIES: Fairness Hearing Set For December 12, 2003 --------------------------------------------------------------- Final fairness hearing for the settlement proposed by Lucent Technologies, In. settle assorted securities, Employee Retirement Income Security Act (ERISA), derivative class action and other related lawsuits against it and certain of its current and former directors, officers and employees is set for December 12, 2003 in the United States District Court in Newark, New Jersey. The agreement is a global settlement of what were 53 separate lawsuits, including a consolidated shareowner class action lawsuit in the U.S. District Court of New Jersey, and related ERISA, bondholder, derivative, and other state securities cases. Under the settlement agreement, the Company will pay $315 million in common stock, cash or a combination of both, at its option. The Company also will issue warrants to purchase 200 million shares of its common stock at an exercise price of $2.75 per share with an expiration date three years from the date of issuance. As of September 30, 2003, the value of these warrants was approximately $161 million, based upon the Black-Scholes option-pricing model. In connection with the settlement the Company will pay up to $5 million in cash for the cost of settlement administration and for certain other costs involved in the issuance of securities. The settlement covers all claims generally relating to the purchase of Lucent securities during different class periods. The primary class period is October 26, 1999 through December 20, 2000. The Company expects that the settlement approval and claims administration process will go on until the latter part of calendar 2004 and does not expect to distribute any proceeds until sometime in the fourth quarter of fiscal 2004 or in fiscal 2005. The Company agreed to deposit into escrow $100 million of the settlement amount in cash or securities, or a combination of both, upon final approval of the settlement by the court of the consolidated case "In re Lucent Technologies Inc., Securities Litigation" and the ERISA cases. In addition to the Company's contribution of cash, stock and warrants, certain of the Company's insurance carriers have agreed to pay their available policy limits of $148 million in cash into the total settlement fund. The Company's former affiliate, Avaya Inc., is contractually responsible under its agreements with the Company to contribute an additional $24 million to the settlement. In a filing with the Securities and Exchange Commission, the Company reserved the right to terminate the settlement if class members who purchased more than 3% of the total shares purchased by all class members during the class period of any alleged class elect to opt out of the settlement and pursue their claims directly against it. The Company will need to defend any lawsuits that may be brought by parties opting out of the settlement, regardless of whether it elects to consummate the settlement. The Company and certain of its current and former officers and directors are defendants in an action in the U.S. District Court in New Jersey, styled "Staro Asset Management, LLC v. Lucent Technologies Inc. et al.," alleging violations of federal securities laws. The case was originally part of the global settlement referred to above, however, the plaintiff indicated its desire not to settle and to pursue its claim separately against the defendants. The Company has moved to dismiss the complaint. MUTUAL FUNDS: 3 More States Join Massachusetts In Funds Probe ------------------------------------------------------------- A top securities regulator on Thursday said that at least three others states have joined Massachusetts in subpoenaing mutual fund companies' records as part of a widening probe into improper trading, Reuters reports. "We are working with regulators in New Hampshire, Alabama and Connecticut and we are looking at everything," Massachusetts Secretary of the Commonwealth William Galvin, told Reuters. Subpoenas have already been sent to Boston-based Fidelity Investments, the nation's largest mutual fund company, as well as MFS Investment Management, Loomis Sayles & Co. L.P., John Hancock Funds, Pioneer Investment Management Inc., and Scudder Investments. Mr. Galvin said his office, which has been at the forefront of the probe, now receives new information from insiders every day. "We are taking it wherever it leads us," he said. The investigation into the $7 trillion mutual fund industry, where 95 million Americans invest their life savings, expanded again on Thursday when's Mr. Galvin's office charged that Prudential Securities, the nation's third largest brokerage, let hedge funds conduct illegal late trading in mutual funds. "Hedge funds were among the principal looters here," Mr. Galvin said, "This underlines the incompatibility of hedge funds and mutual funds. It is like putting a shark into a goldfish tank." He said a handful of hedge funds, including Chronos Asset Management, which is backed by Canadian Imperial Bank of Commerce and based in nearby Cambridge, Massachusetts, and London-based Folkes Asset Management and Illinois-based Ritchie Capital Management, were the most active in making the illegal trades with the help of Prudential's Boston-office. "Those were the frequent fliers," he told Reuters. Mr. Galvin's office has found evidence that these funds and others tried to deceive regulators and mutual fund companies by opening several accounts with brokers to mask their illegal trading activities. The market-timing scandal broke in September when New York Attorney General Eliot Spitzer announced a $40 million settlement with Canary Capital, a New Jersey hedge fund, for alleged market timing and late trading in mutual funds. Late trading occurs when investors are allowed to trade after the 4 p.m. market close at that day's prices. Market timing, which is not illegal, involves investors buying and selling mutual fund shares quickly in order to profit from stale prices. NATIONAL CENTURY: SEC Lodges Suit V. Exec Over Financial Fraud -------------------------------------------------------------- The Securities and Exchange Commission sued Brian J. Stucke, formerly Director of Compliance and Associate Vice President at National Century Financial Enterprises, Inc. (NCFE), alleging that he participated in a scheme to defraud investors in securities issued by subsidiaries of NCFE. NCFE, a private corporation located in Dublin, Ohio, and its subsidiaries collapsed suddenly in October 2002 when investors discovered that the companies had hidden massive cash and collateral shortfalls from investors and auditors. The collapse caused investor losses exceeding $1 billion. Mr. Stucke, a resident of London, Ohio, consented to a permanent injunction prohibiting him from violating the antifraud provisions of the federal securities laws; an order barring him from serving as an officer or director of a public company; and orders of disgorgement, prejudgment interest, and a civil penalty, with those amounts to be determined at a later hearing. The complaint, which was filed in the United States District Court for the Southern District of Ohio, alleges that two wholly owned subsidiaries of NCFE purchased medical accounts receivable from health-care providers and issued notes that securitized those receivables. From at least February 1999 to October 2002, the subsidiaries offered and sold at least $3.25 billion in total notes through private placements to institutional investors. The complaint further alleges that senior NCFE officials improperly "advanced" to health-care providers $1 billion or more of the capital raised from investors without receiving required medical accounts receivable in return. These advances were essentially unauthorized, unsecured loans to distressed or defunct health-care providers-many of which were partly or wholly owned by NCFE or its principals. The unsecured advances were inconsistent with representations made by senior NCFE officials in offering documents provided to investors. According to the complaint, Mr. Stucke aided other NCFE officials in concealing their fraud from trustees, investors, potential investors, and auditors by: (1) preparing the forms used to authorize improper advances made by other NCFE officials; (2) transferring funds between the subsidiaries' bank accounts to mask cash shortfalls of as much as $400 million; (3) improperly using $101 million in proceeds from a new offering to cover existing reserve-account shortfalls; and (4) creating and distributing false monthly investor reports to trustees, investors, potential investors, and auditors. Without admitting or denying the allegations in the complaint, Mr. Stucke consented to the entry of an order that: (i) permanently enjoins him from violating the antifraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder; (ii) permanently bars him from serving as an officer or director of a public company; and (iii) orders him to pay disgorgement, prejudgment interest, and a civil monetary penalty, with those amounts to be determined at a later hearing. The Commission filed its action at the same time that the U.S. Attorney's Office for the Southern District of Ohio unsealed a criminal information against Mr. Stucke for the conduct that is the subject of the Commission's complaint. The suit is styled "SEC v. Brian J. Stucke, Civil Action No. C2- 03-01161." PHILIP MORRIS: Appeals $10.1 Billion Smokers Injury Suit Verdict ---------------------------------------------------------------- Philip Morris USA, ordered to pay $10.1 billion for tricking Illinois smokers into believing light cigarettes are less harmful than regular ones, appealed the verdict to the Illinois Supreme Court on Wednesday, AP new reports. Philip Morris claims the trial court never should have granted class action status to the case, which led to the first consumer-fraud trial in the nation to focus on light cigarettes. The company says it obeyed federal law when it labeled its cigarettes with the Surgeon General's warning against tobacco products, and charges the $10.1 billion verdict was arbitrary and excessive. "We've presented a very compelling argument about why this judgment should be set aside," William Ohlemeyer, Philip Morris' vice president and associate general counsel, said Wednesday. Madison County Judge Nicholas Byron ruled in March that Philip Morris violated the state's consumer fraud law in the way it marketed its Marlboro Lights and Cambridge Lights brands. A spokeswoman for plaintiffs' attorney Stephen Tillery, who won the March lawsuit on behalf of 1 million Illinois smokers, said the appeal was expected. "There's nothing in this brief that provides any new legal or factual basis for changing any of the trial court's findings," spokeswoman Joy Howell said. "There are no surprises and no new legal analysis." Mr. Ohlemeyer said he expects oral arguments and a decision to come by the end of next year, the Associated Press reports. REED SLATKIN: CA AG Charges Janu With Obstruction of Justice ------------------------------------------------------------ On December 5, 2003, the U.S. Attorney for the Central District of California announced that Jean Janu was charged with conspiracy to obstruct justice during an Securities and Exchange Commission enforcement investigation of Reed E. Slatkin and with taking steps to conceal Mr. Slatkin's plot to hide his Ponzi scheme from the SEC. From approximately 1986 until May 2001, Mr. Slatkin operated a massive Ponzi scheme in which he solicited more than $593 million from approximately 800 investors. On May 11, 2001, the SEC obtained a temporary restraining order and asset freeze against Mr. Slatkin in federal district court in Los Angeles. The SEC alleged that Mr. Slatkin defrauded hundreds of clients through his unregistered investment advisory business located in Santa Barbara, California. Ms. Janu, 56, formerly of Santa Fe, N.M., has agreed to plead guilty when she is arraigned in January to obstructing the SEC's investigation and to misprision of a felony for concealing Mr. Slatkin's scheme in an attempt to deceive the SEC regarding the authenticity of Mr. Slatkin's account statements. In her plea agreement, Ms. Janu admitted that, at Mr. Slatkin's direction, she created and revised account statements and other documents that supported Mr. Slatkin's claim that he held over $500 million in securities in brokerage accounts at the fictitious entity "NAA Financial" of Zurich, Switzerland. Ms. Janu knew these documents were to be submitted to the SEC. She created these bogus statements on her computer and printed the NAA account statements on blank, European-sized stationary provided to her by Mr. Slatkin that contained NAA's name and purported Swiss address. Mr. Slatkin then instructed her to erase the account statements from her computer. During the SEC investigation, Ms. Janu falsely testified under oath that she did not have any knowledge of any direct or indirect power held by Mr. Slatkin over any accounts in any kind of foreign financial institutions. In addition, Ms. Janu falsely testified that she had never heard the name NAA Financial. On June 7, 2001, in the SEC's action, the U.S. District Court for the Central District of California entered a Judgment of Permanent Injunction against Reed E. Slatkin. Mr. Slatkin, without admitting or denying the allegations in the complaint, consented to the entry of the injunction from future violations of the federal securities laws. Mr. Slatkin has also been barred by the Commission from associating with any investment adviser. On September 3, 2003, Judge Morrow sentenced Mr. Slatkin to 14 years in prison for his role in the massive Ponzi scheme. Mr. Slatkin pleaded guilty to 15 counts, including conspiracy to obstruct justice during an SEC enforcement investigation. The suit is styled "U.S. v. Jean Janu, CR 02-1222." RHODE ISLAND: Three Charged Over February Station Nightclub Fire ---------------------------------------------------------------- Capping a nine-month investigation into the blaze that killed 100 people and injured some 200, in February, at the Station nightclub in West Warwick, Rhode Island, a grand jury returned felony indictments against two of the club's owners and a tour manager for the rock band Great White, Reuters news reports. In what became the fourth-deadliest nightclub fire in U.S. history, The Station went up in flames on February 20 when sparks from a pyrotechnic display at the start of a Great White concert spread to flammable foam on the club's walls. During separate arraignments in front of Rhode Island Superior Court Judge Netti Vogel, club owners Jeffrey and Michael Derderian, and the band's tour manager, Dan Biechele, were each charged with 100 counts of involuntary manslaughter with criminal negligence, and 100 counts of involuntary manslaughter in violation of a misdemeanor. All three pleaded not guilty. Each count carries a maximum sentence of 30 years in prison, prosecutors said. Judge Vogel set bail at $10,000 cash for Mr. Biechele, and at $5,000 cash for each of the Derderian brothers. Rhode Island Attorney General Patrick Lynch noted that the indictments do not allege - and the crime of involuntary manslaughter does not require - proof that the defendants intended to cause the deaths of 100 people. Accordingly, he accused the Derderians of failing to properly maintain the nightclub by keeping the foam on the walls. He accused Mr. Biechele of lighting the pyrotechnics that started the fire. Jeffrey Pine, a lawyer for Jeffrey Derderian, said the brothers sent their condolences and prayers to families of the victims but protested their innocence. "They are not criminals, they did not commit a criminal act and should not be facing criminal charges," Mr. Pine told reporters after the Derderians posted bail. Earlier, Mr. Lynch discussed the charges during what was described as an emotional and tumultuous meeting behind closed doors with victims and relatives of those who perished in the inferno. Survivors - some bearing scars of burns suffered in the blaze - exchanged tearful hugs as they filed into a banquet hall in West Warwick to hear from the state's top prosecutor. However, witnesses said tears gave way to anger during the meeting as many relatives demanded why others - including the entire band and city officials - had not been indicted. "It was a disappointing first step," Michelle Hoell, who lost her sister in the fire, said of the charges unveiled against the three men. In addition to the criminal charges against the Derderians and Mr. Biechele, a raft of civil lawsuits has been filed against a wider group of defendants in connection with the blaze. Mr. Lynch said he expects it will be at least a year and a half before the criminal cases go to trial. ROADHOUSE GRILL: FL Court Hears Motion For Stock Suit Dismissal --------------------------------------------------------------- The United States District Court for the Southern District of Florida heard oral arguments on Roadhouse Grill, Inc.'s motion to dismiss the class action filed against its then chairman of its board of directors, and its president and chief executive officer. This action is styled: "Sears v. Roadhouse Grill, Inc, et al., Case No. 02-CV-60493." The suit was filed on behalf of all purchasers of the stock of the Company between August 31, 1998 and August 1, 2001, with certain exclusions, and appears to be based principally, if not solely, on the fact that certain financial statements have been restated as described above. As the Company filed for relief under Chapter 11 of the United States Bankruptcy Code on April 16, 2002, any claims in this Action should have been filed by the plaintiffs with the court. If the plaintiffs had filed a claim with the Court, their claim against the Company would have been subordinated to the claims of all creditors of the Company. However, no claim against the Company was filed during the bankruptcy proceedings. As a result, the Company believes that the plaintiffs' claims against the Company have now been extinguished. On July 26, 2002, while the Company's Chapter 11 proceedings were pending, the plaintiffs filed an amended class action complaint. Since the case was stayed against the Company, the individual defendants filed a motion to dismiss the amended class action complaint on September 4, 2002, and the plaintiffs filed an opposition thereto on October 3, 2002. On April 4, 2003, the court heard arguments on the motion to dismiss and dismissed the amended class action. The plaintiffs filed a second amended class action on May 5, 2003 naming only the individual defendants and not the Company. The individual defendants filed a motion to dismiss the second amended class action complaint on June 4, 2003, to which plaintiffs responded. The judge's ruling on the motion to dismiss is currently pending. UNITED RETAIL: Former Employees File Wage Violations Suit in CA --------------------------------------------------------------- United Retail Incorporated faces a class action filed in the California Superior Court, styled "Erik Stanford vs. United Retail Incorporated," by a former manager in California. The suit is purportedly a class action on behalf of certain current and former associates in California in the past four years. The plaintiff asserts state wage and hour claims. Based on a preliminary factual review, management believes there are meritorious procedural defenses available, such as that the plaintiff does not adequately represent the classes identified in the lawsuit. Although counsel is unable at this early stage to predict the ultimate outcome of the case and the amount of any potential liability with any accuracy, management does not believe that the case will have a material impact on the Company's financial condition or results of operations. WORLDCOM INC.: Fund Wants Out Of Milberg-Led Bond Suit Coalition ---------------------------------------------------------------- A union annuity fund that was part of a coalition of WorldCom Inc. bond investors is now trying to become part of the main class action lawsuit, Dow Jones Business News reports. However, it's unclear whether the asbestos workers fund, or any other fund whose claims are dismissed, will be able to opt in to the class action fold, lawyers said. The Asbestos Workers Local 12 Annuity fund recently asked the federal judge overseeing the litigation not to stand in the way of its defection to the main class action - a move that would end its individual suit and its association with a group of investors represented by famed plaintiffs' law firm Milberg Weiss Bershad Hynes & Lerach LLP. In a letter sent to the court last week, a lawyer for the fund advised U.S. District judge Denise Cote, that it instructed Milberg Weiss "to immediately voluntarily dismiss the fund's individual action." The decision by the annuity followed several rulings adverse to Milberg Weiss and its clients handed down in the case by Judge Cote. Under one of the rulings, the union fund faces the possibility of being barred from recovering losses associated with its investment in a May 2001 WorldCom bond offering because of statute of limitation issues. The fund is one of at least 120 Milberg Weiss bondholding clients trying to recoup some portion of the funds lost in the $11 billion WorldCom accounting fraud. The fraud first came to light in June 2002, a month before the telecommunications firm filed for Chapter 11 bankruptcy court protection. Now known as MCI Inc., the company's plan of reorganization was approved in October. The fund bolstered its position by noting that its case had not yet reached Judge Cote's docket and by questioning the advice it received from Milberg Weiss, guidance that the judge herself ruled led to "confusion and misunderstanding." Taking a highly unusual step, Judge Cote went so far as to order a "curative notice" be sent to investors outside of the class action to address "deficiencies" in Milberg's client communications. "According to Milberg Weiss, there were no apparent disadvantages to the annuity fund in pursuing such an individual action," the fund's lawyer, Stephanie Suarez, said in the letter. "It has since become clear, however," the letter continued, "that Milberg Weiss's advice to the trustees of the annuity fund failed to adequately address a number of critical issues," including potential statute of limitation impediments. Ms. Suarez didn't return calls for comment, Dow Jones reports. Milberg partner William Lerach, who is overseeing the WorldCom litigation, disputed Ms. Suarez' claims. "That's untrue, we never made a presentation to the board of trustees of that fund," he said. "When we made presentations we made full and fair and balanced presentations on the risks and rewards of individual litigation." Mr. Lerach declined to say if other funds were following the annuity fund's lead. "I won't discuss communications with clients," he said. Under one of the rulings involving Alaska's Department of Revenue and the state pension investment board, two Milberg clients, Judge Cote ruled that claims filed after June 25, 2003 - a year after the WorldCom fraud became public - were barred under the statute of limitations. The asbestos workers fund filed its lawsuit on August 13. WorldCom's board of directors and the underwriting syndicate that handled the bond deals are now seeking to have that decision apply to other investors as well. Judge Cote has not yet been called on to formally decide whether funds that want to opt back into the class would be permitted to recover through the class action, lawyers involved in the case said. In the notice being sent to individual action plaintiffs, Judge Cote said that defendants in the case have contended that even if claims are dismissed without prejudice, such investors shouldn't be allowed to recover funds under established legal doctrine. ZALE CORPORATION: Final Approval Granted To Consumer Suit Pact -------------------------------------------------------------- Final approval has been granted on November 20,2003 to the settlement proposed by Zale Corporation to settle the class actions filed against it and: (1) Jewelers National Bank, (2) Zale Indemnity Company, (3) Zale Life Insurance Company, (4) Jewelers Financial Services, (5) Jewel Re-Insurance, Ltd. and (6) certain employees of the Company One suit was filed in the Circuit Court for Colbert County, Alabama. Another was filed in the United States of America District Court for the Eastern District of Texas, Texarkana Division. Both purported class actions concern allegations that the defendants marketed credit insurance to customers in violation of state statutory and common laws and federal anti- racketeering laws. ZION CAPITAL: SEC Imposes Sanctions Due To Securities Violations ---------------------------------------------------------------- The Securities and Exchange Commission has imposed sanctions on Zion Capital Management LLC, formerly a registered investment adviser, and Ricky A. Lang, Zion's president and sole owner. The Commission found that the Respondents had violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, by favoring an account in which Lang had a financial interest over Zion's advisory client in the allocation of securities trades. The Commission further found that the Respondents violated Section 207 of the Advisers Act by making material misrepresentations and omissions regarding the existence of a conflict of interest in Zion's Form ADV filed with the Commission. The Commission also found that Zion violated and that Mr. Lang aided and abetted and was a cause of Zion's violations of Section 204 of the Advisers Act and Advisers Act Rules 204-2(a)(3) and 204-2(a)(7) by failing to maintain copies of memoranda of orders given by Zion for the purchase or sale of a security and of all written communications relating to the execution of securities trades. The Commission barred Mr. Lang from association with any investment adviser or investment company and ordered the Respondents to cease and desist from committing or causing any further violations of the provisions that they were found to have violated or to have aided and abetted; to pay, jointly and severally, disgorgement in the amount of $211,827; and to pay, jointly and severally, a civil penalty of $220,000. New Securities Fraud Cases BIOVAIL COPRORATION: Scott + Scott Files NY Securities Lawsuit -------------------------------------------------------------- The law firm of Scott + Scott, LLC initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all persons who purchased the common shares of Biovail Corporation between May 17, 2002 and October 30, 2003. Following the action's filing, the Securities and Exchange Commission announced the commencement of an "informal inquiry" into the drugmaker's accounting and financial reporting. After the SEC's announcement, Biovail shares plummeted 20% to $18.51. Biovail shares opened trading today at $17.57. While Biovail has called this lawsuit "frivolous," the Canadian drugmaker has been criticized for not properly estimating inventories of its drugs; low revenue from its generic brand of Prilosec and excess inventory of heart drug Cardizem CD. Chief Executive Eugene Melnyk has been criticized for the purchase of a company plane by an entity he controlled, the use of Barbados as a tax shelter for Biovail, a doctor compensation program that pays doctors for using Cardizem LA and acquisitions that led to confusing accounting. The Complaint alleges that Biovail and certain of its officers and directors made materially false and misleading statements during the Class Period. Specifically, Defendants made material misrepresentations concerning Biovail's financial results and business by improperly reporting revenue and earnings attributable to sales. Plaintiff further alleges that these material misrepresentations artificially inflated the price of Biovail's common shares, which traded as high as $ 50.30 on the New York Stock Exchange and as high as CD $ 67.75 on the Toronto Stock Exchange during the Class Period. For more information, contact Neil Rothstein, by Mail: 108 Norwich Avenue, Colchester, Connecticut 06415, by Phone: 800/404-7770 (fax: 860/537-4432), or by E-mail: nrothstein@aol.com. FRED ALGER: Stull Stull Launches Securities Lawsuit in S.D. NY -------------------------------------------------------------- Stull, Stull & Brody initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all purchasers, redeemers and holders of shares of Alger Capital Appreciation Institutional Fund (Nasdaq: ALARX, ACARX), Alger Balanced Institutional Fund (Nasdaq: ABLRX, ABIRX), Alger Socially Responsible Growth Institutional Fund (Nasdaq: ASRGX, ASRRX), Spectra Fund (Nasdaq: SPEAX, SPECX) and other Fred Alger Mutual Funds from November 1, 1998 through September 3, 2003, inclusive. The following funds are subject to this class action: (1) Alger SmallCap Portfolio (Sym: ALSAX, ALSCX, AGSCX) (2) Alger SmallCap and MidCap Portfolio (Sym: ALMAX, ALMBX, ALMCX) (3) Alger MidCap Growth Portfolio (Sym: AMGAX, AMCGX, AMGCX) (4) Alger LargeCap Growth Portfolio (Sym: ALGAX, AFGPX, ALGCX) (5) Alger Capital Appreciation Portfolio (Sym: ACAAX, ACAPX, ALCCX) (6) Alger Health Sciences Portfolio (Sym: AHSAX, AHSBX, AHSCX) (7) Alger Balanced Portfolio (Sym: ALBAX, ALGBX, ALBCX) (8) Alger Small Cap Institutional Fund (Sym: ALSRX, ASIRX) (9) Alger MidCap Institutional Fund (Sym: ALMRX, ALGRX) (10) Alger LargeCap Growth Institutional Fund (Sym: ALGRX, ALGIX) (11) Alger Capital Appreciation Institutional Fund (Sym: ALARX, ACARX) (12) Alger Balanced Institutional Fund (Sym: ABLRX, ABIRX) (13) Alger Socially Responsible Growth Institutional Fund (Sym: ASRGX, ASRRX) (14) Spectra Fund (Sym: SPEAX, SPECX) The complaint alleges that defendants violated the Securities Act of 1933; the Securities Exchange Act of 1934, and the Investment Company Act of 1940. The Complaint charges that, throughout the Class Period, defendants issued false and misleading statements in registration statements and prospectuses and, as a result, plaintiff and the Class were damaged. For more information, contact Tzivia Brody, by Phone: toll-free 1-800-337-4983, by Fax: 212/490-2022, or by E-mail: SSBNY@aol.com. NASDAQ STOCK: Wechsler Harwood Commences Securities Suit in NY --------------------------------------------------------------- The law firm of Wechsler Harwood LLP initiated a class action suit against the Nasdaq Stock Market Inc. and its President and CEO in the United States District Court for the Southern District of New York, on behalf of all persons who traded the stock of Corinthian Colleges, between 10:46 a.m. and approximately 12:30 p.m. on December 5, 2003. The complaint alleges that the Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5. Beginning at approximately 10:46 a.m. on December 5, 2003, the market price of COCO fell precipitously from $57.45 to as low as $38.97 per share within 12 minutes. At 10:58 a.m., Nasdaq halted trading in COCO, stating that the plunge was caused by "misuse or malfunction" of an electronic trading system. Nasdaq permitted trading to resume approximately one hour later at 11:55 a.m. When COCO reopened at 11:55 a.m., the price of the stock recovered quickly. Approximately 30 minutes after trading in COCO resumed, Nasdaq belatedly announced that it would cancel all trades in COCO made between 10:46 a.m. and 10:58:08 a.m. At no time prior to approximately 12:30 p.m. did Nasdaq inform investors that it would cancel all trades in COCO between 10:46 a.m. and 10:58:08 a.m. Therefore, during the period between the time COCO resumed trading at 11:55 a.m. and the time Nasdaq announced the cancellation of such trades at approximately 12:30 p.m., investors made trading decisions in reliance on Nasdaq's statement that trading had resumed and without knowing that Nasdaq had decided to cancel the trades between 10:46 a.m. and 10:58:08 a.m. Nasdaq's belated cancellation of such trades caused injury to investors who traded COCO securities between 10:46 a.m. and approximately 12:30 p.m. on December 5, 2003. For more information, contact Wechsler Harwood LLP, by Mail: 488 Madison Avenue, 8th Floor, New York, New York 10022, or by Phone: (877) 935-7400. PMA CAPITAL: Bernstein Liebhard Lodges Securities Lawsuit in PA --------------------------------------------------------------- Bernstein, Liebhard & Lifshitz, LLP initiated a securities class action in the Eastern District of Pennsylvania on behalf of all persons who acquired securities of PMA Capital Corporation (NASDAQ: PMACA) between November 13, 1998 and November 3, 2003, inclusive, against the Company and: (1) John W. Smithson, (2) Francis W. McDonnell, and (3) William E. Hitselberger According to the lawsuit, defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated under Section 10(b), by issuing a series of material misrepresentations to the market during the Class Period. More specifically, the Complaint alleges that the defendants' statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) the Company maintained inadequate loss reserves for its PMA Re subsidiary; (ii) the Company insufficiently increased its loss reserves during the Class Period; and (iii) as a result of the foregoing, the Company's reported earnings, assets and equity were materially false and misleading. On November 4, 2003, PMA shocked the market when it issued a press release announcing that it would record an unexpected pretax charge of about $150 million to strengthen loss reserves at PMA Re. In addition, PMA announced its intention to suspend common stock dividends and explore strategic alternatives with respect to its reinsurance operations. Following the charge, the Company stated it expected to report a net loss for 2003, which would make four consecutive years of poor operating results. Upon this news, shares of the Company fell 62% or $8.11 per share to close at $5.03 per share on unusually high trading volume on November 4, 2003. For more information, 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: PMACA@bernlieb.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., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Roberto Amor, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2003. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. 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