/raid1/www/Hosts/bankrupt/CAR_Public/040227.mbx
C L A S S A C T I O N R E P O R T E R
Friday, February 27, 2004, Vol. 5, No. 41
Headlines
21st CENTURY: NY Court Grants Securities Suit Certification
ADELPHIA: Files Reorganization Plan As Executives Face Trial
ARGENTINA: S.D. New York Court Certifies Securities Lawsuit
AUTOCARE: CA Court Grants SEC Summary Judgment in Fraud Suit
BANK OF AMERICA: Jury Awards $75M To Customers In Charge Lawsuit
BETTER THAN FORMULA: FDA Warns Against Dietary Supplement
BOEING CORP: Kansas Judge Withdraws Bias Suit Certification
CALIFORNIA: Gay Marriage Foes Ask Court To Stop Issuing Licenses
CANADA: Ontario Asks Judge To Fix Walkerton Compensation Plan
CHAROEN POKPHAND: Motion To Facilitate Class Suit Notice Denied
CLEARONE COMMUNICATIONS: Court Issues Injunction V. Former Execs
COLUMBIA MANAGEMENT: SEC Lodges Civil Fraud Lawsuit in MA Court
COPPER MOUNTAIN: Re-argues Motion To Dismiss Stock Lawsuit in CA
FLORIDA: Gays Launch Lawsuit V. State Over Same-Sex Marriage Ban
FORD MOTOR: MS Court Remands Defective Parts Suit To State Court
GLOBAL RISK: 500 Men Deployed in Iraq File Suit For Unpaid Wages
GREEN HORNET: FDA Warns Against Purchase Of Illegal Street Drug
HULBURT BARRINGER: SEC Commences Subpoena Enforcement Action
HUSSEIN EL ZEIN: SC Court Enters Injunction For Securities Fraud
IBM CORPORATION: Court Seeks More Data on Pension Suit Damages
INVESTORS ASSOCIATES: SEC Bars Ex-Broker for Penny Stock Fraud
MARTHA STEWART: Defense Rests Its Case In Securities Fraud Trial
MERCURY GENERAL: Court Allows Plaintiffs To File Amended Suits
MERCURY INSURANCE: Court Refuses Class Certification in CA Suit
MICHIGAN: Appellate Court Upholds State Sex Offender Registry
NEW YORK: Favorable Summary Judgment Granted In Motorist Lawsuit
NORTHWEST PIPE: Agrees To Settle Fire-Sprinkler Suit For $14.5M
NUTRAMERICA: Faces CA, NY Suits Over TrimSpa Diet Product Line
OAO MEGIONNEFTEGAZ: Minority Holders Launch Suit v. Russian Firm
PARMALAT FINANZIARIA: U.S. Regulators Want Stock Probe Details
PELE-PHONE: Allegedly Seeks to Block Release of Gov't. Report
PHILIPPINES: Government May Have Committed Fraud in Marcos Case
QUALITY DISTRIBUTION: Faces Investor Suit For Securities Fraud
RALPHS GROCERY: SEC Issues Cease-And-Desist Orders V. 3 Ex-Execs
ROBERTSON STEPHENS: SEC Okays $5M Disgorgement Fund Distribution
TV AZTECA: SEC Files Civil Action V. Saba, et al., For Fraud
Asbestos Alert
ASBESTOS LITIGATION: ACE Limited Improves Its Survival Ratio
ASBESTOS LITIGATION: BNS Co. Fights 259 Asbestos Related Claims
ASBESTOS LITIGATION: Chubb Corp. Strengthens Asbestos Reserves
ASBESTOS LITIGATION: DaimlerChrysler Faces 28T Asbestos Claims
ASBESTOS LITIGATION: Electrolux AB Fights Against 584 Lawsuits
ASBESTOS LITIGATION: Fairfax Financial Reports Asbestos Reserves
ASBESTOS LITIGATION: Federal-Mogul Posts $39MM Asbestos Charge
ASBESTOS LITIGATION: General Cable Corp. Named in 48,000 Suits
ASBESTOS LITIGATION: Georgia-Pacific Extends Reserve to 2013
ASBESTOS LITIGATION: James Hardie Denies Any Asbestos Liability
ASBESTOS LITIGATION: Odyssey Re Holdings Posts Asbestos Reserves
ASBESTOS LITIGATION: PPG Subsidiary Caught Up in Asbestos Claims
ASBESTOS LITIGATION: Universal Automotive Faces Two Lawsuits
ASBESTOS LITIGATION: Loews Corp. Shores Up $465MM APMT Reserves
ASBESTOS ALERT: Amersham PLC Reveals Asbestos Related Liability
ASBESTOS ALERT: Converium Holding Increases Asbestos Reserves
ASBESTOS ALERT: Hanson PLC Adds To Asbestos Related Provisions
ASBESTOS ALERT: Hedman's Asbestos Case Spurs Trading Halt
ASBESTOS ALERT: MDC Holdings Pays Asbestos Remediation Costs
ASBESTOS ALERT: Tarragon Realty Under EPA Investigation
New Securities Fraud Cases
AGCO CORPORATION: Milberg Weiss Files Securities Lawsuit in GA
AAIPHARMA INC.: Brian Felgoise Files Securities Suit in E.D. NC
EL PASO: Cohen Milstein Lodges Securities Fraud Suit in S.D. TX
EL PASO: Shepherd Finkelman Lodges Securities Fraud Suit in TX
FRANKLIN FUNDS: Rabin Murray Files Securities Suit in N.D. CA
QUALITY DISTRIBUTION: Brian Felgoise Files Securities Suit in FL
QUALITY DISTRIBUTION: Brodsky Smith Files Securities Suit in FL
QUALITY DISTRIBUTION: Lasky Rifkind Files Securities Suit in FL
QUALITY DISTRIBUTION: Charles Piven Files Securities Suit in FL
SONUS NETWORKS: Paskowitz & Associates Lodges Stock Suit in MA
*********
21st CENTURY: NY Court Grants Securities Suit Certification
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The United States District Court for the Southern District of
New York granted certification of a lawsuit brought against 21st
Century Holding Company, et al., on behalf of Plaintiff
shareholders Jeffrey Cross and Judith Rosenblatt, and other
purchasers of common stock issued by defendant 21st Century
Holding Company between November 5, 1998 and August 13, 1999,
alleging violations of securities laws.
Plaintiffs' claims arise under Sections 11 and 15 of the
Securities Act of 1933, Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated by
the Securities Exchange Commission. Therefore, jurisdiction
arises under 15 U.S.C. 77v(a) and 78aa and under 28 U.S.C. 1331
and 1337. Venue is proper in this district pursuant to 15 U.S.C.
78v and 78aa.
ADELPHIA: Files Reorganization Plan As Executives Face Trial
------------------------------------------------------------
Adelphia Communications Corporation filed a reorganization plan
with the United States Bankruptcy Court of the Southern District
of New York, while its founders await trial for fraud.
The plan includes $8.8 billion in new "exit" financing from a
group of banks, the largest ever for a bankrupt company. The
plan, which must be approved by a majority of creditors and the
bankruptcy court, lays out a priority of payments in cash and
new stock to various creditors and values the Denver-based
company at about $17 billion.
While Adelphia's new management said they envision its future as
an independent company, analysts speculated that it would
eventually be swallowed up by a larger company as part of a
long-running industry consolidation trend, reports Reuters.
The Adelphia plan will pay senior creditors including bank
lenders full recovery in cash and new preferred securities to
certain joint venture partners. But subordinated debt holders,
preferred and common stock holders will get only certain
proceeds of litigation that the company has undertaken against
former auditors Deloitte & Touche, the founding Rigas family and
the financial institutions that loaned money to the company
prior to its bankruptcy in June, 2002.
One shareholder group is already objecting to the plan and has
asked the bankruptcy court for permission to file its own
reorganization plan that would sell Adelphia off in parts. A
sale, according to the court-appointed Adelphia Equity
Committee, would provide "a full recovery for creditors and a
very significant recovery for shareholders."
While shareholders are typically wiped out in bankruptcies, the
equity committee said Adelphia's management undervalued the
company by several billion dollars -- enough, they said, to give
them "substantial" recovery under a plan.
Founder John Rigas, his sons Timothy and Michael, and Adelphia's
former director of internal reporting, Michael Mulcahey, are
accused of stealing millions of dollars from the company by
taking out co-borrowing loans for personal business and to cover
margin calls on Adelphia stock. They deny the charges.
Upon emergence from Chapter 11, Adelphia estimates it would have
approximately $8 billion in debt and an additional $750 million
revolving credit facility.
ARGENTINA: S.D. New York Court Certifies Securities Lawsuit
-----------------------------------------------------------
The United States District Court for the Southern District of
New York granted certification of a lawsuit brought against the
Republic of Argentina, on behalf of H.W. Urban, GmbH.
This is the second motion to obtain approval for class action
treatment. In the first motion there were additional plaintiffs,
and they sought to represent holders of 68 series of Argentine
bonds payable in six different currencies. The motion was denied
in an opinion dated May 12, 2003. The court held that the
proposed class was too large, too diverse, and too vaguely
defined for there to be a manageable class action.
The Amended Class Action Complaint names one plaintiff as the
proposed class representative. This plaintiff is a German
company, owned by Horst Urban, a German businessman. Plaintiff
is the owner of bonds from two series:
(1) Republic of Argentina bonds, issued January 30, 1997,
due January 30, 2017, bearing interest at 11 3/8% per
year; and
(2) Republic of Argentina bonds, issued April 7, 1999, due
April 7, 2009, bearing interest at 11 3/4% per year.
Plaintiff owns $1,000,000 worth of bonds of the first series and
$145,000 worth of bonds of the second series.
Attached to the complaint are the prospectuses for the two
series of bonds. The prospectus for the first series shows that
it involves bonds in the face amount of U.S. $2,000,000,000. The
prospectus for the second series shows that it involves bonds in
the face amount of U.S. $1,500,000,000.
The complaint defines the proposed class as all persons who, on
or before July 22, 2002, purchased bonds in either series and
who hold the bonds continuously through the date of "any
judgment as to liability" in the action. The complaint asserts
that the members of the class are so numerous that joinder of
all members is impracticable, although the exact number of class
members is unknown to plaintiff at the present time.
There are allegations about the December 2001 moratorium on bond
obligations declared by the Republic. There are also allegations
regarding consent to service of process in New York City, the
applicability of the laws of the State of New York, and the
waiver of sovereign immunity, all of which allegations are based
on the October 19, 1994 Fiscal Agency Agreement attached to the
complaint.
AUTOCARE: CA Court Grants SEC Summary Judgment in Fraud Suit
------------------------------------------------------------
The Honorable Virginia A. Phillips, U.S. District Judge for the
Central District of California, granted the Securities and
Exchange Commission summary judgment as to the disgorgement and
civil penalties against Joseph Sanfellipo, James E. Gasper, and
Kimball R. Vance, Jr., who were previously charged by the
Commission for their role in a fraudulent telemarketing scheme
known as Autocare America.
The Court ordered Mr. Sanfellipo to pay $352,007 in disgorgement
and prejudgment interest and $120,000 in penalties; Mr. Gasper
to pay $67,445 in disgorgement and prejudgment interest and
$66,276 in penalties; and Mr. Vance to pay $4,071 in
disgorgement and prejudgment interest and $13,000 in penalties.
Previously, on November 14, 2002, the Commission filed an
emergency action to halt the telemarketing scheme allegedly run
by the defendants. The Commission's complaint alleged that
California AutoCare Corporation, an auto repair company, sought
to raise $9 million through the sale of unregistered stock and
that the defendants had raised more than $500,000 in a two-month
period before the Commission sought to halt the scheme.
The Commission further alleged that Mr. Sanfellipo, of Laguna
Beach, California, defrauded investors by representing that:
(1) California AutoCare had significant business
relationships with Shell Oil Company, NAPA Auto Parts,
Monroe, and Interstate Batteries, when in fact it did
not;
(2) there were 20 AutoCare America retail locations
throughout California, when in fact there were only 5;
and
(3) California AutoCare and AutoCare Americorp were
negotiating sponsorship deals with Starbucks and Krispy
Kreme Doughnuts, when in fact they were not.
The Commission also alleged that Mr. Gasper, of Solana Beach,
California, and Mr. Vance, of Layton, Utah, offered and sold
California AutoCare's stock without being registered as brokers.
The Commission charged California AutoCare, AutoCare Americorp
and Mr. Sanfellipo with violations of the securities
registration and antifraud provisions of the federal securities
laws, namely Sections 5(a), 5(c) and 17(a) of the Securities Act
of 1933 and Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5. The Commission charged Mr. Gasper, Mr. Vance
and Elihu M. Sigal with violations of the securities and broker-
dealer registration provisions of the securities laws, namely
Sections 5(a) and 5(c) of the Securities Act and Section 15(a)
of the Exchange Act. All of the defendants consented to
permanent injunctions without admitting or denying the
Commission's allegations.
Also, Mr. Sigal agreed to pay $22,584.48 in disgorgement and
prejudgment interest and $6,500 in civil penalties and
California AutoCare and AutoCare Americorp, which are under the
control of a court-appointed Receiver, agreed to pay $2,127,516
in disgorgement. If the Receiver's recovery and liquidation of
the companies' assets fail to satisfy the full disgorgement and
interest amounts, the unsatisfied amounts shall be waived. If
the Receiver collects more than the ordered disgorgement and
interest however, California AutoCare and AutoCare Americorp
shall be assessed civil penalties in amounts not to exceed
$1,792,516 and $335,000, respectively.
The suit is styled "SEC v. California AutoCare Corporation,
AutoCare Americorp, Joseph Sanfellipo, James E. Gasper, Kimball
R. Vance, Jr., and Elihu M. Sigal, Case No. EDCV 02-1999."
BANK OF AMERICA: Jury Awards $75M To Customers In Charge Lawsuit
----------------------------------------------------------------
A San Francisco jury awarded several customers of the Bank of
America US$75 million for a class action filed over fees charged
to certain customers who have direct deposits with the bank, BCN
reports.
Paul Miller filed the suit six years ago, over a mix-up that
started when the bank improperly credited his account with
$1,800. Mr. Miller, whose income of roughly $640 per month came
from Social Security and Supplemental Security Income,
unknowingly spent the cash. He later faced deductions from the
bank, throwing his life in turmoil, his attorneys Mark Johnson
and Thomas Brandi told BCN.
The suit, which was filed on behalf of more than a million
others who depend on the government checks and said their
accounts were also tapped for charges by the bank, charged that
such government-issued funds are protected from such deductions.
In addition to the $75 million award, according to the
plaintiffs' attorneys, each class member is now due a $1,000
payment. The bank's attorney, Joseph Genshlea, was not
immediately available for comment at the end of the day, BCN
reports. He has reportedly argued that the Bank of America's
policies were intended to protect its customers from problems
such as bouncing a check.
BETTER THAN FORMULA: FDA Warns Against Dietary Supplement
---------------------------------------------------------
The Food and Drug Administration is warning consumers that a
product, Better Than Formula Ultra Infant Immune Booster 117,
sold over the Internet as a dietary supplement should not be fed
to infants. NSP Research Nutrition of Mt. Clemens, Michigan,
sells the product as a dietary supplement. Even though NSP
Research Nutrition labeled their product as "a dietary
supplement," as a result of its labeling claims FDA is concerned
that the product may be an infant formula. The term "Better than
Formula," in the product name describes this product as a
substitute for, or alternative to, other infant formulas.
In addition, the "mixing instructions and directions" printed on
the label state that "As with adults, infants should have small
feedings every 2 to 3 hours throughout the day and should never
be overfed." This statement appears to represent the product for
use as a meal and not as a dietary supplement.
There are a myriad of other promotional claims that appear to
describe this product as an infant formula.
Under the Federal Food, Drug, and Cosmetic Act, the term "infant
formula" means a food which purports to be or is represented for
special dietary use solely as a food for infants by reason of
its simulation of human milk or its suitability as a complete or
partial substitute for human milk." Any infant formula marketed
must be registered with the FDA at least 90 days before
marketing.
The manufacturer has not submitted a notification required under
Section 412 of the Federal Food, Drug, and Cosmetic Act for use
of this product as an infant formula. If this product is used as
an infant formula, there are no assurances that have been
provided to the agency by the manufacturer that this product as
represented for use 1) would support growth of infants, 2)
contains nutrients essential for infants that are required by
law in infant formulas, and 3) is manufactured under good
manufacturing practices. In addition, the label lists a number
of ingredients that have not been evaluated for safe use in
infant formula.
"Since the product has not been reviewed as an infant formula,
its nutritional value and safety as an infant formula are
unknown," said FDA Commissioner Mark B. McClellan, M.D., Ph.D.
"We urge parents who have purchased this product to immediately
stop feeding it to their infants."
To date, FDA is not aware of any illnesses or injuries
associated with this product. FDA advises that consumers contact
their health-care provider if they have any concerns about
possible health problems or illness of their infant.
The FDA doesn't approve dietary supplements before they are
marketed to the public, but baby formula must be reviewed by the
agency before it can be sold. The FDA will take action against
dietary supplement products it considers unsafe or makes false
and misleading claims.
The FDA sent agents and investigators to the Better Than Formula
warehouse in Detroit to confiscate the product it still had in
stock, NSP Research Nutrition co-owner Ron Kosloff said.
Mr. Kosloff and his partner in the venture, David Jantz, said
they hope the FDA will review the product and advise them on how
they can resume marketing it.
Mr. Jantz said the company sold about 300 cans of the product
since it started marketing it last August. A can sells for $40
wholesale and contains 120 servings, or about a three-week
supply, he said.
The FDA declined to comment on the case beyond the warning
issued by Commissioner Mark McLellan in January, AP reports.
BOEING CORP: Kansas Judge Withdraws Bias Suit Certification
-----------------------------------------------------------
The United States District Court in Kansas reversed the class
action certification granted to most of the claims in a gender
discrimination suit filed against Boeing Corporation by female
employees at a company plant, Dow Jones Business News reports.
The Kansas lawsuit was filed in January 2002 by Wichita women
alleging sex discrimination at Chicago-based Boeing, joining
similar complaints filed the same day in Missouri and
California. A similar case against Boeing was filed three
months later in Oklahoma. The lawsuits alleged Boeing denied
women promotions, equal pay, overtime and other employment
opportunities because of their sex. It also cites cases of
sexual harassment.
Last April, Judge Brown granted certification to the suit, filed
by salaried female employees who said they were discriminated
against in salary and promotions. He also certified a class
based on the claims from hourly female workers who said they
were discriminated in promotions.
In his ruling, Judge Wesley Brown reversed his earlier decision
and issued a summary judgment in favor of the Company on the
plaintiffs' remaining claims of discrimination in overtime pay
for hourly female workers, saying subsequent evidence does not
support the class action status.
"We are pleased that the judge more or less confirmed a few
things we know, or thought we knew, and that is the fact the
company has gone to great lengths to ensure equity in the very
things the ladies brought suit against - and that is equity in
pay and promotion," Boeing spokesman Dick Ziegler told Dow
Jones.
The remaining nine women named as original plaintiffs can still
pursue their claims, James Armstrong, an attorney representing
Boeing in the case told Dow Jones.
CALIFORNIA: Gay Marriage Foes Ask Court To Stop Issuing Licenses
----------------------------------------------------------------
Opponents of gay marriage asked the California Supreme Court on
Wednesday to stop San Francisco from issuing any more same-sex
marriage licenses and to nullify the thousands of weddings
already performed, the Associated Press reports.
The Alliance Defense Fund filed the lawsuit less than a week
after two state judges declined to stop San Francisco city
officials from issuing the marriage licenses, more than 3,200 of
which have been granted since February 12.
Robert Tyler, an attorney for the Alliance Defense Fund, told AP
that if local officials can declare what is state law and what
is not, "we would have complete chaos in the system."
State law bars gay marriage, but Mayor Gavin Newsom has argued
that the California Constitution's equal protection clause
trumps state law and requires that all persons be treated
equally. On Tuesday, President Bush cited San Francisco's gay-
marriage spree as well as a recent ruling by Massachusetts'
highest court when he backed a constitutional amendment banning
gay marriage, AP reports.
CANADA: Ontario Asks Judge To Fix Walkerton Compensation Plan
-------------------------------------------------------------
The province of Ontario, Canada asked Ontario Superior Court
Justice Warren Winkler to try and improve the compensation plan
for residents of Walkerton Ontario for the contaminated water
tragedy in 2000, the Associated Press reports.
Approximately 2,500 people fell ill and seven were killed when
they were stricken by E. coli from contaminated drinking water.
Residents filed a class action against the government, which
later formulated a compensation plan to settle the suit.
However, the plan has been met with considerable opposition.
The major complaint against the compensation plan - which
settled a class action against the provincial government - was
that it was not responsive to their needs. Several plaintiffs
have been unable to access interim funding even in cases where
they have incurred significant costs getting medical treatment.
Others say the adjusters overseeing the payouts are demanding
mountains of paperwork that may not always be available, while
others worry about what will happen if they settle now but end
up with long-term health problems. Some are also having trouble
finding a lawyer to pursue their claims because the fees are too
low, an earlier Class Action Reporter story (January 22,2004)
stated.
During the election campaign last fall, Ontario Premiere Dalton
McGuinty visited Walkerton and promised to look into complaints
from residents about the compensation plan. In a Cabinet
meeting this week, Mr. McGuinty said, "We heard some of the
concerns relating to the length of time it's taking to get
awards and there's obviously some misunderstanding with respect
to their rights . So we've made representations to the judge
involved and we believe the judge will shortly be making an
announcement with respect to the ways he's going to enhance the
plan."
Ontario Superior Court Justice Warren Winkler oversees the
compensation plan, which is independent from the provincial
government. Sources close to the judge told AP he's expected to
release his directives on how the plan should be altered in the
next few days. Last week, Judge Winkler, government lawyers and
claimants said they would all cooperate to resolve people's
concerns.
Opposition members told AP the government has to make sure the
plan is fixed quickly so that residents get the compensation
they deserve. "It's disgraceful," said NDP member Marilyn
Churley. "The people of Walkerton have suffered enough. They
shouldn't have to wait. This appears to be a delay tactic. Why
do they have to go to court? Why don't they just step in, figure
out what the problem is and fix it."
CHAROEN POKPHAND: Motion To Facilitate Class Suit Notice Denied
---------------------------------------------------------------
The United States District Court for the Middle District of
Alabama, Northern Division, denied Plaintiffs motion to
facilitate class notice of a lawsuit brought against Charoen
Pokphand (USA), Inc., on behalf of Jacqueline Davis and Barbara
Green, et al., alleging violations of certain labor laws for
failing to pay them overtime wages for work over 40 hours per
week.
Plaintiffs bring this action under the Fair Labor Standards Act
(FLSA), 29 U.S.C.A. 201-219, on behalf of themselves and others
similarly situated, alleging that their employer, defendant
Charoen Pokphand (USA), Inc., violated the FLSA by failing to
pay them overtime wages for work over 40 hours per week.
Plaintiffs seek to represent all similarly situated employees
(current and former) of Defendant who were subject to the
uniform policy of not paying overtime compensation.
In opposition, Pokphand argues that plaintiffs have not
established that other employees want to opt-in and that the
members of the proposed class are similarly situated to
plaintiffs themselves. Pokphand also argues that plaintiffs have
not shown that the potential opt-in plaintiffs have been denied
pay in violation of the FLSA and therefore class notice should
not be authorized.
CLEARONE COMMUNICATIONS: Court Issues Injunction V. Former Execs
----------------------------------------------------------------
The Honorable Dale A. Kimball, U.S. District Judge, ordered
permanent injunctions from future violations of the antifraud,
reporting and issuer books and records provisions of the federal
securities laws against Frances M. Flood, former Chairman, CEO
and President of ClearOne Communications, Inc. and Susie Strohm,
former CFO of ClearOne.
Ms. Flood was barred from serving as an officer or director of a
publicly held company, and Ms. Flood and Ms. Strohm were ordered
to disgorge performance-based compensation and to pay civil
money penalties. Both Ms. Flood and Ms. Strohm consented to
entry of the orders without admitting or denying the allegations
in the Commission's Complaint, which alleged that for a number
of reporting periods beginning with the quarter and fiscal year
ended June 30, 2001, they engaged in a program of inflating
ClearOne's revenues and net income by engaging in improper
revenue recognition.
The order against Ms. Flood prohibits violations of Section
17(a) of the Securities Act of 1933 and Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, and aiding and abetting violations of Sections 13(a)
and 13(b)(2)(A) of the Exchange Act and Rules 13a-1, 13a-13,
13b2-1 and 12b-20 promulgated thereunder. The order against Mr.
Flood also provides for disgorgement in the amount of $71,000,
prejudgment interest of $2,881.93, a civil penalty of $71,000,
and prohibits Ms. Flood from acting as an officer or director of
any issuer that has a class of securities registered pursuant to
Section 12 of the Exchange Act or that is required to file
reports pursuant to Section 15(d) of the Exchange Act.
The order against Ms. Strohm prohibits violations of Section
17(a)(2) and (3) of the Securities Act, aiding and abetting
violations of Section 13(a) and 13(b)(2)(A) of the Exchange Act
and Rules 13a-1, 13a-13, and 12b-20 promulgated thereunder, and
orders her to disgorge $25,000, prejudgment interest of
$1,014.75 and pay a civil penalty of $25,000.
The suit is styled "SEC v. ClearOne Communications, Inc., et
al., Docket No. 2:03CV00055DAK."
COLUMBIA MANAGEMENT: SEC Lodges Civil Fraud Lawsuit in MA Court
---------------------------------------------------------------
The Securities and Exchange Commission filed for a civil fraud
action in a Boston federal court alleging that Columbia
Management Advisors, Inc. and Columbia Funds Distributor Inc.
allowed certain preferred mutual fund customers to engage in
short-term and excessive trading, while at the same time
representing publicly that it prohibited such trading.
Columbia Management Advisors, Inc. is a registered investment
adviser that manages Columbia mutual funds; Columbia Funds
Distributor is a registered broker-dealer that is the principal
underwriter responsible for selling the funds. Both are
subsidiaries of FleetBoston Financial Corporation.
The Commission's complaint alleges that, from 1998 through 2003,
Columbia Distributor secretly entered into arrangements with at
least nine investors allowing them to engage in frequent short-
term trading in at least seven funds, including international
funds and a fund aimed at young investors.
The complaint alleges that, in some of the arrangements,
defendants accepted so-called "sticky assets" - long-term
investments that were to remain in place in return for allowing
the investors to actively trade in the funds. The complaint
alleges that the nine investors who entered the arrangements
engaged in frequent short-term or excessive trading in at least
sixteen different Columbia funds.
It further alleges that executives of Columbia Distributor
entered into the arrangements, and that Columbia Advisors knew
and approved of eight of the arrangements and allowed them to
continue despite knowing such short-term trading was detrimental
to long-term shareholders in the funds.
According to the Commission's complaint, the short-term
trading arrangements were contrary to disclosures made in the
funds' prospectuses. Specifically, six of the nine arrangements
were entered into or continued after Columbia adopted prospectus
disclosure expressly stating that the funds did not permit
short-term or excessive trading. The complaint alleges that the
traders' investments increased the size of the funds and
resulted in increased advisory fees to Columbia Advisors and
increased Columbia Distributor's revenues.
The Commission's complaint alleges that defendants breached
their duty to act at all times in the best interests of their
mutual funds and to provide full and fair disclosure of all
material facts to investors, because they never disclosed the
short-term trading arrangements, or that Columbia Advisors had a
conflict of interest because the arrangements increased its
fees.
The specific charges against the defendants in the federal court
action are that they violated Section 17(a) of the Securities
Act of 1933, Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934, and Section 17(d) and Rule 17d-1 of the
Investment Company Act of 1940. Additionally, the SEC's
complaint alleges that:
(1) Columbia Advisors violated Sections 206(1) and 206(2)
of the Investment Advisers Act of 1940, and that
Columbia Distributor aided and abetted those
violations;
(2) that Columbia Advisors violated Section 34(b) of the
Investment Company Act; and
(3) that Columbia Distributor violated Section 15(c) of the
Exchange Act.
The Commission is seeking injunctive relief, disgorgement,
restitution of investor losses and civil penalties, and an order
pursuant to Section 36(a) of the Investment Company Act
enjoining Columbia Advisors from serving as an investment
adviser to any registered investment company.
The suit is styled "SEC v. Columbia Management Advisors, Inc.
and Columbia Funds Distributor, Inc., Civil Action No. 04 CV
10367-GAO."
COPPER MOUNTAIN: Re-argues Motion To Dismiss Stock Lawsuit in CA
----------------------------------------------------------------
Copper Mountain Networks, Inc. re-argued its motion to dismiss
the consolidated securities class action filed in the United
States District Court for the Northern District of California
against it and two of its officers.
The suit, styled "In re Copper Mountain Networks Securities
Litigation, case number C-00-3894-VRW," alleges violations of
the federal securities laws arising out of recent declines in
the Company's stock price.
Several related derivative actions against certain of the
Company's current and former officers and directors are pending
in California Superior Court and in Delaware. The complaints
allege claims in connection with various alleged statements and
omissions to the public and to the securities markets.
The Company filed a motion to dismiss the federal securities
suit, which was heard on November 29, 2001. The motion was re-
argued on February 19, 2004, and the Company expects a ruling
shortly. No discovery has been conducted.
FLORIDA: Gays Launch Lawsuit V. State Over Same-Sex Marriage Ban
----------------------------------------------------------------
Dozens of homosexual men and women filed a lawsuit challenging
Florida's law prohibiting same-sex marriages, the Associated
Press reports. The suit names as defendant Broward County Clerk
Howard Forman who issues wedding licenses for the county.
The move comes a day after President Bush asked for a
constitutional amendment prohibiting same-sex marriages. The
president's request followed a decision by officials in San
Francisco to allow gays and lesbians to wed, possibly in
violation of California law.
"An idea whose time has come can never be stopped," Ellis Rubin,
attorney for the 175 plaintiffs, told AP. "This idea's time is
now."
Jacob DiPietre, a spokesman for Gov. Jeb Bush, said the
president's brother stands behind the state law. Florida is
among 38 states that prohibit same-sex unions. "We've had a law
on the books in Florida since 1977 banning gay marriage and the
governor took an oath of office to uphold the laws of the
state," he told AP.
Gays and lesbians employed by Broward County are eligible to
have their same-sex partners covered by work-provided health
insurance and receive other benefits typically extended to
spouses.
"We're people, human beings, American citizens," James Stewart,
a retired teacher from Dania Beach, told AP. "It's an old
cliched line, but you know what? If we're going to pay our
taxes, we deserve every right that should be granted to every
American citizen."
FORD MOTOR: MS Court Remands Defective Parts Suit To State Court
----------------------------------------------------------------
The United States District Court for the Southern District of
Mississippi, Jackson Division granted Plaintiffs Motion to
Remand a lawsuit brought against the Ford Motor Company, et al.,
on behalf of Plaintiffs Angela Burrell, Philip Pate, and Jesse
Earl Friar, et al., to recover for personal injuries and
property damages arising out of automobile accidents.
Plaintiffs allege that Defendants manufactured and sold them
automobiles with defective ignition systems, which caused the
cars to stall, resulting in the subject accidents. Plaintiffs
claim that Defendants knew about the defects and actively
sought to conceal them. The claims in the Complaint are strict
liability, fraudulent concealment, deceptive trade practices,
deceptive advertising, negligence, breach of implied and
express warranties, negligent misrepresentation, and civil
conspiracy.
The lawsuit was originally filed in the Circuit Court of Holmes
County, Mississippi, on December 27, 2002. The case was timely
removed to this Court on April 17, 2003. Plaintiffs filed the
subject Motion to Remand on May 16, 2003.
The defendants named in the case are the FORD MOTOR COMPANY;
East Ford, Inc.; Don Fancher Autos, Inc.; and Fictitious
Defendants "A"--"Z".
GLOBAL RISK: 500 Men Deployed in Iraq File Suit For Unpaid Wages
----------------------------------------------------------------
Global Risk Strategies, Inc. and its Fiji representative
Lieutenant Colonel Sakiusa Raivoce faces a potential class
action filed on behalf of 500 men the Company contracted for
deployment in Iraq, ABC Radio Australia reports.
Fiji lawyer Tevita Fa is representing a group of former soldiers
who alleged the Company promised them lucrative pay in Fiji.
Once they got to Iraq, the men allegedly had to sign a contract
for lower wages.
Mr. Fa told ABC Radio that none of the soldiers could return to
Fiji, because they didn't have any money and had to stay on and
continue their work with the Company. He asserts the men are
owned US$12.5 million in wages.
GREEN HORNET: FDA Warns Against Purchase Of Illegal Street Drug
---------------------------------------------------------------
The Food and Drug Administration (FDA) is warning consumers not
to purchase or consume a liquid product called Green Hornet, a
product promoted on the Internet, and sold in stores, as a
herbal version of the illegal street drug "Ecstasy."
FDA considers this product to be an unapproved new drug since it
contains, among other ingredients, the undeclared active
ingredients diphenhydramine and dextromethorphan, found in over-
the-counter (OTC) drugs.
FDA recently became aware of reports of adverse events
experienced by four teenagers after consuming Green Hornet. The
teenagers were rushed to a hospital emergency room suffering
from seizures, excessive heart rates, severe body rashes and
high blood pressure. FDA is investigating whether Green Hornet
alone or in combination with other substances caused the severe
adverse reactions.
"We are investigating whether the product consumed by the four
teenagers caused the seizures and other symptoms. Our advice
about so-called "safe" alternatives to street drugs remains the
same: They are not safe. Do not buy them, and do not use them,"
said FDA Commissioner Mark B. McClellan, M.D., Ph.D. "FDA will
pursue every available enforcement option to remove these
products from the marketplace and will seek penalties against
those responsible for offering them."
The Green Hornet product involved in this case was sold by
Kekio, Inc., Colorado Springs, Colo., doing business as a store
called Mind Excursions. The store, which also operates a
website, has stopped selling the product.
The product comes in 4 and 16oz. bottles and the label does not
bear the name of the manufacturer. The products labeling lists a
variety of herbal ingredients, however FDA analysis has
identified two drug ingredients in this product: diphenhydramine
and dextromethorphan, which are individually found in numerous
OTC cough/cold products.
HULBURT BARRINGER: SEC Commences Subpoena Enforcement Action
------------------------------------------------------------
The Securities and Exchange Commission filed a subpoena
enforcement action in U.S. District Court for the Northern
District of Georgia against Hulburt Van R. Barringer and Susan
Diane Barringer.
Pursuant to a subpoena issued on October 24, 2003, the
Barringers were obligated to produce documents and to appear for
testimony before the Commission on December 10th and 11th, 2003.
After informing the Commission of their intentions through
counsel, the Barringers failed to appear and failed to produce
the required documents. Accordingly, the Commission filed its
Application For An Order To Show Cause And For An Order
Requiring Obedience To Subpoena, along with a supporting
Memorandum and Declaration.
In its Application and supporting filings, the Commission
alleges that on August 5, 2003, the Commission issued its Order
Directing Private Investigation and Designating Officers to Take
Testimony (Formal Order) in the Wealth Builders International
investigation. The Formal Order authorizes the staff to conduct
an investigation into whether, among other things, Wealth
Builders International or certain persons and entities
associated with it violated the antifraud provisions of the
federal securities laws.
According to information received by the Commission, Susan
Barringer is the former office manager of Wealth Builders
International and Van Barringer is a former promoter;
accordingly, their testimony may provide evidence as to whether
they or others violated the federal securities laws. The
Commission seeks an Order directing the Barringers to show cause
why the Court should not enter an Order requiring them to appear
for testimony and produce the required documents.
The suit is styled "SEC v. Hulburt Van R. Barringer and Susan
Diane Barringer, Case No. 1:04-MI-0045," and is pending in the
United States District Court for the Northern District of
Georgia.
HUSSEIN EL ZEIN: SC Court Enters Injunction For Securities Fraud
----------------------------------------------------------------
The Honorable Margaret B. Seymour, U.S. District Judge for the
District of South Carolina, entered an Order of Permanent
Injunction and Other Relief Against Hussein Hassan El Zein on
February 19 restraining him from further violations of Sections
5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder.
Mr. El Zein was ordered to pay disgorgement, prejudgment
interest and a civil penalty in amounts to be resolved upon
motion of the Commission at a later date. Mr. El Zein consented
to the entry of the order without admitting or denying any of
the allegations of the Commission's complaint.
The Commission's complaint alleged that H. El Zein, Mohamad
Elzein and Darin Knee, from approximately July through October
2001, raised approximately $541,000 from investors in a
fraudulent, unregistered offering of securities in the form of
investment contracts.
The defendants made materially false and misleading statements
and omissions in connection with the offers and sales of the
investment contracts including, among other things, false
historical returns and promised returns without a reasonable
basis therefore. Also, the complaint alleged that the private
placement memorandum utilized by the defendants inaccurately
stated that Focus Mentors Elzein Management (Focus Mentors) was
fully insured by Allstate Insurance Company, such that the
assets of Focus Mentors were protected in the unlikely case that
Focus Mentors or its executives were to declare bankruptcy and
falsely stated that each client's principal investment was
protected in the case of acts of dishonesty.
These statements were false because Focus Mentors did not have
such insurance. The complaint further alleged that Mr. Knee
promoted Focus Mentors on his MoneyJoe.com website and in his
related electronic newsletter called "Insiders Club." Among
other things, the complaint alleged that Knee's website
described Focus Mentors as a "secure opportunity" with "107%
plus principal guaranteed" even though Mr. Knee had no
reasonable basis for such statements.
The suit is styled "SEC v. Mohamad Wael Ibrahim Elzein,
individually and d/b/a Focus Mentors Elzein Management; Hussein
Hassan El Zein; and Darin Raymond Knee, Civil Action File No.
3:03-2843-24 D.S.C."
IBM CORPORATION: Court Seeks More Data on Pension Suit Damages
--------------------------------------------------------------
The United States District Court in the Southern District of
Illinois ordered workers suing International Business Machines
Corporation (IBM) in a landmark pension lawsuit to supply more
information about how much damages they think the Company should
pay, Dow Jones Business News reports.
Judge G. Patrick Murphy ordered the Company and the plaintiffs
to give him more materials on the issue. "I'm going to do my
very best to get this case wrapped up by summer," Judge Murphy
said, Dow Jones reports. "The parties have submitted papers,
and I have taken oral arguments. I've asked them to give me some
more materials and they're in the process of doing that.
Everyone is going to be given all the opportunity they need."
Earlier this month, Judge Murphy ruled that the Company must
make back payments to workers covered by a retirement plan that
didn't give those with more years of service a fair share of
benefits. No damages have yet been set in the class action, but
IBM has said that it could owe $6 billion in back benefits if
the judge were to adopt an earlier proposal by plaintiffs.
The Armonk, N.Y., company says it shouldn't have to make any
retroactive payments at all. "The remedies requested by these
plaintiffs are unsupportable, factually and as a matter of law,"
IBM spokeswoman Kendra Collins told Dow Jones on Wednesday.
"There have been no decisions made on the amount of retroactive
relief, which we believe should be zero."
The rulings follow a highly publicized decision by Judge Murphy
in July that held IBM violated age-discrimination provisions of
federal pension law when it converted one of its pension plans
to a cash-balance plan in 1999. In October, plaintiffs told the
court they wanted IBM to recalculate pension benefits accrued
under the plan using a new formula. IBM countered in December
by saying it didn't owe any retroactive benefits.
IBM has argued that it shouldn't be liable for back benefits,
based on City of Los Angeles, Department of Water and Power v.
Manhart, a 1978 pension case that involved the issue of age
discrimination. IBM argued that like the city of Los Angeles, it
was blind-sided by what it called a drastic change in the law.
In the case of IBM, the change was Judge Murphy's contention
that its plan had violated federal law.
Judge Murphy said in his ruling earlier this month that IBM is
liable, and, "There has not been a change in the law . All that
has changed is IBM's clever, but ineffectual, response to law
that it finds too restrictive for its business model."
INVESTORS ASSOCIATES: SEC Bars Ex-Broker for Penny Stock Fraud
--------------------------------------------------------------
The Securities and Exchange Commission barred broker Eric
Stuerken from association with a broker or dealer and from
participating in an offering of penny stock.
Mr. Stuerken pleaded guilty in U.S. District Court for the
Southern District of New York to securities fraud and conspiracy
to commit securities fraud, mail fraud and wire fraud.
According to the criminal indictment, Mr. Stuerken engaged in
high-pressure sales tactics that included:
(1) using false and misleading sales pitches to induce
clients to buy penny stocks promoted by Investors
Associates, Inc. (House stocks), including making
baseless price predictions about the stocks and failing
to inform clients of negative aspects of the issuers;
(2) opening clients' accounts with well-known stocks and
switching the clients to House stocks;
(3) making unauthorized purchases of House stocks in
clients' accounts;
(4) making false and misleading statements to persuade
customers not to sell House stocks; and
(5) failing to take and execute customer orders to sell
House stocks
At the time of the conduct underlying the criminal convictions,
Mr. Stuerken was associated with the Melville, New York branch
of Investors Associates, Inc., a now defunct broker-dealer.
Without admitting or denying the Commission's findings, except
as to the Commission's jurisdiction and his underlying criminal
conviction, Mr. Stuerken consented to be barred by the
Commission from association with a broker or dealer and from
participating in an offering of penny stock. In the criminal
proceedings, the U.S. District Court ordered him to pay
restitution to victims to the extent of his earnings at
Investors Associates, Inc.
MARTHA STEWART: Defense Rests Its Case In Securities Fraud Trial
----------------------------------------------------------------
Martha Stewart's lawyers rested their case on Wednesday after
presenting just one witness in the belief that prosecutors
failed to prove securities fraud and other charges against the
company, Reuters News reports.
Ms. Stewart and her former Merrill Lynch stockbroker Peter
Bacanovic face accusations that they lied to investigators to
hide the reason behind the celebrity homemaker's sudden sale of
nearly 4,000 shares ImClone Systems Inc. stock on December 27,
2001.
Prosecutors charged Mr. Bacanovic with ordering his assistant to
give Stewart a secret tip that ImClone's founder, Sam Waksal,
was dumping all of his shares. Ms. Stewart then quickly acted
on the news by selling all of her stock in the biotech company.
ImClone shares fell steeply the next day when it was announced
that health regulators had given the thumbs down to the
company's cancer drug. However, the defendants deny the charges
and maintain that they had a pre-existing agreement to sell Ms.
Stewart's shares if ImClone fell to $60.
Ms. Stewart's lawyers put former Stewart attorney Steven Pearl
on the stand before resting their case. Mr. Pearl, previously
an associate at the law firm that represented her when she was
interviewed by federal authorities in February 2002, was
assigned to take notes. One key part of his version
contradicted a report written by an FBI agent who also took
notes during the interview. The interview, which was not tape
recorded, provided prosecutors with evidence for charges that
Stewart made false statements to investigators.
Ms. Stewart, a former model and stockbroker who turned a
catering company into a media empire, could face up to 10 years
in prison if convicted of securities fraud, the most serious of
the charge against her. Her lawyers decided against putting the
celebrity businesswoman on the stand.
Lawyers are still awaiting rulings from U.S. District Judge
Miriam Goldman Cedarbaum on whether key charges against Stewart
would be dismissed, including the securities fraud count.
That charge accuses Stewart of proclaiming her innocence in a
move to mislead investors in her company, Martha Stewart Living
Omnimedia.
While Stewart's lawyers only put Pearl on the stand, Bacanovic's
defense included a handful of witnesses, including Heidi DeLuca,
Stewart's business manager, who provided the strongest testimony
for the defense team. DeLuca backed the defendants' version of
the stock sale agreement, saying that Bacanovic had told her he
wanted to set a floor price for the ImClone shares.
In its rebuttal case on Wednesday, prosecutors played a tape of
investigators questioning Bacanovic in which he said he had not
discussed a floor price with DeLuca and that he did not get into
that level of detail with her.
Closing arguments in the federal court are scheduled for Monday
and Tuesday. The jury will begin deliberations the next day, six
weeks after their selection.
MERCURY GENERAL: Court Allows Plaintiffs To File Amended Suits
--------------------------------------------------------------
The Los Angeles Superior Court in California allowed plaintiffs
to file amended class actions against Mercury General
Corporation and Mercury Insurance Corporation, over their
insurance valuation systems.
One suit, originally captioned "Dan O'Dell, individually and on
behalf of others similarly situated v. Mercury Insurance
Company, Mercury General Corporation," involves a dispute over
whether Mercury's use of certain automated database vendors to
help determine the value of total loss claims is proper.
In 2003, the court granted the Company's motion to stay the
action pending compliance with a contractual arbitration
provision. After completion of the arbitration which should
occur in June 2004, the Company and its attorneys intend to
challenge the pleadings and seek a dismissal.
The others suit, styled "Marissa Goodman, on her own behalf and
on behalf of all others similarly situated v. Mercury Insurance
Company (Los Angeles Superior Court)," challenges the Company's
use of certain automated database vendors to assist in valuing
claims for medical payments. The plaintiff is seeking to have
the case certified as a class action.
As with the O'Dell case, and the other cases in the coordinated
proceedings, plaintiff alleges that these automated databases
systematically undervalue medical payment claims to the
detriment of insureds. The plaintiff is seeking actual and
punitive damages.
Similar lawsuits have been filed against other insurance
carriers in the industry. The case has been coordinated with
two other similar cases, and also with ten other cases relating
to total loss claims. The Company and the other defendants were
successful on demurrer. Plaintiffs were given leave to file
amended complaints, which are expected in 2004.
MERCURY INSURANCE: Court Refuses Class Certification in CA Suit
---------------------------------------------------------------
The Orange County Superior Court in California refused class
certification for the lawsuit filed against Mercury Insurance
Company, styled "Sheila Leivas, Individually And On Behalf Of
All Others Similarly Situated vs. Mercury Insurance Company."
The suit involves a dispute over premium retained by the Company
during a time when the plaintiff was not covered following a
voluntary cancellation of the policy and prior to reinstatement
of the policy.
The court also overruled plaintiffs' Demurrer to the Company's
cross complaint, thereby allowing Mercury to proceed with its
action for the return of premium owed to Mercury if plaintiff's
action proceeds.
MICHIGAN: Appellate Court Upholds State Sex Offender Registry
-------------------------------------------------------------
The 6th U.S. Circuit Court of Appeals has upheld Michigan's sex
offender registry, saying the registry doesn't imply those
listed are a danger to society, the Associated Press reports.
The court said the registry simply gave names and addresses of
all those convicted of a sex offense, making no reference to
whether the person is dangerous. "Under well-settled precedent
... damage to reputation alone does not implicate a protected
liberty or property interest," the court said in a ruling
released Wednesday.
The decision overturns a lower court ruling, in the lawsuit
filed by former state corrections officer Daniel Fullmer, who
was convicted of having sex with a female inmate in 1999. Mr.
Fullmer pleaded no contest to criminal sexual conduct. He has
argued that he shouldn't be included on the registry because he
is not a danger to the public. A federal judge in 2002 ruled
the registry was unconstitutional because it stigmatized Mr.
Fullmer. The appeals court kept the registry open while
deciding the case.
State Attorney General Mike Cox welcomed the appeals court's
decision. "Knowledge is power, and knowing of where sex
offenders live helps to keep our communities, families and
citizens safer," Mr. Cox said in a statement.
All states have sex offender registries, but not all make the
contents public. Michigan's registry was made public on the
Internet in 1999. It gives the names and addresses of convicted
sex offenders as well as the charges of which they were
convicted.
NEW YORK: Favorable Summary Judgment Granted In Motorist Lawsuit
----------------------------------------------------------------
The United States District Court for the Southern District of
New York granted Summary Judgment in favor of the city of New
York for a lawsuit brought against the City of New York, et al.,
on behalf of James Mcguire III, et al., for alleged violations
of Vehicle and Traffic laws with regards the suspension of their
licenses.
The plaintiffs here are ten motorists from, variously, New York,
New Jersey, and Pennsylvania who were arrested in New York
between 2001 and 2003 for driving with suspended licenses in
violation of section 511(1) of the New York State Vehicle and
Traffic Law.
Plaintiffs allege that they were unaware that their licenses
were suspended and that they were arrested because the arresting
officers, in accordance with the practice of the New York City
police department, relied entirely on records of the New York
State Department of Motor Vehicles showing that plaintiffs'
licenses had been suspended. Plaintiffs claim that this was an
insufficient basis to give the arresting officers probable cause
to believe that the plaintiffs had the scienter required for
violation of 511(1), because the DMV records did not show that
plaintiffs had received actual notice of their suspensions.
Plaintiffs further allege that even assuming the police officers
had reason to believe such notice had been given, in actuality
the DMV failed to take the steps that were necessary to provide
such notice in a manner reasonably calculated to reach the
plaintiffs.
On these grounds, plaintiffs allege that the constitutional
rights of plaintiffs and others similarly situated were violated
by the arresting officers, their superiors (i.e., the New York
City Police Commissioner and the Mayor of New York), the City of
New York, and the Commissioner of the DMV (Raymond Martinez).
Following extensive discovery, briefing, and oral argument, the
Court granted summary judgment in favor of the arresting
officers, the Mayor, the Police Commissioner, and the DMV
Commissioner on grounds of qualified immunity, as well as on
various other grounds particular to certain of these defendants.
See transcript, October 9, 2003, at 10-11, 20. The Court
reserved, however, on the plaintiffs' remaining claim against
the City, which asserted that the City's practice of arresting
persons for violation of 511(1) based solely on a computer check
of DMV suspension records violated 42 U.S.C. 1983. The Court now
grants summary judgment in favor of the City of New York on that
claim as well. Relatedly, the Court here sets forth an
additional ground for its previous determination granting
summary judgment in favor of the DMV Commissioner.
NORTHWEST PIPE: Agrees To Settle Fire-Sprinkler Suit For $14.5M
---------------------------------------------------------------
Northwest Pipe Co. reached a $14.5 million preliminary
settlement agreement for a class action filed in the United
States District Court in San Jose, California, over allegedly
defective fire-sprinkler pipe, Knight-Ridder/ Tribune Business
News reports.
Foothill/De Anza Community College District in California filed
the suit in 2000, after they installed Poz Loc in its Campus
Center in Cupertino, California. The suit alleges that the
ultrathin, small-diameter pipe began leaking in 1997 and later
blew apart at the seams, causing $100,000 in damages and
replacement costs. The suit also named as defendant the pipe's
original manufacturers, Texas-based Southwestern Pipe and P&H
Tube.
The lawsuit was granted class certifications after plaintiffs'
attorneys produced evidence that accordingly showed Poz Loc had
failed in at least 100 other locations. The pipe has been
installed in more than 1,500 schools, hospitals, hotels,
commercial buildings, parking garages and private homes in six
Western states.
The settlement, if approved by a federal judge in San Jose,
Calif., would resolve claims brought against the Company, Dow
Jones reports. Under the agreement, Northwest Pipe's insurers
will cover the first $5 million in replacement claims and legal
costs. The company will be liable for any remaining claims, up
to $9.5 million, through 2021. The Company agreed to the deal
without conceding liability.
NUTRAMERICA: Faces CA, NY Suits Over TrimSpa Diet Product Line
--------------------------------------------------------------
Nutramerica, maker of the popular TrimSpa diet product line
faces two class actions filed by Verboon, Milstein & Peter, LLP
in California and New York, accusing the maker of false and
misleading advertising and of misrepresenting the ingredients
contained in TrimSpa Completely Ephedra Free, also known as
TrimSpa EF.
Ms. Anna Nicole Smith has recently been touting the
effectiveness of TrimSpa EF in a series of high-profile guest
appearances in venues such as Larry King Live and Live With
Regis and Kelly, in advertisements, magazine cover stories and
other arenas, including the Daytona 500, where her likeness was
featured on a race car sponsored by the makers of TrimSpa, a
press release from the law firm states. During all of her
appearances, Ms. Smith has enthusiastically claimed that the
TrimSpa diet supplement is a "miracle drug" and the reason she
was able to lose so much weight in just a matter of months.
Nutramerica, the manufacturer and distributor of TrimSpa EF,
maintains that it replaced controversial ephedra with the
substance Hoodia Gordonii, an African cactus that grows to six
feet. The manufacturer claims that Houdia works as an appetite
suppressant, prevents hunger pangs, provides a feeling of
fullness and prevents over-eating. According to the TrimSpa web
site, "This amazing ingredient is a natural appetite suppressant
used for generations by tribal hunters of South Africa to stave
off hunger during long hunting expeditions."
Lawsuits filed in California on January 21, 2004 and another
filed Monday, February 23, 2004 in New York allege not only that
TrimSpa doesn't work, but that TrimSpa doesn't even contain
Houdia. The lawsuits present scientific studies that reveal
that TrimSpa EF does not contain the appetite suppressant found
in Hoodia Gordonii. Further studies show that TrimSpa EF does
not contain any other appetite suppressant.
The lawsuits allege that through deception and targeting people
who want to lose weight, Nutramerica has sold thousands and
thousands of units of TrimSpa EF. The complaints seek an
unspecified amount of damages.
For further information, please contact Terry Fahn or Tammy
Taylor of Sitrick and Company for Verboon, Milstein & Peter, LLP
by Phone: +1-310-788-2850
OAO MEGIONNEFTEGAZ: Minority Holders Launch Suit v. Russian Firm
----------------------------------------------------------------
Portfolio investors in major Russian oil company OAO
Meginneftegaz asked Russian courts to halt a series of deals the
Company conducted with interested parties, Dow Jones Business
News reports.
The Company, a subsidiary of OAO SlavNeft, allegedly illegally
forfeited $1.2 billion in oil export receipts to the Company in
2002 and the first nine months of 2003, Vostok Nafta Investment
Ltd. told Dow Jones. "Although Megionneftegaz refuses to
provide details of related-party transactions, these
transactions are clearly detrimental (to the company)," said
Alex Williams, Vostok Nafta's Russia director, at a press
conference.
Russian oil companies TNK-BP - a joint venture between BP PLC
(BP) and the shareholders of Tyumen Oil Co. (TNKO.RS) - and OAO
Sibneft (SIBN.RS) own Slavneft on a 50-50 basis. In turn,
Slavneft owns 61% of Megionneftegaz. However, Megionneftegaz
accounts for 90% - or 316,000 barrels a day - of Slavneft's oil
production.
Mr. Williams said Vostok Nafta has begun inviting thousands of
individuals registered as Megionneftegaz shareholders, most of
whom are employees of the oil company, to turn the legal
proceedings into a class action. In addition, the investment
fund, which says it owns about 8.5% of Megionneftegaz, will also
file suits in Western courts.
BP has referred all questions about Megionneftegaz to TNK-BP,
which has declined to comment, Dow Jones reports. In the past,
TNK-BP has said it won't have control over Slavneft's day-to-day
operations until TNK-BP and Sibneft sign a definitive agreement
on how to split the assets.
Instead of exporting oil directly to the global market,
Megionneftegaz sells its crude to trading companies at below-
market prices. In court, Vostok Nafta intends to prove that
Megionneftegaz's trading partners are ultimately owned by
interested parties - Slavneft, Sibneft and TNK-BP. Shareholders
didn't vote on any of these deals, rendering them illegal, Mr.
Williams told Dow Jones. According to Russian law, interested
parties are prohibited from voting on transactions that could be
beneficial to them.
Mr. Slavneft couldn't be immediately reached for comment, Dow
Jones reports. However, in the past, Slavneft spokesman Ilya
Medvedev has dismissed Vostok Nafta's claims, saying the fund's
goal is to force up the price of Megionneftegaz's shares in the
event of a buyout by Slavneft.
PARMALAT FINANZIARIA: U.S. Regulators Want Stock Probe Details
--------------------------------------------------------------
Officials from the United States Securities and Exchange
Commission (SEC), the Department of Justice and the Federal
Bureau of Investigation met with Italian investigators this
week, seeking to gather information on how U.S financial
institutions worked with Parmalat, as police made another arrest
linked to the food group's scandal, Reuters reports.
The US officials were "particularly interested in our
documentation and information regarding Bank of America and
Deloitte & Touche," a judicial source told Reuters.
A former Bank of America executive in Italy and the Milan office
of auditors Deloitte & Touche are under investigation in a wide-
ranging probe by prosecutors who are looking into the near
collapse of Parmalat in December. The source, who requested
anonymity, said the U.S. officials were also interested in what
the Italian prosecutors knew about the ties of Citigroup to the
dairy multinational.
A Citigroup unit set up a financing vehicle named Buconero, or
Black Hole, which U.S. lawsuits have alleged helped Parmalat
mislead investors. Citigroup has denied the claim. Deloitte,
Citigroup and Bank of America declined to comment, Reuters
states.
The source said Wednesday's meeting was informal and that
Italian authorities would make a formal request to U.S.
authorities for documents that could be used in a trial. On
Tuesday, the U.S. team met prosecutors in the northern city of
Parma who are also investigating the food group.
Parmalat triggered one of the world's biggest financial scandals
in December when a four-billion-euro hole appeared in its
accounts. Its debts have since been revealed to be 14.5 billion
euros. The SEC in December charged Parmalat with securities
fraud relating to the sale of $1.5 billion in bonds in the
United States, and it has worked with Italian authorities since
then.
Bank of America, Citigroup and Morgan Stanley are among seven
institutions under investigation in Italy to see how much they
knew about Parmalat's finances when they did business with the
group, media reports have said.
Parmalat founder Calisto Tanzi has told investigators that about
500 million euros ($630 million) was diverted from publicly-
listed Parmalat into the family's tourism companies. Mr.
Tanzi's daughter Francesca Tanzi, who sat on the board of
Parmatour, was arrested last week.
PELE-PHONE: Allegedly Seeks to Block Release of Gov't. Report
-------------------------------------------------------------
Pele-Phone asked the Tel Aviv District Court in Israel to block
the release of a Ministry of Communications document dated 2000,
stating that the Company and the other wireless companies
charged exorbitant prices for incoming calls, the Globes Online
reports.
Architect Ido Dauber and producer Danny Wesley filed the report
in court, as part of their petition seeking approval of a class
action against the Company and Cellcom. The petition, filed in
early December 2002, asserted that the wireless companies had
charged exorbitant prices for incoming calls from other
networks.
Two years ago, the consumer paid as high as NIS 0.70 per minute
for incoming calls, in addition to the regular price paid by the
caller to his network. The class action petitioners charged
wireless firms with abusing their monopoly and the fact that the
customer could not choose the company through which the call
would be made to a subscriber of another network, to charge
exorbitant prices.
The report, dealing with "reciprocal connectivity rates to
cellular networks," found that significant market failure had
harmed consumers. Consumers were unable to choose on which
network they finished their call. Given the inflexible demand
in the incoming calls market and a lack of alternatives, the
cellular companies took advantage of their power to raise prices
above what they would have been in a state of balance.
The report also found that the proper and appropriate price of
an incoming call was NIS 0.25 per minute in December 1999
prices, while the wireless companies had raised their prices far
above this, Globes Online reports. Thus, the Ministry of
Communications ordered a reduction of the price to NIS0.53 per
minute starting in 2003.
The figures in the report have been published many times in the
press and other forums. The Company nevertheless this week
petitioned the court for an order of confidentiality regarding
the document. The petition also asked that the report be
removed from the court file, since it was a confidential
document that could not be used as evidence.
Pele-Phone's petition was submitted to Tel Aviv District Court
Judge Hadassa Achituv-Hartman. The initial hearing on the class
action petition has been scheduled for March 3.
PHILIPPINES: Government May Have Committed Fraud in Marcos Case
---------------------------------------------------------------
The Philippine government may have misrepresented itself in a
United States lawsuit seeking to determine ownership of about
$40 million belonging to late dictator Ferdinand Marcos, United
States District Court in Hawaii Judge Manuel L. Real told the
Associated Press.
Filipinos launched a lawsuit against the Marcos estate in 1986,
the year he was deposed and fled to Hawaii, where he died in
exile in 1989. In 1995, a Honolulu jury awarded plaintiffs $2
billion after finding Marcos responsible for summary executions,
disappearances and torture.
Attorneys representing the 9,539 Filipino plaintiffs are now
trying to recover the $40 million to start paying the $2 billion
judgment. To date, none of the plaintiffs, nor their estates,
have received any compensation, and the award has grown to more
than $3.1 billion with interest. The $40 million originally was
held by a Panamanian financial company alleged to be a shell
corporation established by Marcos to hide illegally obtained
assets.
Judge Real said information brought up at an earlier hearing
made it appear that perhaps some form of agreement was reached
between the Philippine government and other parties in the case
- specifically the Philippine National Bank and the Panamanian
corporation, Arelma Inc. - to turn the funds over to the
government should either party prevail. Judge Real asserted
that any such agreement would constitute fraud, and ordered
attorneys to investigate the relationship between all three
parties. The trial was recessed until May 24.
The Philippine government cited "sovereign immunity" and refused
to be part of the case, saying it had no connection to the $40
million and that it should not be a party, AP reports.
Jay Ziegler, an attorney representing Arelma and the Philippine
National Bank, declined comment, saying he wanted to further
study the judge's request and discuss the matter with his
clients, AP reports.
Robert Swift, an attorney for the class of plaintiffs, told AP
Arelma was established by Marcos in Panama in 1972 - the same
year he declared martial law in the Philippines - as a shell
corporation to hide illegally obtained assets. He said $2
million from Arelma was placed in a New York brokerage firm in
1972, and through the management of a Swiss financier grew to
$40 million by 2000. The financier, Jean-Louis Sunier, testified
in a deposition last year that he managed the account for
Marcos, Mr. Swift added.
Mr. Ziegler said the undisputed facts in the case show only that
Arelma was incorporated in 1972 and that funds were transferred
to a New York account. He said there is no evidence to
definitively link either account to Marcos, AP states.
Also staking a claim to the $40 million was attorney Daniel
Cathcart, who represents the estate of Rogelio Roxas, a Filipino
treasure hunter who contends Marcos assets deposited into Arelma
included money from the sale of items stolen from him, including
a diamond-encrusted gold Buddha statue and some $22 billion
worth of gold bullion.
The $40 million is separate from some $683 million in frozen
Swiss assets that the Philippine Supreme Court awarded to the
Philippine government last July. Plaintiffs attorneys contend
the Marcos regime illegally obtained millions that were stashed
in various accounts around the world.
QUALITY DISTRIBUTION: Faces Investor Suit For Securities Fraud
--------------------------------------------------------------
Quality Distribution Inc. is the target of a purported class
action alleging the company materially overstated its financial
results and presented figures that didn't comply with generally
accepted accounting principles in the prospectus for its initial
public offering, Dow Jones Business News reports.
The law firm of Schiffrin & Barroway LLP said in a press release
Tuesday that the suit names Quality Distribution Chairman,
President and Chief Executive Thomas L. Finkbinder and Chief
Financial Officer Samuel M. Hensley.
Schiffrin & Barroway said the suit, which is seeking class-
action status, covers those who purchased the stock through Feb.
2, when the company said it would restate results dating back to
2001. Quality Distribution said it had discovered insurance law
violations at its Power Purchasing Inc. unit.
Representatives for the tank truck operator weren't immediately
available after normal business hours Tuesday to comment on the
suit.
As reported, Quality Distribution expects the accounting
irregularity will trigger a charge of $3 million to $6 million
in its fourth quarter and believes the restatement will shave
$10 million from operating income prior to 2003 and will cut $6
million from reported results for the nine months ended Sept.
30.
RALPHS GROCERY: SEC Issues Cease-And-Desist Orders V. 3 Ex-Execs
----------------------------------------------------------------
The Securities and Exchange Commission issued three separate
Orders directing Christopher S. Hall, Steven L. Mortensen, and
Steven F. Stork, three former controllers of Ralphs Grocery
Company, to cease and desist from committing violations of the
internal controls provisions of the Securities Exchange Act of
1934.
Each respondent consented to the entry of his Order without
admitting or denying the Commission's findings. The Orders
concern seven General Liability Accounts that contained
insufficiently supported transactions during the period 1998
through the first two quarters of 2000.
In the Orders, the Commission found that Ralphs placed excess
income in the General Liability Accounts on its balance sheet
instead of recognizing the income immediately through its income
statement in conformity with Generally Accepted Accounting
Principles (GAAP). When an accounts receivable employee at
Ralphs received an atypical, or non-recurring, check or other
income receipt, Ralphs, on occasion, recorded that item in one
of the General Liability Accounts that functioned without proper
documentation or accounting basis as reserve accounts. Ralphs
also inflated certain expenses and correspondingly built up the
General Liability Accounts. Then, from time to time, Ralphs
transferred amounts from the General Liability Accounts into
income without proper documentation or accounting basis.
The Commission also found that at quarter end, Ralphs used
journal entries to transfer substantial portions of the balances
of the General Liability Accounts to other liability accounts.
At the beginning of the next period, Ralphs automatically
reversed these journal entries and restored the pre-existing
balances to the General Liability Accounts. This process had
the effect of reducing the balances in the General Liability
Accounts at quarter end.
The Commission's Order concerning Christopher S. Hall found that
Mr. Hall, 39, served as vice-president and controller of Ralphs
from 1995 to 1997. In early 1997, Ralphs also appointed Mr.
Hall its chief accounting officer. In June 1998, Ralphs
promoted him to senior vice-president of finance and
administration. On January 12, 1999, Mr. Hall's financial
reporting and accounting responsibilities were transferred to
other individuals at Ralphs. He left two months later.
The Order also found that Mr. Hall knowingly failed to implement
a system of internal accounting controls to detect or prevent
Ralphs' transfers of items into the General Liability Accounts
without proper documentation or accounting basis. As a result,
the Commission found that Respondent Hall committed violations
of Section 13(b)(5) of the Exchange Act and Rule 13b2-1
thereunder, and was a cause of Ralphs' violations of Sections
13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and
Rules 13a-1 and 13a-13 thereunder that occurred during, or
related to, Ralphs' first three quarters of 1998.
The Commission's Order concerning Steven L. Mortensen found that
Mr. Mortensen, 41, was director of accounting at Ralphs from
1996 until June 1998 and reported to the controller of Ralphs.
In June 1998, he was promoted to vice president of finance and
controller of Ralphs and through early 1999 continued to report
to the former controller who had been promoted to Chief
Accounting Officer. Mr. Mortensen continued to hold the
position of vice president of finance and controller until
December 1999, when he left Ralphs.
The Order also found that Mr. Mortensen circumvented the
internal controls that then existed at Ralphs. As a result, the
Commission found that Mr. Mortensen committed violations of
Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2
thereunder.
The Commission's Order concerning Steven F. Stork found that Mr.
Stork, 50, was vice-president of accounting for Ralphs from 1989
until December 1999. He reported to Ralphs' controller. He
then served as controller of Ralphs from December 1999 through
March 2000, and he was vice-president of finance of Ralphs
during April 2000, when he left Ralphs.
The Order also found that Mr. Stork circumvented the internal
controls that then existed at Ralphs. As a result, the
Commission found that Mr. Stork committed violations of Section
13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2
thereunder.
ROBERTSON STEPHENS: SEC Okays $5M Disgorgement Fund Distribution
----------------------------------------------------------------
The Securities and Exchange Commission approved a plan of
distribution for a $5 million disgorgement fund in an
administrative proceeding captioned "In the Matter of Robertson
Stephens, Inc."
The Commission also appointed Laurence Storch to serve as the
fund administrator and to identify persons who should receive
reimbursement from the fund pursuant to the terms of the plan of
distribution. The disgorgement fund includes both the
disgorgement and, pursuant to the Fair Funds provision of the
Sarbanes-Oxley Act of 2002, the civil penalty paid by Robertson
Stephens when it settled the administrative proceeding.
Under the terms of the settlement, Robertson Stephens also was
ordered to cease-and-desist from willfully violating Sections
15(c) and 17(a) of the Securities Exchange Act of 1934, and
Rules 15c1-2(b), 17a-4(b)(4), and 17a-4(j) thereunder. In the
underlying proceeding, Robertson Stephens was alleged to have
issued materially misleading research reports and failed to
maintain and produce promptly to the Commission staff e-mail
communications.
TV AZTECA: SEC Files Civil Action V. Saba, et al., For Fraud
------------------------------------------------------------
The Securities and Exchange Commission filed a civil action in
the U.S. District Court for the Southern District of New York
against Moises Saba Masri, a Mexican national, and Albert
Sutton, a broker at Middlegate Securities in New York City, New
York.
The Commission's complaint alleges that on August 20, 1999, the
defendants violated the anti-fraud provisions of the federal
securities laws by unlawfully "marking the close" and thereby
manipulating the price of T.V. Azteca American Depository
Receipts (TZA), which are listed on the New York Stock
Exchange. The complaint seeks permanent injunctions and civil
penalties against all two defendants, and disgorgement with pre-
judgment interest from Saba.
According to the Commission's complaint, in February, March, and
May 1999, Saba used the brokerage account of Tentafin Limited,
an offshore corporation controlled by Saba and his family, at
Middlegate to sell a large number of TZA put options having
strike prices of $5 and $7.50 and an expiration date of August
20, 1999. These options, if exercised by their holders,
contractually obligated Saba to buy nearly 860,000 shares of TZA
at $5 per share, and nearly 500,000 shares of TZA at $7.50 per
share, on the August 20, 1999 expiration date.
The Commission's complaint alleges that on August 20, 1999, the
price of TZA ranged from $4.9375 to $5.1875, ultimately hovering
at $5 ten minutes prior to the close of trading. According to
the complaint, at that point, Saba could reasonably expect that
the holders of the TZA put options with a $7.50 strike price
would exercise their options, causing a $3.7 million liability
in Saba's Tentafin account. If the holders of the TZA put
options with a $5 strike price also exercised their options, the
complaint further alleges, Saba would likely incur a further
liability of $4.3 million.
The complaint charges that, in order to avoid incurring this
additional liability, Saba instructed Sutton, his broker at
Middlegate Securities, to begin buying TZA in the open market
during the last ten minutes of trading so as to cause the per
share price to close above $5. According to the complaint,
Sutton then executed a series of precisely timed purchases with
the purpose and effect of causing TZA's per share price to close
above $5, thereby enabling Saba to avoid the $4.3 million
additional liability on the $5 put options.
The complaint alleges that Sutton's incremental purchases of
200,000 TZA during the last ten minutes of trading on August 20,
1999 constituted approximately 94% of the buy-side activity for
that security during the last hour of the trading day. The
complaint further alleges that, by engaging in these
manipulative trades, Saba and Sutton violated Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The suit is styled "SEC v. Moises Saba Masri, et al., 04 CV
1584."
Asbestos Alert
ASBESTOS LITIGATION: ACE Limited Improves Its Survival Ratio
------------------------------------------------------------
ACE Limited reported on February 4, 2004 that net income for
2003 was a record $1,400,000,000 or $4.93 per share, compared
with net income of $77,000,000 or $0.19 per share for the prior
year. The prior year included a charge of $354,000,000 in the
fourth quarter related to asbestos and environmental reserves.
At December 31, 2003, ACE Limited's gross three-year survival
ratio was 10.3x and its gross one-year survival ratio was 9.9x.
The Company stated that survival ratios are adversely affected
by the timing of certain previously agreed upon settlements.
These payments were anticipated in the Company's 2002 asbestos
study.
The Company's obligations with respect to further funding of the
Brandywine run-off are limited pursuant to the Brandywine
Restructuring Order under an $800,000,000 aggregate excess of
loss reinsurance agreement. Additional information about the
order and other Company obligations is in the "Asbestos and
Environmental Claims" section of the "Management's Discussion
and Analysis of Financial Conditions and Results of Operations"
incorporated into the Company's filed Form 10-K for the year
ended December 31, 2002. As at December 31, 2003, about
$466,000,000 in losses and recoverable bad debt reserves were
ceded to the aggregate excess of loss reinsurance agreement
leaving a remaining limit of about $334,000,000.
ASBESTOS LITIGATION: BNS Co. Fights 259 Asbestos Related Claims
---------------------------------------------------------------
BNS Co. is subject to the filing of claims and lawsuits relating
to past products manufactured by the Company and other business
activities. Most of these suits are toxic tort claims resulting
primarily from the use of small internal seals that allegedly
contained asbestos and were used in small fluid pumps
manufactured by the Company's former pump division, which was
sold in 1992.
There have also been tort claims brought by owners and users of
machine tools manufactured and sold by a division that was sold
in 1993, and a few miscellaneous claims relating to employment
activities, environmental issues, sales tax audits and personal
injury claims.
The Company has insurance coverage, but in general the coverage
available has limitations. The Company expects that it will
continue to be subject to additional toxic tort claims in the
future. As a matter of Delaware law the directors are required
to take the probability of future claims into consideration and
provide for final resolution of them in any liquidation
strategy.
The claims relating to the former pump division pose the most
uncertainty. The Company has limited information concerning the
number and location of pumps manufactured and, therefore, is
unable to estimate the aggregate number of claims which might be
filed in the future, which is necessary in order to reliably
estimate any financial exposure. This product line was
introduced in the late 1800s. The materials alleged to contain
asbestos were used for an undetermined period of time ending in
the late 1960s. The claims relate to exposure to this asbestos
material. The Company sold its pump division in 1992 but
remains subject to claims related to products manufactured prior
to that date.
Since 1994 the Company has been named as a defendant in a total
of 369 known claims (as of February 3, 2004) relating to these
pumps. In many cases these claims involve more than 100 other
defendants. Fifty-four of those claims were filed prior to
December 31, 2001. However, in 2002 the Company was named in 98
additional claims; in 2003 there were a total of 192 new claims
filed; and the Company has received notice of another 25 claims
thus far in 2004. In 2002, 42 claims were settled for $30,000
exclusive of attorney's fees, and in January a plaintiff's
attorney agreed to settle one claim for $500 and file for
dismissal in another 67 claims. There are currently 259 claims
that are open and active. However, under certain circumstances
some of the settled claims may be reopened.
The Company believes it has significant defenses to any
liability for toxic tort claims on the merits. It should be
noted that, to date, none of these toxic tort claims have gone
to trial and therefore there can be no assurance that these
defenses will prevail. Settlement and defense costs to date
have been insignificant. However, there can be no assurance
that the number of future claims and the related costs of
defense, settlements or judgments will be consistent with the
experience to date of existing claims.
ASBESTOS LITIGATION: Chubb Corp. Strengthens Asbestos Reserves
--------------------------------------------------------------
Chubb Corporation's financial results for the fourth quarter of
2003 included a $250,000,000 pre-tax ($0.86 per share after-tax)
increase in net asbestos loss reserves.
Fourth quarter results for 2002 included a $75,000,000 pre-tax
($0.29 per share after-tax) increase in net asbestos loss
reserves reflecting a reduction in the reinsurance recoverable
estimate.
Excluding the asbestos charges in both years, the fourth quarter
combined loss and expense ratio improved to 94.8% in 2003 from
97.8% in 2002. Including the asbestos charges, the fourth
quarter combined ratio was 104.0% in 2003 and 101.2% in 2002.
Chubb Commercial Insurance (CCI) net written premiums grew 19%
to $1,050,000,000. Excluding the asbestos charges in both
years, the combined ratio for the fourth quarter improved to
88.1% in 2003 from 93.3% in 2002. Including the asbestos
charges, the fourth quarter combined ratio was 113.2% in 2003
and 102.7% in 2002.
Full year results for 2003 included a $250,000,000 pre-tax
($0.90 per share after-tax) increase in net asbestos loss
reserves. Full year results for 2002 included a $741,000,000
pre-tax ($2.79 per share after-tax) increase in net asbestos and
environmental (A&E) loss reserves.
Together with its independent outside actuaries, Chubb completed
a rigorous update of the 2002 ground-up asbestos reserve
analysis. Based on developments related to its insureds and on
overall industry experience, an increase in reserves was
indicated. Consistent with Chubb's policy of maintaining
reserve adequacy, the company has increased its net reserves by
$250,000,000.
"Based upon this detailed update," said John D. Finnegan,
Chairman, President and Chief Executive Officer, "we have as
high a level of confidence in the adequacy of our asbestos
reserves as is possible in this dynamic and challenging
environment."
Total reserves for asbestos as of year-end 2003 were just over
$1,000,000,000. A detailed update of Chubb's asbestos reserves
has been posted on the company's Internet site at
http://www.chubb.com
ASBESTOS LITIGATION: DaimlerChrysler Faces 28T Asbestos Claims
--------------------------------------------------------------
DaimlerChrysler AG reported that it (primarily DaimlerChrysler
Corporation) has experienced a growing number of lawsuits, which
seek compensatory and punitive damages for illnesses alleged to
have resulted from direct and indirect exposure to asbestos used
in some vehicle components (principally brake pads).
Typically, these suits name many other corporate defendants and
may also include claims of exposure to a variety of non-
automotive asbestos products. A single lawsuit may include
claims by multiple plaintiffs alleging illness in the form of
asbestosis, mesothelioma or other cancer or illness. The number
of claims in these lawsuits increased from around 14,000 at the
end of 2001 to around 28,000 at the end of 2003. In the
majority of these cases, plaintiffs do not specify their alleged
illness and provide little detail about their alleged exposure
to components in DaimlerChrysler vehicles. Some plaintiffs do
not exhibit current illness, but seek recovery based on
potential future illness.
In 2001, DaimlerChrysler and other automobile manufacturers
asked the federal bankruptcy court in Delaware overseeing the
bankruptcy proceedings of an automotive supplier, Federal-Mogul
Corporation, to consolidate all of the asbestos brake cases
pending in state courts throughout the U.S. with the asbestos
brake litigation involving Federal-Mogul supervised by the
bankruptcy court. The company believed that consolidation would
reduce the cost and complexity of defending these individual
cases. In 2002, the bankruptcy court decided that it did not
have the authority to consolidate these cases, and the U.S.
Court of Appeals upheld that decision. The U.S. Supreme Court
in January 2003 denied the company's request and that of other
manufacturers to review the decision. The company believes that
many of these lawsuits involve unsubstantiated illnesses or
assert only tenuous connections with components in our vehicles,
and that there is credible scientific evidence to support the
dismissal of many of these claims. Although the company's
expenditures to date in connection with such claims have not
been material to its financial condition, it is possible that
the number of these lawsuits will continue to grow, especially
those alleging life-threatening illness, and that the company
could incur significant costs in the future in resolving these
lawsuits.
ASBESTOS LITIGATION: Electrolux AB Fights Against 584 Lawsuits
--------------------------------------------------------------
Electrolux AB reported that litigation and claims related to
asbestos are pending against the Electrolux Group in the US.
Almost all of the cases refer to externally supplied components
used in industrial products manufactured by discontinued
operations prior to the early 1970s. Many of the cases involve
multiple plaintiffs who have made identical allegations against
many other defendants who are not part of the Group.
As of December 31, 2003, the Group had a total of 584 lawsuits
pending, representing around 21,000 plaintiffs (up from 535
lawsuits, representing 20,700 plaintiffs, as reported in the
October 31, 2003 edition of the Class Action Reporter). During
2003, 497 new cases were filed and 129 pending cases were
resolved. Around 20,000 of the plaintiffs refer to cases
pending in the state of Mississippi.
Electrolux believes its predecessor companies may have had
insurance coverage applicable to some of the cases during some
of the relevant years. Electrolux is currently in discussions
with those insurance carriers.
ASBESTOS LITIGATION: Fairfax Financial Reports Asbestos Reserves
----------------------------------------------------------------
Fairfax Financial Holdings Limited announced that its unaudited
results for the fourth quarter of 2003 were impacted by net
reserve charges aggregating $224,000,000 at Crum & Forster and
the runoff operations. Crum & Forster's net charge of
$39,000,000 included a $150,000,000 strengthening of asbestos
reserves; the runoff operations strengthened reserves by
$434,000,000, which resulted in a net charge of $185,000,000
after the effect of existing reinsurance protections.
The results for the fourth quarter of 2002 were impact by
$200,000,000 of reserve strengthening and $63,600,000 of
restructuring charges in connection with the reorganization of
TIG, partially offset by $188,400,000 of negative goodwill on
the acquisition of the remaining 72.5% economic interest in TRG
Holdings.
The company produced an excellent underwriting result in 2003.
The combined ratio of its continuing insurance and reinsurance
operations was 97.6% for the year, with Northbridge, Crum &
Forster and OdysseyRe producing combined ratios of 92.6%, 104.4%
(99.7% excluding the effect of the net strengthening of asbestos
reserves) and 96.9% respectively.
Revenue in the year increased to $5,713,900,000 from
$5,067,400,000 last year principally as a result of increased
realized gains, earned premiums and claims fees offset by
reduced interest and dividend income. During 2003, net premiums
written by Northbridge, Crum & Forster and OdysseyRe, expressed
in local currency on a consistent basis, increased 35.2%, 12.6%
(28.0% treating Seneca bail bonds on a consistent basis and
excluding the effect of the net strengthening of asbestos
reserves) and 32.0% respectively over 2002. Consolidated net
premiums written in 2003 increased by 10.3% to $4,448,100,000
from $4,033,900,000 in 2002, and increased 28.4% excluding the
effect of TIG's discontinued MGA-controlled program business.
The U.S. insurance combined ratio for the year ended December
31, 2003 improved to 102.5% (99.1% excluding the net effect of
Crum & Forster strengthening its asbestos reserves) from 107.1%
last year (after giving effect to the discontinued TIG business
which was moved to runoff).
Crum & Forster's combined ratio improved to 104.4% for 2003
(99.7%, excluding the effect of the net strengthening of
asbestos reserves) from 108.3% in 2002 reflecting the impact of
price increases in excess of 10% for 2003, improved retention of
existing business, growth in new business and its continued
focus on expenses. Crum & Forster's net premiums written in
2003 increased by 28.0% over 2002 (prior to the negative impact
of Seneca recording its bail bonds on a net basis commencing
January 1, 2003 and the effect of the net strengthening of
asbestos reserves), reflecting new business and price increases
on renewal business. United States Fire Insurance, Crum &
Forster's principal operating subsidiary, was redomiciled from
New York to Delaware at December 31, 2003 and moved to a
positive earned surplus position of about $146,000,000 at
December 31, 2003, a significant improvement from its negative
earned surplus position of $255,000,000 at December 31, 2002.
As a result, U.S. Fire has 2004 dividend capacity of about
$80,000,000. North River Insurance, Crum & Forster's New
Jersey-domiciled operating subsidiary, reduced its negative
earned surplus position to $6 at December 31, 2003 from $38 at
December 31, 2002. Crum & Forster will begin to publish
financial information on its website during the first quarter of
2004.
ASBESTOS LITIGATION: Federal-Mogul Posts $39MM Asbestos Charge
--------------------------------------------------------------
Federal-Mogul Corporation's 2003 net loss from continuing
operations was driven by asset impairments of $102,000,000 and
was further impacted by an asbestos charge of $39,000,000.
Asset impairments were recorded to adjust the carrying value of
certain intangible and tangible assets to their estimated fair
values because of reductions in projected future asset
recoverability.
The asbestos charge was recorded to adjust the Company's
asbestos-related insurance recoverable pursuant to the terms of
a settlement. The Company continued to generate positive cash
from operating activities during the fourth quarter of 2003,
providing $50,000,000 for the period.
On October 1, 2001, Federal-Mogul decided to separate its
asbestos liabilities from its true operating potential by
voluntarily filing for financial restructuring under Chapter 11
of the Bankruptcy Code in the United States and Administration
in the United Kingdom.
ASBESTOS LITIGATION: General Cable Corp. Named in 48,000 Suits
--------------------------------------------------------------
General Cable Corporation reports that it is subject to certain
asbestos litigation and unexpected judgments or settlements
could have a material adverse effect on its financial results.
The Company has been a defendant in asbestos litigation for
around 15 years. As of December 31, 2003, General Cable was a
defendant in about 48,000 lawsuits. Around 33,000 of these
lawsuits have been brought on behalf of plaintiffs by a single
admiralty law firm ("MARDOC") and seek unspecified damages.
Plaintiffs in the MARDOC cases generally allege that they
formerly worked in the maritime industry and sustained asbestos-
related injuries from products that the Company ceased
manufacturing in the mid-1970s. The MARDOC cases are managed
and supervised by a federal judge in the United States District
Court for the Eastern District of Pennsylvania by reason of a
transfer by the judicial panel on Multidistrict Litigation.
On May l, 1996, the District Court ordered that all pending
MARDOC cases be administratively dismissed without prejudice and
placed them on an inactive administrative docket. To reinstate
a MARDOC case from the inactive docket, plaintiffs' counsel must
show that the plaintiff not only suffered from a recognized
asbestos-related injury, but also must produce specific product
identification evidence to proceed against an individual
defendant. During 2002, plaintiffs' counsel requested that the
District Court allow discovery in around 15 cases. Prior to
this discovery, plaintiffs' counsel indicated that they believed
that product identification could be established as to many of
the 100 or so defendants named in these MARDOC cases. To date,
in this discovery, the Company has not been identified as a
manufacturer of asbestos-containing products to which any of
these plaintiffs were exposed.
The Company cannot assure that any judgments or settlements of
the pending non-maritime and/or MARDOC asbestos cases or any
cases which may be filed in the future will not have a material
adverse effect on its financial results, cash flows or financial
position. Moreover, certain of the Company's insurers may be
financially unstable and in the event one or more of these
insurers enter into insurance liquidation proceedings, the
Company will be required to pay a larger portion of the costs
incurred in connection with these cases.
General Cable is also a defendant in around 15,000 cases brought
in various jurisdictions throughout the United States. About
5,000 of these cases have been brought in federal court in
Mississippi or other federal courts and then been transferred to
the MDL, but are on a different docket from the MARDOC cases.
The vast majority of cases on this MDL docket have been inactive
for over four years. Cases may only be removed from this MDL
proceeding via a petition filed by the plaintiff indicating that
the matter is ready for trial and requesting it be returned to
the originating federal district court for trial. Petitions
usually only involve plaintiffs suffering from terminal diseases
allegedly caused by exposure to asbestos-containing products.
To date, in cases that the Company is a defendant, no plaintiff
has requested return of any action to the originating district
court for trial.
There are around 15,000 pending non-maritime asbestos cases
involving the Company's subsidiaries. The majority of these
cases involve plaintiffs alleging exposure to asbestos-
containing cable manufactured by the Company's predecessors.
In addition to the Company's subsidiaries, many other wire and
cable manufacturers have been named as defendants in these
cases.
With regard to the 10,000 remaining cases, the Company has
aggressively defended them based upon either lack of product
identification as to General Cable manufactured asbestos-
containing product and/or lack of exposure to asbestos dust from
the use of a General Cable product. In the last 10 years, the
Company has had no cases proceed to verdict. In many of the
cases, General Cable was dismissed as a defendant before trial
for lack of product identification.
Based on the Company's experience in this litigation, the
amounts pleaded in the complaints are not typically meaningful
as an indicator of its potential liability. This is because
(1) the amounts claimed usually bear no relation to the
level of plaintiff's injury, if any;
(2) complaints nearly always assert claims against multiple
defendants (a typical complaint asserts claims against
some 110 different defendants);
(3) damages alleged are not attributed to individual
defendants;
(4) the defendants' share of liability may turn on the law
of joint and several liability;
(5) the amount of fault to be allocated to each defendant
is different depending on each case;
(6) many cases are filed against the Company, even though
the plaintiff did not use any of its products, and
ultimately are withdrawn or dismissed without any
payment;
(7) many cases are brought on behalf of plaintiffs who have
not suffered any medical injuries, and ultimately are
resolved without any payment to that plaintiff; and
(8) with regard to claims for punitive damages, potential
liability generally is related to the amount of
potential exposure to asbestos from a defendant's
products.
The Company's asbestos-containing products contained only a
minimal amount of fully encapsulated asbestos.
Further, General Cable has resolved the claims of about 11,500
plaintiffs. The cumulative average settlement for these matters
is less than $180 per case. As of December 31, 2003, the
Company had accrued on its balance sheet a liability of
$1,600,000 for asbestos-related claims. This amount represents
the Company's best estimate in order to cover resolution of
future asbestos-related claims.
In January 1994, the Company entered into a settlement agreement
with certain principal primary insurers concerning liability for
the costs of defense, judgments and settlements, if any, in all
of the asbestos litigation described above. Subject to the
terms and conditions of the settlement agreement, the insurers
are responsible for a substantial portion of the costs and
expenses incurred in the defense or resolution of this
litigation. However, recently one of the insurers participating
in the settlement that was responsible for a significant portion
of the contribution under the settlement agreement has entered
into insurance liquidation proceedings. As a result, the
contribution of the insurers has been reduced and General Cable
may ultimately have to bear a larger portion of the costs
relating to these lawsuits. Moreover, certain of the other
insurers may be financially unstable, and if one or more of
these insurers enter into insurance liquidation proceedings, the
Company will be required to pay a larger portion of the costs
incurred in connection with these cases.
General Cable believes that the resolution of the present
asbestos litigation will not have a material adverse effect on
its financial results, cash flows or financial position, based
on
(i) the terms of the insurance settlement agreement;
(ii) the relative costs and expenses incurred in the
disposition of past asbestos cases;
(iii) reserves established on the Company's books which are
believed to be reasonable; and
(iv) defenses available to the Company in the litigation.
However, since the outcome of litigation is inherently
uncertain, the Company cannot give absolute assurance regarding
the future resolution of the asbestos litigation. Liabilities
incurred in connection with asbestos litigation are not covered
by the American Premier indemnification.
ASBESTOS LITIGATION: Georgia-Pacific Extends Reserve to 2013
------------------------------------------------------------
Georgia-Pacific Corporation reported recently that its fourth
quarter results include a net asbestos charge of $16,000,000 for
extending its reserve to 2013.
Fourth quarter 2003 net income was $132,000,000 (52 cents
diluted earnings per share) before some unusual items including
a pretax charge of $16,000,000 ($10,000,000 after tax or 4 cents
diluted loss per share), net of anticipated insurance
recoveries, for adding an additional year to its rolling, 10-
year reserve for asbestos liabilities and defense costs.
Fourth quarter 2002 net income was at break even, before a
pretax charge of $315,000,000 ($198,000,000 after tax or 79
cents diluted loss per share) for asbestos liabilities and
defense costs, net of anticipated insurance recoveries, and a
pretax credit of $102,000,000 ($64,000,000 after tax or 25 cents
diluted earnings per share) resulting from an increase in
asbestos insurance receivables of $118,000,000 offset by a
charge to the asbestos liability reserve, net of insurance, of
$16,000,000.
The company's Other segment (primarily includes unallocated
corporate expenses and the elimination of intersegment sales)
reported a fourth quarter 2003 loss of $138,000,000 compared
with a loss of $421,000,000 for the same period of 2002.
Included in the 2003 results was a pretax charge of $35,000,000
for asbestos costs, net of anticipated insurance recoveries,
litigation settlement costs and costs to monetize a portion of
its asbestos insurance receivable, as well as $27,000,000 in
stock compensation costs. The segment's fourth quarter 2002
results included a $315,000,000 pretax charge, net of expected
insurance proceeds for adding to the company's reserve for
asbestos costs.
For the year 2003, this segment reported a loss of $282,000,000
including a pretax credit of $102,000,000 for the full-year
adjustment to the asbestos reserve after including a
$118,000,000 increase in the company's asbestos insurance
receivable, as well as pretax charges of $69,000,000 primarily
for litigation, monetization of the asbestos insurance
receivable, and pension settlement costs. The segment also
incurred a pretax charge of $47,000,000 for stock-based
compensation costs. For the year 2002, this segment reported a
loss of $703,000,000, including $378,000,000 of unusual pretax
charges primarily for asbestos and business separation costs.
Georgia-Pacific also provided an update on its asbestos
litigation, saying that current and projected asbestos
liabilities continue to be closely monitored by the company.
Its liabilities and defense costs through the fourth quarter
2003 remained in line with projections for the full year. As it
has in prior years and as previously disclosed, Georgia-Pacific
extended its projections of its asbestos liabilities and
insurance recoveries an additional year through 2013 and accrued
these amounts in the fourth quarter 2003, resulting in a pretax
charge of $16,000,000, net of anticipated insurance recoveries.
In September 2003, Georgia-Pacific completed agreements with two
of its insurers to confirm the total amounts of insurance to be
paid by those companies for Georgia-Pacific's asbestos
liabilities and costs during the period through 2012. Because
these amounts were larger than Georgia-Pacific had assumed in
calculating its anticipated asbestos insurance receivables at
the end of 2002, the company recorded a pretax credit of
$118,000,000 to "Other income, net" on its third quarter 2003
statement of operations. At the end of 2003, all of the
company's available insurance was included in its insurance
receivable.
The accuracy of statements relating to the company's asbestos
liabilities and defense costs is subject to a number of risks,
uncertainties and assumptions, including the rate at which new
asbestos claims will be filed, the cost of defending and
resolving pending and future claims, the occurrence of various
types of diseases among the general population, the continued
solvency of insurance companies which wrote product liability
policies for Georgia-Pacific, and the applicability to Georgia-
Pacific of court decisions involving other companies which
establish precedents for the allocation and payment of insurance
coverage.
ASBESTOS LITIGATION: James Hardie Denies Any Asbestos Liability
---------------------------------------------------------------
With the establishment and funding of the Medical Research and
Compensation Foundation in February 2001, James Hardie
Industries no longer owned or controlled two Australian
companies which manufactured and marketed asbestos-related
products prior to 1987. Those companies were former
subsidiaries of ABN 60 Pty Limited (formerly known as JHIL). On
March 31, 2003, James Hardie transferred control of ABN 60 to a
newly established company named ABN 60 Foundation Pty Ltd.
In prior years and up to the date of the establishment of the
Foundation, these two former subsidiaries incurred costs of
asbestos-related litigation and settlements. From time to time,
ABN 60 was joined as a party to asbestos suits which were
primarily directed at the two former subsidiaries, which are now
controlled by the Foundation. As all three former subsidiaries
of the Company are no longer a part of James Hardie, and all
relevant claims against ABN 60 had been successfully defended,
no provision for asbestos-related claims was established in the
Company's accounts at December 31, 2003 or March 31, 2003.
While it is difficult to predict the incidence or outcome of
future litigation, the Company believes it is remote that any
significant personal injury suits for damages in connection with
the former manufacture or sale of asbestos containing products
that are or may be filed against ABN 60 or its former
subsidiaries would have a material adverse effect on the
business, results of operations or financial condition of the
Company. This belief is based in part on the separateness of
corporate entities under Australian law, the limited
circumstances where "piercing the corporate veil" might occur
under Australian law, and there being no equivalent under
Australian law of the U.S. legal doctrine of "successor
liability." The courts in Australia have confirmed the primacy
of separate corporate entities and have generally refused to
hold parent entities responsible for the liabilities of their
subsidiaries absent any finding of fraud, agency, direct
operational responsibility or the like.
On October 29, 2003, the Foundation issued a media release
announcing that it has experienced increases in the number of
asbestos-related claims during the past few years. The
Foundation said that new projections for Australia, involving
many defendant companies including Australian government
entities, were similar to the experience of the Foundation.
Based upon new actuarial estimates, the Foundation stated that
existing funding could be exhausted within five years. The
release stated that the Foundation was investigating a range of
legal options involving James Hardie or related entities. The
Company does not believe that there are any valid legal claims
that may be presented against the Company for potential
asbestos-related liabilities of the former subsidiaries, the
Foundation or the ABN 60 Foundation and any such claims would be
defended vigorously.
The Company has not incurred any asbestos litigation and
settlement payments during the nine months ended
December 31, 2003, nor does it expect to incur any material
costs in the future related to asbestos litigation.
ASBESTOS LITIGATION: Odyssey Re Holdings Posts Asbestos Reserves
----------------------------------------------------------------
Odyssey Re Holdings Corp. stated in a recent filing that its
reserves include amounts related to environmental impairment and
asbestos-related illnesses, which, net of related reinsurance
recoverable, totaled about $62,000,000 as of December 31, 2003
and 2002. The majority of the Company's environmental and
asbestos-related liabilities arise from contracts entered into
before 1985 and underwritten as standard general liability
coverage where the environmental or asbestos-related liabilities
were neither clearly defined nor specifically excluded.
Significant uncertainty exists as to the ultimate settlement of
these liabilities since, among other things, there are
inconsistent court resolutions with respect to underlying policy
intent and coverage, and uncertainties as to the allocation of
responsibility for resultant damages.
A dedicated claims unit manages the environmental impairment and
asbestos related illness liabilities, due to the significantly
greater uncertainty involving this exposure. This unit performs
audits of policyholders with significant asbestos and
environmental exposure to assess the Company's potential
liabilities. This unit also monitors developments within the
insurance industry having a potential impact on the Company's
reserves. Through these processes, the Company believes that it
has established an adequate provision for environmental
impairment and asbestos-related illness liabilities. Recent
developments, which may have an impact on its liabilities,
include
(1) the significance of increased bankruptcy filings as a
result of asbestos claims,
(2) growth in the filing of claims against peripheral
defendants and
(3) recent claim settlement activity by companies with
significant asbestos exposure.
The Company's survival ratio for environmental and asbestos
related liabilities as of December 31, 2003 is eleven years,
reflecting full utilization of remaining indemnifications. Its
underlying survival ratio for environmental related liabilities
is five years and for asbestos-related liabilities is fourteen
years. The survival ratio represents the environmental
impairment and asbestos related illness reserves, net of
reinsurance, on December 31, 2003 plus indemnifications, divided
by the average paid environmental and asbestos claims, net of
reinsurance, for the last three years. The Company's survival
ratio is nine years, prior to the reflection of
indemnifications. Refer to note 16 of our consolidated financial
statements included in this Form 10-K. The Company's survival
ratio compares favorably with the United States Property and
Casualty Industry average survival ratio of nine years as
published by A.M. Best in its special report on Asbestos and
Environmental claims dated October 6, 2003.
The Gross cumulative deficiency for 1996 through 2002 was
impacted by significant loss reserve adjustments for Odyssey
America and Clearwater. A reserve adjustment in calendar year
1997 on 1996 and prior gross outstanding losses, recognizing
reserve inadequacies in Odyssey America prior to its purchase by
Fairfax, accounts for about $140,000,000 of the estimated
$294,000,000 gross cumulative deficiency reported for 1996. A
reserve adjustment in calendar year 2002 on 2001 and prior gross
outstanding losses, recognizing reserve inadequacies in Odyssey
America's United States casualty business written in the 1997-
2000 period, accounts for about $47,000,000, $60,000,000,
$128,000,000, and $146,000,000 of the around $535,000,000,
$680,000,000, $687,000,000, and $543,000,000 Gross cumulative
deficiencies reported for years 1998 through 2001, respectively.
A reserve adjustment in calendar year 2003 on 2002 and prior
gross outstanding losses, recognizing reserve inadequacies in
Odyssey America's and Clearwater's United States casualty
business written in the 1997-2000 period, accounts for about
$133,000,000, $233,000,000, $303,000,000, $278,000,000, and
$261,000,000 of the estimated $535,000,000, $680,000,000,
$687,000,000, $543,000,000, and $340,000,000 Gross cumulative
deficiencies reported for years 1998 through 2002, respectively.
Most of this gross loss emergence has been ceded to
retrocessional protections. Additionally, environmental and
asbestos loss emergence accounts for a substantial portion of
the remaining gross cumulative deficiencies for the years 1996
through 2002. All of this environmental and asbestos emergence
has been ceded to retrocessional and indemnification
protections.
The Company has exposure to asbestos and environmental pollution
claims. Exposure arises from reinsurance contracts under which
the Company has assumed liabilities, on an indemnity or
assumption basis, from ceding companies primarily in connection
with general liability insurance policies issued by such
cedants. The Company's estimate of its ultimate liability for
such exposures includes case basis reserves and a provision for
liabilities incurred but not reported. Case basis reserves are
a combination of reserves reported to the Company by ceding
companies and additional case reserves determined by the
Company's dedicated asbestos and environmental claims unit based
on claims audits of cedants. The provision for liabilities
incurred but not reported is established based on various
methods such as loss development, market share and frequency and
severity.
The Company's survival ratio for environmental and asbestos
related liabilities as of December 31, 2003 is eleven years,
reflecting full utilization of remaining indemnifications. The
Company's underlying survival ratio for environmental related
liabilities is five years and for asbestos related liabilities
is fourteen years. The survival ratio represents the
environmental impairment and asbestos related illness reserves,
net of reinsurance, on December 31, 2003, plus indemnifications,
divided by the average paid environmental and asbestos claims,
net of reinsurance, for the last three years. The Company's
survival ratio is nine years for environmental and asbestos
related liabilities as of December 31, 2003, prior to the
reflection of indemnifications. The Company's survival ratio
compares favorably with the United States Property and Casualty
Industry average survival ratio of nine years as published by
A.M. Best in its special report on Asbestos and Environmental
claims dated October 6, 2003.
ASBESTOS LITIGATION: PPG Subsidiary Caught Up in Asbestos Claims
----------------------------------------------------------------
PPG Industries Inc. is involved in a number of lawsuits and
claims, both actual and potential, in which substantial monetary
damages are sought, relating to product liability, contract,
patent, environmental, antitrust and other matters arising out
of the conduct of PPG's business. To the extent that these
lawsuits and claims involve personal injury and property damage,
PPG believes it has adequate insurance; however, certain of
PPG's insurers are contesting coverage with respect to some of
these claims, and other insurers, as they had prior to the
asbestos settlement described below, may contest coverage with
respect to some of the asbestos claims if the settlement is not
implemented. PPG's lawsuits and claims against others include
claims against insurers and other third parties with respect to
actual and contingent losses related to environmental, asbestos
and other matters.
The result of any future litigation of such lawsuits and claims
is inherently unpredictable. However, management believes that,
in the aggregate, the outcome of all lawsuits and claims
involving PPG, including asbestos-related claims in the event
the PPG Settlement Arrangement does not become effective, will
not have a material effect on PPG's consolidated financial
position or liquidity; however, any such outcome may be material
to the results of operations of any particular period in which
costs, if any, are recognized.
For over thirty years, PPG has been a defendant in lawsuits
involving claims alleging personal injury from exposure to
asbestos. On May 14, 2002, PPG announced that it had agreed
with several other parties, including certain of its insurance
carriers, the official committee representing asbestos claimants
in the Pittsburgh Corning Corporation bankruptcy (ACC), and the
legal representatives of future asbestos claimants appointed in
the PC bankruptcy, on the terms of the PPG Settlement
Arrangement relating to asbestos claims against PPG and
Pittsburgh Corning Corporation (PC).
As of Dec. 31, 2003, PPG was one of many defendants in numerous
asbestos-related lawsuits involving around 116,000 claims. Most
of PPG's potential exposure relates to allegations by plaintiffs
that PPG should be liable for injuries involving asbestos-
containing thermal insulation products manufactured and
distributed by PC. PPG and Corning Incorporated are each 50%
shareholders of PC. PPG has denied responsibility for, and has
defended, all claims for any injuries caused by PC products.
On April 16, 2000, PC filed for Chapter 11 Bankruptcy in the
U.S. Bankruptcy Court for the Western District of Pennsylvania
located in Pittsburgh, PA. Accordingly, in the first quarter of
2000, PPG recorded an after-tax charge of $35,000,000 for the
write-off of all of its investment in PC. As a consequence of
the bankruptcy filing and various motions and orders in that
proceeding, the asbestos litigation against PPG (as well as
against PC) has been stayed and the filing of additional
asbestos suits against them has been enjoined, until thirty days
after the effective date of a confirmed plan of reorganization
for PC substantially in accordance with the settlement
arrangement among PPG and several other parties discussed below.
The stay may be terminated if the Bankruptcy Court determines
that such a plan will not be confirmed, or the settlement
arrangement set forth below is not likely to be consummated.
Cash from operations and the Company's debt capacity are
expected to continue to be sufficient to fund amounts due under
the asbestos settlement and operating requirements, including
PPG's significant contractual obligations, which are presented
in the following table along with amounts due under the asbestos
settlement:
PPG has recorded an obligation equal to the net present value of
the aggregate cash payments, along with the PPG stock and other
assets that will be contributed to the Asbestos Settlement
Trust. However, PPG has no obligation to pay any amounts under
this settlement until the Effective Date.
Many factors could cause actual results to differ materially
from the Company's forward-looking statements. Among these
factors is the unpredictability of existing and possible future
litigation, including litigation that could result if PPG's
Settlement Agreement for asbestos claims does not become
effective.
An equity forward arrangement was entered into to hedge the
Company's exposure to changes in fair value of its future
obligation to contribute PPG stock into an asbestos settlement
trust. In addition to the change in PPG's stock price,
contributing to the change in fair value of this instrument was
the increase in the number of shares purchased by the bank from
504,900 shares as of December 31, 2002 to 904,900 shares as of
December 31, 2003. The fair value of this instrument as of
December 31, 2003 and 2002 was an asset of $15,000,000 and
$1,000,000, respectively. A 10% decrease in PPG's stock price
would have reduced the value of this instrument by $6,000,000
and $3,000,000, as of December 31, 2003 and 2002, respectively.
PPG also uses an equity forward arrangement to hedge a portion
of its exposure to changes in the fair value of PPG stock that
is to be contributed to the asbestos settlement trust. PPG's
policies do not permit speculative use of derivative financial
instruments.
The terms of the PPG Settlement Arrangement and the Corning
Settlement Arrangement have been incorporated into a bankruptcy
reorganization plan for PC along with a disclosure statement
describing the plan, which PC filed with the Bankruptcy Court on
April 30, 2003. Amendments to the plan and disclosure statement
were filed on August 18 and November 20, 2003. Creditors and
other parties with an interest in the bankruptcy proceeding were
entitled to file objections to the disclosure statement and the
plan of reorganization, and a few parties filed objections. On
November 26, 2003, after considering objections to the second
amended disclosure statement and plan of reorganization, the
Bankruptcy Court entered an order approving it and directing
that it be sent to creditors, including asbestos claimants, for
voting. The Bankruptcy Court established March 2, 2004 as the
deadline for receipt of votes. In order to approve the plan, at
least two-thirds in amount and more than one-half in number of
the allowed creditors in a given class must vote in favor of the
plan, and for a plan to contain a channeling injunction for
present and future asbestos claims under 524(g) of the
Bankruptcy Code, seventy-five percent of the asbestos claimants
voting must vote in favor of the plan. Assuming that the plan
receives the requisite votes, the judge would conduct another
hearing (which the judge has scheduled for May 3-7, 2004)
regarding the fairness of the settlement, including whether the
plan would be fair with respect to present and future claimants,
whether such claimants would be treated in substantially the
same manner, and whether the protection provided to PPG and its
participating insurers would be fair in view of the assets they
would convey to the asbestos settlement trust to be established
as part of the plan. At that hearing, creditors and other
parties in interest could raise objections to the plan.
Following that hearing, the Bankruptcy Court, after considering
objections to the plan, would enter a confirmation order if all
requirements to confirm a plan of reorganization under the
Bankruptcy Code, including the requirements described above,
have been satisfied; this order may be appealed to the U.S.
District Court for the Western District of Pennsylvania. (The
District Court may join the Bankruptcy Court in the confirmation
order, in which case an appeal to the District Court would not
be necessary.) Assuming that the District Court approves the
confirmation order, interested parties could appeal the order to
the U.S. Third Circuit Court of Appeals and subsequently to the
U.S. Supreme Court. The PPG Settlement Arrangement would not
become effective until 30 days after the plan of reorganization
was finally approved by an appropriate court order that was no
longer subject to appeal.
The channeling injunction would not extend to claims against PPG
alleging injury caused by asbestos on premises owned, leased or
occupied by PPG (so called "premises claims"), or claims
alleging property damage resulting from asbestos. Around 9,000
of the 116,000 claims pending against PPG and its subsidiaries
are premises claims. Many of PPG's premises claims have been
resolved without payment from PPG. To date, PPG has paid about
$7,000,000 to settle around 1,100 premises claims, virtually all
of which has been covered by PPG's insurers. There are no
property damage claims pending against PPG or its subsidiaries.
PPG believes that it has adequate insurance for the asbestos
claims not covered by the channeling injunction and that any
financial exposure resulting from such claims will not have a
material effect on PPG's consolidated financial position,
liquidity or results of operations.
In November 2002, PPG entered into a one-year renewable equity
forward arrangement with a bank in order to partially mitigate
the impact of changes in the fair value of PPG stock that is to
be contributed to the asbestos settlement trust. This
instrument, which has been renewed for an additional year, is
recorded at fair value as an asset or liability and changes in
the fair value of this instrument are reflected in "Asbestos
settlement - net" in the statement of income. As of Dec. 31,
2003 and 2002, PPG had recorded a current asset of $15,000,000
and $1,000,000, respectively, and recognized income of
$14,000,000 and $1,000,000 for the years then ended.
PPG makes chemicals, coatings, resins, glass and fiberglass
products.
ASBESTOS LITIGATION: Universal Automotive Faces Two Lawsuits
------------------------------------------------------------
In 1999, Universal Automotive purchased its factory in
Walkerton, Virginia, which had been using asbestos in products.
The Company immediately discontinued the manufacturing of
asbestos disc brake pads and continued to sell through the
existing asbestos brake drum lining and raw materials for a
period of time.
The Company is not aware of any claims having been made at any
of its facilities related to asbestos exposure, but a risk
exists that persons may seek to assert that this exposure was
related to the Company's operations, which could subject it to
liability.
Additionally, persons may seek to assert that the Company's
operation as a warehouse distributor prior to 1996 may have
resulted in the sale of products that contained asbestos. A
large number of lawsuits were filed against the Company and
numerous other automotive manufacturers and distributors, and
Universal Automotive was recently dismissed out of these
lawsuits.
The Company remains a named defendant, along with numerous other
defendants, in a total of two lawsuits. The Company intends to
seek dismissal on similar grounds from such lawsuits but cannot
assure the outcome of the lawsuits.
ASBESTOS LITIGATION: Loews Corp. Shores Up $465MM APMT Reserves
---------------------------------------------------------------
Loews Corporation said in a recent filing with the Securities
and Exchange Commission that net prior year development
consisted of $1,202,000,000 related to core reserves and
$465,400,000 related to asbestos, environmental pollution and
mass tort (APMT) reserves, after tax and minority interest.
The net prior year development also resulted in additional
cessions to CNA's reinsurance contracts, including the corporate
aggregate reinsurance treaties. These additional cessions
resulted in $60,300,000 of interest expense (after tax and
minority interest), which is recorded as a reduction in
investment income.
ASBESTOS ALERT: Amersham PLC Reveals Asbestos Related Liability
---------------------------------------------------------------
Amersham plc recently reported to the Securities and Exchange
Commission regarding insurance liability for unpaid claims and
claims adjustment expenses related to policies that may cover
environmental and asbestos exposures, based on known facts and
an assessment of applicable law and coverage litigation.
Liabilities are recognized for both known and unasserted claims
(including the cost of related litigation) when sufficient
information has been developed to indicate that a claim has been
incurred and a range of potential losses can be reasonably
estimated. Developed case law and adequate claim history do not
exist for certain claims principally due to significant
uncertainties as to both the level of ultimate losses that will
occur and what portion, if any, will be deemed to be insured
amounts.
COMPANY PROFILE
Amersham plc
Amersham Place
Little Chalfont, Buckinghamshire
HP7 9NA
United Kingdom
Phone: +44 (0) 1494-544000
Fax: +44 (0) 1494-542266
http://www.amersham.com/
Description: Amersham plc and its subsidiary undertakings
constitute an international group engaged in the R&D (research
and development), production, sale, distribution and licensing
of medical imaging contrast media and radiopharmaceuticals
through its Amersham Health business. The Group is also engaged
in R&D, manufacture and sale of specialized products and
services for life sciences research, and the manufacture of
biopharmaceuticals through its Amersham Biosciences business.
ASBESTOS ALERT: Converium Holding Increases Asbestos Reserves
-------------------------------------------------------------
As of December 31, 2003 and 2002, Converium Rckversicherung
(Deutschland) AG had reserves for environmental impairment
liability and asbestos-related claims of $45,800,000 and
$44,600,000, respectively. The company's survival ratio
(calculated as the ratio of reserves held, including IBNR, over
claims paid over the average of the last three years) for
asbestos and environmental reserves was 13.6 years at December
31, 2003, compared to 13.5 years at December 31, 2002.
Converium believes that its exposure to environmental impairment
liability and asbestos-related claims is relatively small due to
the diminutive amount of business written prior to 1987 for
Converium AG and Converium Reinsurance (North America) Inc.
Additionally, Converium Reinsurance (North America) Inc. is
protected by a stop loss agreement with Zurich Insurance Company
(ZIC), a wholly owned subsidiary of Zurich Financial Services,
for business effected prior to June 1, 1993. As of December 31,
2003 and 2002, Converium Rckversicherung (Deutschland) AG had
reserves for environmental impairment liability and asbestos-
related claims of $45,800,000 and $44,600,000, respectively,
representing a survival ratio (calculated as the ratio of
reserves held, including IBNR, over claims paid over the average
of the last three years) of 13.6 years and 13.5 years,
respectively.
COMPANY PROFILE
Converium Holding AG
Baarerstrasse 8
Zug, 6300
Phone: (646) 885-3300
http://www.converium.com
Description: Converium Holding AG is a global reinsurer whose
business is organized around four operating segments consisting
of three non-life segments, Converium Zurich, Converium North
America and Converium Cologne, and the Converium Life segment.
The Company offers non-life and life reinsurance, as well as
structured/finite solutions, with clients and coverages
throughout the world.
ASBESTOS ALERT: Hanson PLC Adds To Asbestos Related Provisions
--------------------------------------------------------------
Hanson PLC's non-operating exceptional item charges totaled
GBP94,900,000 (profit of GBP11,000,000). Of this amount,
GBP76,600,000 relates to an increase in the group's asbestos
provision.
Various Hanson subsidiaries in the US are defendants in a number
of lawsuits alleging bodily injury due to exposure to asbestos-
containing products before 1984. At the end of 2003,
outstanding claimants totaled around 124,200 (81,500). New
claimants were 7,900 for the second six months of 2003, which
was less than half of the 21,000 new claimants received in the
first six months. Most of the reduction was due to fewer mass
claims being filed in the period. Mass claimants in Mississippi
have slowed significantly since new legislation was introduced
effective April 1, 2003 to limit out of State mass filings.
The gross cost of resolving asbestos claims in 2003 was
$43,200,000 ($37,300,000) including legal fees of $21,400,000
($16,000,000). The net cost after insurance was $3,800,000
($4,100,000).
Hanson's approach to accounting for the asbestos liabilities of
its US subsidiaries is to provide for cost of resolution, which
is both probable and estimable. The costs of resolving possible
claims are accounted for as contingent liabilities. At present,
based on detailed analysis, the provision for costs that are
both probable and estimable equates to about eight years of
gross cost at current levels. In total, the full year increase
in the provision for future asbestos costs was $125,000,000,
including a second half charge of $20,000,000, taking the gross
provision to $317,000,000. Offsetting this is about $73,000,000
of remaining insurance cover.
ASBESTOS ALERT: Hedman's Asbestos Case Spurs Trading Halt
---------------------------------------------------------
Hedman Resources Limited issued a news release summarizing
matters under ongoing investigation that necessitated its
request for a halt trade order from Market Regulation Services
and the TSX Venture Exchange. These matters included the
historical status of ongoing asbestos litigation particularly in
the United States, and insurance coverage concerns related to
escalating asbestos litigation.
COMPANY PROFILE
Hedman Resources Limited
400 - 3875 Keele Street
North York, Ontario
Canada, M3J 1N6
Phone: 416-630-6991
Fax: 416-630-7904
http://www.hedmanresources.com
Description: Hedman Resources Limited produces a line of
industrial mineral products for a variety of potential end
users. These products include Northfil, a non-toxic,
environmentally safe, heat-and abrasion-resistant industrial
filler, which it processes using a proprietary technology at its
Matheson, Ontario facility. Hedman is developing a product
derived from Northfil called Firefelt, which is designed for the
building products industry. Hedman is also a joint venture
partner in the sale and distribution of Vermiculite, a low-
density biologically-inert product with a chemically active
surface used as an additive, filler, absorbent, fertilizer and
soil cover in a number of industry end-user applications.
ASBESTOS ALERT: MDC Holdings Pays Asbestos Remediation Costs
------------------------------------------------------------
The Company previously purchased 63 lots within the former Lowry
Air Force Base, in an area known as the Northwest Neighborhood,
in Denver, Colorado. As of December 31, 2003, the Company had
sold homes on all 63 lots, completed construction of homes on 48
of these lots, closed 47 of the homes, and commenced
construction on four of the remaining 15 lots. Asbestos,
believed to have resulted from historic activities of the United
States Air Force, has been discovered in this area. In August
2003, the Colorado Department of Public Health and Environment
issued a Final Response Plan imposing requirements to remediate
the asbestos. Through December 31, 2003, the Company had
expended about $2,250,000 in sampling and remediation costs and
currently projects the total costs of these efforts to be about
$3,900,000. The Company has an accrual of $1,650,000 for the
expected remaining costs as of December 31, 2003. Remediation
of 57 of the 63 lots had been completed by the Company as of
December 31, 2003. The Company has notified the Air Force and
United States Department of Defense of their responsibility to
reimburse the Company for all costs associated with the
asbestos. Those agencies currently dispute their responsibility
to reimburse the Company and the other landowners. The Company
is evaluating available legal remedies to recover costs
associated with the asbestos.
ASBESTOS ALERT: Tarragon Realty Under EPA Investigation
-------------------------------------------------------
In April 2003, in connection with the condominium conversion of
Pine Crest Village at Victoria Park, representatives of Tarragon
Realty Investors Inc. may have inadvertently disturbed asbestos-
containing materials. Such actions are currently under
investigation by the Environmental Protection Agency and may
result in civil and/or criminal proceedings under applicable
law. The extent of any resulting liability is unknown at this
time. The Company has incurred legal and other professional
fees and costs of relocating residents in connection with this
matter totaling $112,000 for the three-month period and
$262,000 for the nine-month period. Remediation efforts are
underway at a total estimated cost of $700,000, of which
$228,000 has been incurred to date and the remainder of which
has been accrued.
New Securities Fraud Cases
AGCO CORPORATION: Milberg Weiss Files Securities Lawsuit in GA
--------------------------------------------------------------
The law firm of Milberg Weiss initiated a class action in the
United States District Court for the Northern District of
Georgia commenced, on behalf of an institutional investor on
behalf of purchasers of AGCO Corporation common stock during the
period between February 6, 2003 and February 4, 2004.
The complaint charges AGCO and certain of its officers and
directors with violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. AGCO is primarily engaged in
the manufacture and distribution of agricultural equipment and
related replacement parts worldwide.
The complaint alleges that during the Class Period, defendants
caused AGCO's shares to trade at artificially inflated levels
through the issuance of false and misleading financial
statements. As a result of this inflation, AGCO was able to
complete a private offering, raising proceeds of $150 million on
or about December 15, 2003.
Specifically, the complaint alleges that the statements
defendants issued during the Class Period were each materially
false and misleading when made as they failed to disclose and
misrepresented the following material adverse facts which were
then known to defendants or recklessly disregarded by them:
(1) the Company had improperly recorded revenue on its
"bill and hold" transactions where risk did not pass to
the customer; and
(2) as a result of the foregoing, the Company's revenue and
income recognition deviated from Generally Accepted
Accounting Principles and was therefore materially
false and misleading.
On February 5, 2004, less than two months after the private
placement, the Company issued a press release which stated that
the Company's accounting practices were under investigation by
the SEC. The stock dropped below $17 per share on this news.
For more information, contact William S. Lerach, by Mail:
401 B. St., Suite 1700, San Diego, CA 92101, by Phone: 800-449-
4900, or by E-mail: wsl@milberg.com.
AAIPHARMA INC.: Brian Felgoise Files Securities Suit in E.D. NC
---------------------------------------------------------------
The Law Offices of Brian M. Felgoise, P.C. initiated a
securities class action in the United States District Court for
the Eastern District of North Carolina, on behalf of
shareholders who acquired aaiPharma, Inc. securities between
April 24, 2002 and February 4, 2004, inclusive, against the
company and certain key officers and directors.
The action charges that defendants violated the federal
securities laws by issuing a series of materially false and
misleading statements to the market throughout the Class Period
which statements had the effect of artificially inflating the
market price of the Company's securities.
For more information, contact Brian M. Felgoise, by Mail: 261
Old York Road, Suite 423, Jenkintown, Pennsylvania, 19046, by
Phone: (215) 886-1900, or by E-mail: FelgoiseLaw@aol.com.
EL PASO: Cohen Milstein Lodges Securities Fraud Suit in S.D. TX
---------------------------------------------------------------
The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C.,
initiated a class action lawsuit in the United States District
Court for the Southern District of Texas, on behalf of
purchasers of the common stock of El Paso Corporation during the
period February 22, 2000 and February 17, 2004, inclusive,
against defendants El Paso Corporation, and:
(1) Ronald Kuehn, Jr.,
(2) Douglas Foshee,
(3) D. Dwight Scott, and
(4) William Wise
The Complaint alleges that defendants issued statements during
the Class Period which were materially false and misleading, in
violation of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, by failing to disclose and/or misrepresented that"
(i) El Paso's reporting of proved oil and gas reserves was
overstated by 41%;
(ii) the Company's estimate of discounted future cash flows
was overstated, and
(iii) El Paso's method of estimating reserves and discounted
future cash flows deviated from industry standards and
violated rules of the Securities and Exchange
Commission.
As a result of defendants' conduct, the price of El Paso
securities was materially overstated throughout the Class
Period.
On February 17, 2004, El Paso announced that the Company had
overstated its reported reserves by 41% or 1.8 trillion cubic
feet and that, as a result, it would have to take a $1 billion
pretax charge in the fourth quarter of 2003. In response to this
revelation, El Paso common stock fell 18% on unusually heavy
trading volume of 57 million shares, to close at $7.26 a share
on February 18, 2004.
For more information, contact Steven J. Toll, Stefanie Roemer or
Diana Steele, by Mail: 1100 New York Avenue, N.W., West Tower -
Suite 500, Washington, D.C. 20005, by Phone: 888-240-0775 or
202-408-4600 (toll free), or E-mail: stolldc@cmht.com,
sroemer@cmht.com, or dsteele@cmht.com.
EL PASO: Shepherd Finkelman Lodges Securities Fraud Suit in TX
--------------------------------------------------------------
The law firm of Shepherd, Finkelman, Miller & Shah, LLC
initiated a class action lawsuit in the United States District
Court for the Southern District of Texas, Houston Division, on
behalf of all purchasers of securities of El Paso Corporation,
between and including March 30, 2003 through and including
February 17, 2004, against defendants El Paso, and:
(1) Ronald Kuehn, Jr.,
(2) Douglas Forshee, and
(3) D. Dwight Scott
The Complaint alleges that defendants violated Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 by issuing a
series of material misrepresentations to the market during the
Class Period. Specifically, the Complaint charges Defendants
with issuing materially false and misleading statements
regarding El Paso's financial results and reported reserves, as
well as violating Generally Accepted Accounting Principles and
industry rules. As a result of Defendants' conduct, the
Complaint alleges that El Paso was able to inflate its stock
price, maintain its credit rating, and maintain its status in
the energy industry as a leader.
On February 17, 2004, El Paso announced that the Company had cut
its proven natural gas reserves estimate by approximately 41
percent and would take a $1 billion pretax charge in the fourth
quarter of 2003. In response to this devastating news, El Paso's
stock price plummeted by approximately 18% to close at $7.26 on
unusually heavy trading volume of 57 million shares on February
18, 2004. The magnitude of this write-down of reserves shocked
the market and, quoting one analyst, "suggests to us that prior
management had significantly overstated the productive capacity
of the company's gas reserves." Another analyst is quoted as
alleging that El Paso had "prematurely booked" certain reserves
before securing necessary permission to develop the assets.
There are now at least two class action lawsuits pending in the
United States District Court for the Southern District of Texas
alleging similar securities law violations relating to El Paso's
recent reserve reduction and $1B charge. The proposed class
periods vary. The first suit filed alleges claims on behalf of
persons who purchased or otherwise acquired the securities of El
Paso between March 30, 2003 and including February 17, 2004. The
other suit alleges a class period of February 22, 2000 through
February 17, 2004. The investigation into El Paso's reporting of
reserves continues. After April 19, 2004, the Court will appoint
a lead plaintiff and lead counsel who will thereafter file a
detailed, consolidated amended complaint which pleading will set
the class period that the lead plaintiff and lead counsel
determine is appropriate, based on a review of facts available
by that time. The consolidated amended complaint may also name
additional or different defendants, based on a continued review
of available evidence.
For more information, contact James E. Miller, by Phone:
866/540-5505, or by E-mail: jmiller@classactioncounsel.com.
FRANKLIN FUNDS: Rabin Murray Files Securities Suit in N.D. CA
-------------------------------------------------------------
The law firm of Rabin, Murray & Frank LLP initiated a class
action lawsuit in the United States District of the Northern
District of California on February 12, 2004, on behalf of
purchasers of Franklin Blue Chip Fund (Nasdaq:FKBBX),
(Nasdaq:FBCCX), (Nasdaq:FBCRX); Franklin Capital Growth Fund
(Nasdaq:FEACX), (Nasdaq:FKEQX), (Nasdaq:FREQX), (Nasdaq: FKIRX);
Franklin Equity Income Fund (Nasdaq:FBEIX), (Nasdaq:FRETX),
(Nasdaq:FREIX); Templeton Global Bond Fund (Nasdaq:TGBAX),
(Nasdaq:TEGBX); and other securities of the Franklin family of
funds operated by Franklin Resources, Inc. and its subsidiaries
between February 6, 1999 and February 4, 2004, inclusive,
seeking remedies under the Securities Exchange Act of 1934, the
Securities Act of 1933 and the Investment Advisers Act of 1940,
against defendants Franklin Resources, Inc., Franklin Advisers,
Inc; Templeton/Franklin Investment Services, Inc.; Franklin
Private Client Services, Inc.; Franklin Mutual Advisers, LLC;
Williams Post; Security Brokerage, Inc.; Daniel G. Calugar,
DCIP, L.P.; Franklin Templeton Strategic Growth Fund, L.P.; each
of the Franklin funds & their registrants, and John Does 1-100.
The Complaint alleges that defendants violated Sections 11 and
15 of the Securities Act of 1933; Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder; and Section 206 of the Investment Advisers Act of
1940. The Complaint charges that, throughout the Class Period,
certain of the defendants failed to disclose that they
improperly allowed certain favored investors, including Calugar,
SBI, and DCIP, to engage in "timing" of the Funds' securities.
In return for receiving extra fees from Calugar, SBI, and DCIP,
and other favored investors, Franklin Resources and its
affiliates allowed and facilitated timing activities in the
Funds, to the detriment of class members who paid, dollar for
dollar, for the improper profits made by Calugar, SBI, and DCIP.
These practices were undisclosed in the prospectuses of the
Funds, which falsely represented that the Funds actively police
against timing and that premature redemptions will be assessed a
charge.
The Funds, and the symbols for the respective Funds named below,
are as follows:
(1) Franklin AGE High Income Fund AGEFX, FAHAX,
FHIBX, FRAIX, FAHRX
(2) Franklin Adjustable U.S. Government Securities Fund
FISAX, FCSCX
(3) Franklin Aggressive Growth Fund FGRAX, FRAAX, FKABX,
FKACX, FKARX
(4) Franklin Alabama Tax-Free Income Fund FRALX, FALEX
(5) Franklin Arizona Tax-Free Income Fund FTAZX, FBAZX,
FAZIX
(6) Franklin AGE High Income Fund AGEFX, FAHAX, FHIBX,
FRAIX, FAHRX
(7) Franklin Adjustable U.S. Government Securities Fund
FISAX, FCSCX
(8) Franklin Aggressive Growth Fund FGRAX, FRAAX, FKABX,
FKACX, FKARX
(9) Franklin Alabama Tax-Free Income Fund FRALX, FALEX
(10) Franklin Arizona Tax-Free Income Fund FTAZX, FBAZX,
FAZIX
(11) Franklin Balance Sheet Investment Fund FRBSX, FBSAX,
FBSBX, FCBSX, FBSRX
(12) Franklin Biotechnology Discovery Fund FBDIX
(13) Franklin Blue Chip Fund FKBCX, FKBBX, FBCCX,
FBCRX
(14) Franklin California High Yield Municipal Fund FCAMX,
FBCAX, FCAHX
(15) Franklin California Insured Tax-Free Income Fund FRCIX,
FRCBX, FRCAX
(16) Franklin California Intermediate-Term Tax-Free Income
Fund FKCIX
(17) Franklin California Limited Term Tax-Free Income Fund
(18) Franklin California Tax-Exempt Money Fund FCLXX
(19) Franklin California Tax-Free Income Fund FKTFX, FCAVX,
FCABX, FRCTX
(20) Franklin Capital Growth Fund FKREX, FEACX,
FKEQX, FREQX, FKIRX
(21) Franklin Colorado Tax-Free Income Fund FRCOX, FCOIX
(22) Franklin Connecticut Tax-Free Income Fund FXCTX, FCTIX
(23) Franklin Convertible Securities Fund FISCX, FROTX
(24) Franklin Double Tax-Free Income Fund FPRTX, FPRIX
(25) Franklin DynaTech Fund FKDNX, (Nasdaq: FDNBX, FDYNX
(26) Franklin Equity Income Fund FISEX, FBEIX,
FRETX, FREIX
(27) Franklin Federal Intermediate-Term Tax-Free Income Fund
FKITX
(28) Franklin Federal Limited Term Tax-Free Income Fund
FFTFX
(29) Franklin Federal Money Fund FMNXX
(30) Franklin Federal Tax-Free Income Fund FKTIX, FAFTX,
FFTBX, FRFTX
(31) Franklin Flex Cap Growth Fund FKCGX, FKCBX,
FCIIX, FRCGX
(32) Franklin Floating Rate Daily Access Fund FAFRX, FBFRX,
FCFRX
(33) Franklin Floating Rate Trust XFFLX
(34) Franklin Florida Insured Tax-Free Income Fund FFLTX
(35) Franklin Florida Tax-Free Income Fund FRFLX, FRFBX,
FRFIX
(36) Franklin Georgia Tax-Free Income Fund FTGAX, FGAIX
(37) Franklin Global Aggressive Growth Fund
(38) Franklin Global Communications Fund FRGUX
(39) Franklin Global Growth Fund
(40) Franklin Global Health Care Fund FKGHX, FGHBX,
FGIIX
(41) Franklin Gold and Precious Metals Fund FKRCX, FGADX,
FAGPX, FRGOX
(42) Franklin Growth Fund FKGRX, FCGAX, FKGBX,
FRGSX, FGSRX
(43) Franklin High Yield Tax-Free Income Fund FRHIX, FYIBX,
FHYIX
(44) Franklin Income Fund FKINX, FRIAX, FBICX,
FICBX, FCISX, FISRX
(45) Franklin Insured Tax-Free Income Fund FTFIX, FBITX,
FRITX
(46) Franklin Kentucky Tax-Free Income Fund FRKYX
(47) Franklin Large Cap Growth Fund FKGAX, FRGAX,
FKGCX, FRLGX
(48) Franklin Large Cap Value Fund FLVAX, FBLCX,
FLCVX, FLCRX
(49) Franklin Louisiana Tax-Free Income Fund FKLAX, FLAIX
(50) Franklin Maryland Tax-Free Income Fund FMDTX, FMDIX
(51) Franklin Massachusetts Insured Tax-Free Income Fund
FMISX, FMAIX
(52) Franklin Michigan Insured Tax-Free Income Fund FTTMX,
FBMIX, FRMTX
(53) Franklin MicroCap Value Fund FRMCX
(54) Franklin Minnesota Insured Tax-Free Income Fund FMINX,
FMNIX
(55) Franklin Missouri Tax-Free Income Fund FRMOX, FMOIX
(56) Franklin Money Fund FMFXX
(57) Franklin Natural Resources Fund FRNRX, FNRAX
(58) Franklin New Jersey Tax-Free Income Fund FRNJX,
FNJBX, FNIIX
(59) Franklin New York Insured Tax-Free Income Fund FRNYX,
FNYKX
(60) Franklin New York Intermediate-Term Tax-Free Income
Fund FKNIX
(61) Franklin New York Limited Term Tax-Free Income Fund
(62) Franklin New York Tax-Exempt Money Fund FRNXX
(63) Franklin New York Tax-Free Income Fund FNYTX, FNYAX,
FTFBX, FNYIX
(64) Franklin North Carolina Tax-Free Income Fund
FXNCX, (Nasdaq: FNCIX)
(65) Franklin Ohio Insured Tax-Free Income Fund FTOIX,
FBOIX, FOITX
(66) Franklin Oregon Tax-Free Income Fund FRORX, FORIX
(67) Franklin Pennsylvania Tax-Free Income Fund FRPAX,
FBPTX, FRPTX
(68) Franklin Real Estate Securities Fund FREEX, FRLAX,
FBREX, FRRSX
(69) Franklin Rising Dividends Fund FRDPX, FRDBX,
FRDTX, FRDRX
(70) Franklin Short-Intermediate U.S. Government Securities
Fund FRGVX, FSUAX
(71) Franklin Small Cap Growth Fund II FSGRX, FSSAX,
FBSGX, FCSGX, FSSRX
(72) Franklin Small Cap Value Fund FRVLX, FVADX,
FBVAX, FRVFX, FVFRX
(73) Franklin Small-Mid Cap Growth Fund FRSGX, FSGAX,
FBSMX, FRSIX, FSMRX
(74) Franklin Strategic Income Fund FRSTX, FKSAX,
FKSBX, FSGCX), FKSRX
(75) Franklin Strategic Mortgage Portfolio FSMIX
(76) Franklin Tax-Exempt Money Fund FTMXX
(77) Franklin Technology Fund FTCAX, FRTCX,
FFTCX, FTERX
(78) Franklin Templeton Conservative Target Fund FTCIX,
FTCCX, FTCRX
(79) Franklin Templeton CoreFolio Allocation Fund FTCOX
(80) Franklin Templeton Founding Funds Allocation Fund
FFALX, FFABX, FFACX
(81) Franklin Templeton Growth Target Fund FGTIX, FTGTX,
FGTRX
(82) Franklin Templeton Hard Currency Fund ICPHX
(83) Franklin Templeton Moderate Target Fund FMTIX, FTMTX,
FTMRX
(84) Franklin Templeton Money Fund FMBXX, FRIXX,
FMRXX
(85) Franklin Tennessee Municipal Bond Fund FRTIX
(86) Franklin Texas Tax-Free Income Fund FTXTX, FTXIX
(87) Franklin Total Return Fund FKBAX, FBDAX,
FBTLX, FCTLX, FTRRX
(88) Franklin U.S. Government Securities Fund FKUSX, FUSAX,
FUGBX, FRUGX, FUSRX
(89) Franklin U.S. Long-Short Fund FUSLX
(90) Franklin Utilities Fund FKUTX, FRUAX,
FRUBX, FRUSX, FRURX
(91) Franklin Virginia Tax-Free Income Fund FRVAX, FVAIX
(92) Templeton China World Fund TCWAX, TACWX
(93) Templeton Developing Markets Trust TEDMX, TDADX,
TDMBX, TDMTX, TDMRX
(94) Templeton Foreign Fund TEMFX, TFFAX, TFRBX,
TEFTX, TEFRX
(95) Templeton Foreign Smaller Companies Fund FINEX,
FTFAX, FCFSX
(96) Templeton Global Bond Fund TPINX, TGBAX,
TEGBX
(97) Templeton Global Long-Short Fund TLSAX, TLSBX
(98) Templeton Global Opportunities Trust TEGOX, TEGPX
(99) Templeton Global Smaller Companies Fund, Inc. TEMGX,
TGSAX, TESGX
(100) Templeton Growth Fund, Inc. TEPLX, TGADX,
TMGBX, TEGTX, TEGRX
(101) Templeton International (Ex EM) Fund TEGEX, TGEFX
(102) Templeton Latin America Fund TELAX, TLAAX,
TLAIX
(103) Templeton Pacific Growth Fund FKPGX, FPGCX
(104) Templeton World Fund TEMWX, TWDBX, TEWTX
(105) Mutual Beacon Fund TEBIX, TEBBX, TEMEX,
BEGRX
(106) Mutual Discovery Fund TEDIX, TEDBX, TEDSX,
TEDRX, MDISX
(107) Mutual European Fund TEMIX, TEUBX, TEURX,
MEURX
(108) Mutual Financial Services Fund TFSIX, TBFSX,
TMFSX, TEFAX
(109) Mutual Qualified Fund TEQIX, TEBQX, TEMQX,
MQIFX
(110) Mutual Recovery Fund FMRVX
(111) Mutual Shares Fund TESIX, FMUBX, TEMTX,
TESRX, MUTHX
For more information, contact Eric J. Belfi or Aaron D. Patton,
By Phone: (800) 497-8076 or (212) 682-1818, Fax: (212) 682-1892,
or by E-mail: info@rabinlaw.com.
QUALITY DISTRIBUTION: Brian Felgoise Files Securities Suit in FL
----------------------------------------------------------------
The Law Offices of Brian M. Felgoise, P.C. initiated a
securities class action in the United States District Court for
the Middle District of Florida, on behalf of shareholders who
acquired Quality Distribution, Inc. securities between November
7, 2003 and February 2, 2004, inclusive, against the company and
certain key officers and directors.
The action charges that defendants violated the federal
securities laws by issuing a series of materially false and
misleading statements to the market throughout the Class Period
which statements had the effect of artificially inflating the
market price of the Company's securities.
For more information, contact Brian M. Felgoise, by Mail: 261
Old York Road, Suite 423, Jenkintown, Pennsylvania, 19046, by
Phone: (215) 886-1900, or by E-mail:
securitiesfraud@comcast.net.
QUALITY DISTRIBUTION: Lasky Rifkind Files Securities Suit in FL
---------------------------------------------------------------
The law firm of Lasky & Rifkind, Ltd., initiated a lawsuit in
the United States District Court for the Middle District of
Florida, on behalf of persons who purchased or otherwise
acquired publicly traded securities of Quality Distribution Inc.
between November 7, 2003 and February 2, 2004, inclusive,
against defendants Quality Distribution, and:
(1) Thomas L. Finkbiner, and
(2) Samuel M. Hensley
The complaint alleges that Defendants violated Sections 11 and
15 of the Securities Exchange Act of 1933. On or about November
7, 2003, Quality commenced an initial public offering of 7
million shares of its common stock at an offering price of $17
per share, raising approximately $119.0 million. In connection
therewith, Quality filed a registration statement, which
incorporated a prospectus, with the SEC. The complaint alleges
that the Prospectus was materially false and misleading because
Quality materially overstated its financial results and its
financial statements were not prepared in accordance with
Generally Accepted Accounting Principles.
On February 2, 2004, the Company announced that it expected to
take a fourth quarter charge and restate its results back to
2001 after discovering insurance law violations at Power
Purchasing Inc., one of its subsidiaries. Quality announced that
it expects to take fourth-quarter 2003 charges of $3 million to
$6 million and it forecast net income for the same period would
be negatively impacted by the problems at the subsidiary.
For more information, contact (800) 495-1868 to speak with an
advisor.
QUALITY DISTRIBUTION: Brodsky Smith Files Securities Suit in FL
---------------------------------------------------------------
The Law offices of Brodsky & Smith, LLC initiated a securities
class action lawsuit in the United States District Court for the
Middle District of Florida, on behalf of shareholders who
purchased the common stock and other securities of Quality
Distribution, Inc., between November 7, 2003 and February 2,
2004 inclusive.
The Complaint alleges that defendants violated federal
securities laws by issuing a series of material
misrepresentations to the market during the Class Period,
thereby artificially inflating the price of Quality Distribution
securities. The Company has announced that it plans to restate
its results back to 2001 after discovering insurance law
violations at one of its subsidiaries.
For more information, contact Marc L. Ackerman or Evan J. Smith,
by Mail: Two Bala Plaza, Suite 602, Bala Cynwyd, PA 19004, by
Phone: toll free 877-LEGAL-90, or by E-mail:
clients@brodskysmith.com.
QUALITY DISTRIBUTION: Charles Piven Files Securities Suit in FL
---------------------------------------------------------------
The Law Offices Of Charles J. Piven, P.A. initiated a securities
class action in the United States District Court for the Middle
District of Florida, on behalf of shareholders who purchased,
converted, exchanged or otherwise acquired the common stock of
Quality Distribution, Inc. between November 7, 2003 and February
2, 2004, inclusive, against defendant Quality Distribution, and:
(1) Thomas L. Finkbiner, and
(2) S. M. Hensley
The action charges that defendants violated federal securities
laws by issuing a series of materially false and misleading
statements to the market throughout the Class Period which
statements had the effect of artificially inflating the market
price of the Company's securities.
For more information, contact Charles J. Piven, by Mail: The
World Trade Center-Baltimore, 401 East Pratt Street, Suite 2525,
Baltimore, Maryland 21202, by Phone: 410/986-0036, or by E-mail:
hoffman@pivenlaw.com.
SONUS NETWORKS: Paskowitz & Associates Lodges Stock Suit in MA
--------------------------------------------------------------
The law firm of Paskowitz & Associates initiated a class action
lawsuit in the United States District Court for the District of
Massachusetts, on behalf of all purchasers of the common stock
of Sonus Networks, Inc. publicly traded securities during the
period between June 3, 2003 and February 11, 2004, inclusive.
The complaint charges Sonus Networks, Inc. and two top
executives with violations of the federal securities laws. More
specifically, the complaint alleges that, throughout the Class
Period, defendants issued numerous statements to the market
concerning the Company's financial results, which failed to
disclose and/or misrepresented the following adverse facts,
among others:
(1) that defendants had improperly and untimely recognized
revenue on certain of the Company's customer
transactions;
(2) that defendants violated Generally Accepted Accounting
Principles and the Company's own internal policies
regarding the timing of revenue recognition; and
(3) as a result of the foregoing, the Company's revenues,
net income and earnings per share published during the
Class Period were materially false and misleading.
On February 11, 2004, after the close of regular trading, Sonus
announced that the Company had identified certain issues,
practices and actions of certain employees relating to both the
timing of revenue recognized from certain customer transactions
and to certain other financial statement accounts, which may
affect the Company's 2003 financial statements and possibly
financial statements for prior periods. Prior to disclosing
these adverse facts, Sonus completed a $126.14 million public
offering, and Sonus insiders sold approximately $2 million of
their personally-held shares to the unsuspecting public. The
next morning, when the market opened for trading, shares of the
Company's stock fell as low as $5.02 per share, a decline of
$1.67 per share, or 24.9%, on extremely high trading volume.
For more information, contact Paskowitz & Associates, by Phone:
1-800-705-9529 (toll free), or by E-mail: classattorney@aol.com.
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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.
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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 2004. All rights reserved. ISSN 1525-2272.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
The CAR subscription rate is $575 for six months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
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