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/raid1/www/Hosts/bankrupt/CAR_Public/990527.MBX C L A S S A C T I O N R E P O R T E R Thursday, May 27, 1999, Vol. 1, No. 80 Headlines ALLMERICA FINANCIAL: Court Gives Final Approval to Settlement BOEING CO.: Settlement Payments Delayed Pending Sept. 23 Hearing CUMBERLAND: Residents Balk at Unfair Fees & Subsidizing Sewers GENERAL MOTORS: Court Says Functioning Brakes are Not Defective HOLOCAUST SURVIVORS: Pharmaceutical Firms Linked to Nazi Tests HOLOCAUST SURVIVORS: Bank Austria's Restitution Offer Criticized INFORMIX CORP.: Deal May Settle Insider Suit for $143 Million IRIDIUM WORLD: Chitwood & Harley File District of Columbia Suit MCKESSON HBOC: Reinhardt & Anderson File Suit in California MCKESSON HBOC: Restating Earnings Again, Firms Keep Suing MICHIGAN PRISONS: New Boss Takes on Female-Offender Issues NEW ORLEANS: Sheriff Investigated for Pregnant Inmates' Abuse QUALMED: Federal Judge Seeks Order for Additional Viagra Doses SOFTWARE AG: Bernstein Liebhard Files Complaint in Virginia SUNRISE HEALTHCARE: Skilled Nurses Sue for Unpaid Overtime TEXACO: Amazonians Accuse Oil Company of Dumping Toxic Wastes TOYS R US: Toy Makers Give Toys to U.S. Marines for Price Fixing TTC: Transit System's Contempt Motion Fails, Costs $96,000 WWII REPARATIONS: Polish Slave Labor Promised Equal Compensation ********* ALLMERICA FINANCIAL: Court Gives Final Approval to Settlement ------------------------------------------------------------- Allmerica Financial Corporation (NYSE: AFC) announced that a settlement agreement in a class action lawsuit against the company and three of its subsidiaries received final approval in U.S. District Court in Worcester, Mass. The class action related to the sale of approximately 400,000 policies from 1978 to May 31, 1998. Final approval of the settlement follows a preliminary approval by the court on December 4, 1998. Allmerica Financial is a diversified group of insurance and financial services companies headquartered in Worcester, Mass. The Allmerica companies rank among the country's 20 leading providers of variable life insurance products and the 30 largest providers of property and casualty insurance coverage. The lead company in the group, Allmerica Financial Corporation, is a Fortune 500 company. BOEING CO.: Settlement Payments Delayed Pending Sept. 23 Hearing ---------------------------------------------------------------- The Associated Press reports that a federal court judge delayed the distribution of money in the settlement of a discrimination lawsuit against Boeing Co. so that a group objecting to the deal can state its case. U.S. District Judge John Coughenour scheduled another hearing in the matter Sept. 23 after attorneys take depositions. Attorney Alan B. Epstein of Philadelphia, who represents dozens of Boeing workers, challenges the settlement. saying that the settlement doesn't provide enough money or a means of enforcement to prevent future discrimination. According to AP, Boeing chairman Phil Condit and the Rev. Jesse Jackson announced the $15 million settlement of the class-action lawsuit on Jan. 22. The deal covers about 12,900 past and present black Boeing workers. In court papers, Boeing lawyers have called Epstein's challenge "sour grapes" from a lawyer who was less effective in the case "and therefore is not getting as much money in attorney fees." AP explained that the suit was filed by 41 Boeing workers who sought at least $82 million in damages. Court documents indicate they later were told by their lawyers that each would get at least $300,000. The maximum award under the settlement is $50,000. However, the Associated Press notes that Oscar Desper III and Bruce Harrell of Seattle, the lawyers who brought the first case on March 17, 1998, would get $3.85 million under the settlement. According to AP, Epstein, who filed a separate class-action discrimination suit last summer on behalf of seven Boeing Helicopters workers in Ridley Township, Pa., would receive $200,000. CUMBERLAND: Residents Balk at Unfair Fees & Subsidizing Sewers -------------------------------------------------------------- A group of 75 families who object to the amount that they are being billed for sewers have raised $3,000 to hire a lawyer who plans to file a class action lawsuit against the town. According to a story in the Providence Journal, Michael Horan, a Cumberland lawyer, notified the town about the planned suit, which the group intends to file in Superior Court before June 1. The residents' complaints include: * Cumberland is applying the proceeds from a $550 sewer tie-in fee established for 476 property owners affected by a 1999 sewer bond to pay the obligations of a 1991 sewer bond, in effect using one class of taxpayers to subsidize another. * A $500,000 expenditure to pay for Cumberland's share of sewers in Highland Park II Industrial Park is coming from the 1999 sewer bond, effectively placing the burden for an improvement that benefits the entire town on a small group of sewer users. * The town should conduct another audit of its sewer fund based on observations stemming from a previous audit that money earmarked for the sewer fund may have been allocated to the town's general operating budget. * The property owners' assessments involving the 1991 sewer bond were never properly set. As a consequence, town taxpayers, whether they have sewer connections or not, are subsidizing that bond in the amount of $1.7 million. Sean McCaffrey, a spokesman for the group of families, said its members have two other goals in filing the lawsuit. We want equitable assessments throughout the town, McCaffrey told the Providence Journal. And we want a clearly established maintenance program and a clearly identified fund for that program, so that when repairs are needed there is a fund to pay for them. McCaffrey said that the families have attended numerous meetings at Town Hall over the last five years, and see no alternative to a lawsuit at this time. At issue are the sewer bills for 476 property owners. In the fall of 1997, the Town Council was on the brink of setting sewer assessment rates for the last two sewer installation projects - Amherst Street and Crestwood Court - completed under the 1992 and 1994 sewer bonds. Town councilors then became aware that the sewer-assessment rate - $49 a linear foot of property frontage - that the town had been charging property owners for sewers installed with the 1992 and 1994 bonds was calculated improperly. Rather than taking into account the actual costs of the sewer projects, the rate was set at a flat $49 a foot rate. Also, the rate was never approved by the Town Council and therefore it was deemed illegal. Last year, the Town Council struggled over how to resolve the problem. In the meantime, no sewer bills were sent to the 476 affected property owners, and the town's sewer fund dropped deeper into the red. In January, after 112 years of defeated motions, town councilors finally approved an ordinance to remedy the situation. The ordinance sets the sewer assessment rate at $79 a linear foot of property frontage, payable over 20 years. The rate was calculated by dividing the total cost of installing all the sewers by the total frontage of the properties on the affected streets, according to town officials. The bills give all property owners credit for any payments they may have already made. The affected property owners say they are being singled out and are being forced to pay for town officials' errors. (Providence Journal; 05/24/99) GENERAL MOTORS: Court Says Functioning Brakes are Not Defective --------------------------------------------------------------- A panel of the Eighth Circuit U.S. Court of Appeals affirmed the dismissal of a class action against General Motors Corp. and Kelsey-Hayes Co. because the plaintiffs failed to show their vehicles' anti-lock brakes, which they admitted were fully functioning, caused them damage. According to a story in the Automotive Litigation Reporter, The plaintiffs alleged the anti- lock brakes manufactured by GM and KH were defective because they might lead drivers to perceive brake failure where no failure existed. The plaintiffs also claimed that as a driver applies pressure to the brake pedal, the pedal falls rapidly to the floor and might lead a driver to misapply the brakes in emergencies. The suit also sought damages for lost resale value and overpayment for the vehicle at the time of purchase. The case was Briehl et al. v. General Motors Corp. et al., No. 97-3506 (8th Cir., April 14, 1999). According to the Automotive Litigation Reporter, the U.S. District Court for the Eastern District of Missouri dismissed the complaint for failure to allege manifestation of a defect and failure to adequately allege damages. The trial judge said the defect must manifest itself before damages can be claimed. The plaintiffs then moved to amend the complaint, but the district court agreed with the defendants' objections that the second complaint still contained fundamental flaws. The judge said the motion to file an amended complaint was without merit because no new evidence was submitted. Affirming, the Eighth Circuit panel found that no cause of action existed because the anti-lock brakes did not malfunction or exhibit any defects. The plaintiffs did not seek damages as a result of actual injury or property damage, but claimed harm as a result of reduced resale value. The panel found the damage claims too speculative and said the original complaint did not show that any member of the class had sold a vehicle at a reduced resale price. The appeals court noted that the plaintiffs failed to calculate an amount of damages, an essential element on claims for implied and express warranty, fraudulent misrepresentation, fraudulent concealment and fraud. The Eighth Circuit also affirmed the denial of the motion to amend, finding that the amended complaint merely added allegations that certain class members suffered accidents or traded in their vehicles at a loss, and still failed to allege any manifested defects. (Automotive Litigation Reporter; May 18, 1999) HOLOCAUST SURVIVORS: Pharmaceutical Firms Linked to Nazi Tests -------------------------------------------------------------- The Associated Press reports that survivors of hideous Holocaust medical "experiments," some conducted by the infamous Dr. Joseph Mengele, are charging in lawsuits that German pharmaceutical companies participated in the tests and profited from their pain. The survivors include twins who say that, a half-century later, they clearly remember Mengele, Auschwitz's "Angel of Death," scrutinizing their naked, tortured bodies. The two federal class-action lawsuits filed in Newark, New Jersey, this month against Bayer AG, Hoechst AG and Schering AG are among the first in the nation linking German companies to Nazi medical experiments. According to AP, a similar class- action lawsuit against Bayer was filed in Indiana in February. The three class-action lawsuits filed May 13 are the latest filings in a recent wave of litigation by survivors of Nazi death camps or slave labor factories aimed at European banks, insurance companies and industrial firms. Of the Newark suits, AP explained that one is filed on behalf of U.S. citizens, the other for citizens of other nations. Each seeks unspecified damages for survivors it estimates number in the hundreds. They accuse the companies of providing toxic chemicals to the Nazis for the "experiments." Company personnel supervised the work and used information from those experiments to market products sold during and after the war, the lawsuits said. Schering also participated in these experiments, but also supported experimental sterilization procedures on camp inmates, the lawsuit said. The allegations stem from "various documents that have become available for researching that were not available before," said Joseph D. Ament, a Chicago lawyer representing plaintiffs in the Newark cases. All of the survivor lawsuits, many filed in U.S. District Court here, have been made possible by a 1991 international agreement settling German reparations to other nations, and thus allowing individuals to sue, said Burt Neuborne, a professor at New York University Law School who is among the lawyers pressing the Newark lawsuits. Hoechst issued a statement that did not address the medical experimentation claims, but cited the company's support of "various organizations and projects dedicated to preserving the memory of the atrocities of the Nazi regime." Bayer spokesman Thomas Reinert in Leverkusen, Germany, told the Associated Press the company would not comment on the lawsuits at this time. Schering spokesman Gert Wlasich told AP the company would examine the claims before commenting. HOLOCAUST SURVIVORS: Bank Austria's Restitution Offer Criticized ---------------------------------------------------------------- The Washington Post reported that a major Austrian bank's $40 million offer to resolve claims of Holocaust victims and their families is being criticized severely by the World Jewish Congress, opening a dispute that could lead to a court fight between the influential congress and lawyers favoring the settlement. At issue is a proposed agreement by Bank Austria and its subsidiary, Creditanstalt, to make restitution of funds lost by Jewish depositors beginning in 1938, when Austria came under the control of Nazi Germany, which confiscated the accounts of depositors it regarded as non-Aryan. Bank Austria's offer is intended to resolve a class action suit brought by four groups of litigants in federal district court in New York. The Post said the settlement calls for $ 30 million to compensate those found to have legitimate claims and $ 10 million for administration, lawyers' fees and settlement of pending claims. The court must approve the settlement. Most of the attorneys pursuing the class action suit favor accepting the bank's offer. The Washington Post noted that the World Jewish Congress is not a party to the suit. But it heads the negotiating committee of the world Jewish community's Conference on Material Claims against Germany and Austria. In that capacity, it has been involved actively in negotiations with Bank Austria. Elan Steinberg, the World Jewish Congress's executive director, told the Post the organization's opposition stems primarily from questions of when in 1938 control of Bank Austria's operations was assumed by the Nazi-controlled Deutsche Bank. Bank Austria contends that most non-Aryan accounts were confiscated after Deutsche Bank took over. However, Steinberg told the Post, documents show that most of the so-called "Aryanization" of accounts took place during the six-month period before Deutsche Bank took charge. He said: "Bank Austria's strategy has been to shift most of the liability to the Deutsche Bank. But its own records show it is unable to sustain that claim." On the other side, those attorneys who favor the settlement charge that the congress is endangering the claims of many elderly and needy victims by pursuing vague new demands. They also say that the documents on which the congress bases its objections have been available for years and were never before raised as an issue. Finally, they question whether the World Jewish Congress speaks for a majority of world Jewry in opposing the settlement. According to the Washington Post story, some noted that Moshe Sanbar, chairman of the Center of Organizations of Holocaust Survivors in Israel and a member of the claims conference, has endorsed the settlement on behalf of his organization. (The Washington Post; May 25, 1999) INFORMIX CORP.: Deal May Settle Insider Suit for $143 Million ------------------------------------------------------------- In one of the largest securities-fraud cases ever to strike Silicon Valley, Informix Corp. of Menlo Park and its former auditors and executives have tentatively agreed to pay $143 million for allegedly lying about company revenues and trading on inside information, according to a report in The San Francisco Chronicle. Although the company denies settling the case, sources close to the litigation say the troubled maker of database software last week reached a handshake deal to compensate investors who were stockholders from early 1995 to late 1997, when Informix allegedly padded revenues with hundreds of millions of dollars of phantom sales. Several top executives, including former Chief Executive Officer Phillip E. White, and the accounting firm Ernst & Young owe unspecified shares of the settlement that sources told The San Francisco Chronicle will be payable in cash and company stock. The settlement is a significant blow for Informix, which earned $57.7 million on sales of $735 million last year. It is also a staggering amount in an industry that is accustomed to settling securities-fraud class actions for an average of about $10 million. "Bad facts make for big settlements," said Professor Joseph Grundfest, a securities-law expert at Stanford Law School. "It would certainly be one of the most significant settlements ever, because of its size and the underlying allegations." The San Francisco Chronicle says the allegations first emerged in dozens of lawsuits filed after the company announced in April 1997 that it would lose money in the first quarter of that year. Executives blamed the losses on unexpectedly slow sales of its touted new technology, a database that could store any kind of information, notably graphics, rather than just text and numbers. But plaintiffs' lawyers contended that top executives had been lying about revenues for years by claiming to have sold software that was merely shipped to customers temporarily and returned to Informix the next financial quarter. The effect of the allegedly phony sales, the attorneys argued, was to increase Informix's stock price so that the executives could sell their shares at an exorbitant profit before the truth became public. Federal securities laws bar "insiders" from selling stock without telling the public about important information, such as the fact that revenues have been falsified. White and former Informix Chief Financial Officer Howard Graham sold more than $15 million worth of stock before the company announced it was losing money. Several months later, the federal Securities and Exchange Commission questioned Informix about recording revenue for unshipped products and other accounting irregularities. Finally, in November 1997, the company was forced to restate its financial results for the previous 14 quarters. The restatements wiped out almost $240 million in profits, sent the company's stock price plummeting and attracted even more lawsuits from shareholders. The lawsuits, which were eventually combined into a federal case and a state case, contended that Informix had entered into side agreements in which it promised customers that they would not have to pay for products the company shipped to them or could return the products that the company was booking as sold. The suits also claimed that Informix shipped products during one financial quarter but booked the shipments as revenue for the previous quarter. Company employees routinely called these transactions "Phil deals" -- referring to company president White -- and closing the last fiscal quarter on "December the 45th." "Due to this fraudulent accounting," said the federal complaint, "Informix was able to report the revenue growth necessary to support its stock price, even though actual demand for Informix's products was not growing as represented to the market." While these accounting practices were taking place, several top executives sold almost all of their stock, the suits claim. The complaints contended that White sold 97 percent of his shares, Graham sold 98 percent of his shares and former Vice President Ronald Alvarez sold 100 percent of his shares. However, an Informix spokesman told The San Francisco Chronicle, "No settlement has been reached. Settlement negotiations are continuing." The complaints also claimed that Ernst & Young, the company's auditors at the time, knew of the accounting irregularities but certified that the company's fiscal practices conformed to generally accepted accounting standards. The auditors also failed to force the company to disclose the irregularities publicly, the complaints charge. Ernst & Young did not return calls yesterday seeking comment on the case or the tentative settlement. Attorneys for the individual defendants declined to comment. (The San Francisco Chronicle; May 26, 1999) IRIDIUM WORLD: Chitwood & Harley File District of Columbia Suit --------------------------------------------------------------- Chitwood & Harley has filed a securities class action in the United States District Court for the District of Columbia on behalf of all persons who purchased or otherwise acquired securities (such as stocks, bonds, debentures, warrants, and call options) issued by Iridium World Communications, Ltd., Iridium, LLC, or Iridium Operating, LLC between September 9, 1998 and March 29, 1999. The complaint alleges that Iridium, certain of its top officers, and Motorola, Inc. violated the federal securities laws by issuing false and misleading statements that caused Iridium securities to trade at artificially high prices. When the true facts surrounding Iridium's troubled operations began to surface, the Company's securities collapsed, resulting in millions of dollars in losses for investors. The complaint further alleges that insiders at the Company sold over $1.5 million worth of stock and that the Company itself sold $250 million worth of stock shortly before the bad news was announced. To learn more, contact Corey D. Holzer, Esq. at 888-873-3999. MCKESSON HBOC: Reinhardt & Anderson File Suit in California ----------------------------------------------------------- Reinhardt & Anderson filed a class action in the United States District Court for the Northern District of California on behalf of those who purchased or otherwise acquired the common stock of McKesson HBOC, Inc. (NYSE:MCK) during the period between October 19, 1998 and April 27, 1999. The complaint charges McKesson and certain of its officers and directors with violations of the federal securities laws by making misrepresentations about McKesson's business, earnings growth and financial statements and its ability to continue to achieve profitable growth. By issuing these allegedly false and misleading statements, defendants artificially inflated McKesson's stock price to a high of $89-3/4 in January 1999, before the true facts about McKesson's troubled operations, diminished profitability and false financial statements were revealed and McKesson's stock collapsed to as low as $32 per share. To learn more, call Randall H. Steinmeyer at 888-253-5139 or 651-227-9990 or write to A.Hogan@ralawfirm.com via email. MCKESSON HBOC: Restating Earnings Again, Firms Keep Suing --------------------------------------------------------- For the second time in two months, medical supplies distributor McKesson HBOC Inc. is revising its fiscal 1999 earnings downward after discovering more accounting problems in its recently acquired health information company HBO, according to an Associated Press report. AP wrote that the news sent the company's stock down more than 12 percent. McKesson did not offer specific revisions, other than to say the restatement may also affect previous years' earnings reports. "I recognize that this is creating uncertainties for investors, but we thought it proper that we should disclose this at this time," McKesson spokesman Larry Kurtz reportedly told AP. "The previous release had identified there could be additional downward revisions, and we now know that for a fact, so we thought it proper to disclose that." McKesson shares closed down $4.68 3/4 a share, at $33.50 on the New York Stock Exchange. McKesson's shares plummeted nearly 50 percent, to $34.50, after it first acknowledged the first problem on April 28. The stock's 52-week high had been $89.75. According to the AP report, the company blamed "improper revenue recognition matters" involving software sales at HBO, which provides computer solutions to help health care providers manage their businesses. McKesson said it's still to early to project another revision of its earnings figures. "It's an ongoing process. When we have the final answer, we'll communicate fully," Kurtz was quoted by AP as saying, adding that the review could take as long as July to complete. At least four law firms have been retained by investors to consider a class-action suit alleging that false statements artificially inflated the profits of McKesson HBOC. For example, Bernstein Liebhard & Lifshitz, LLP which commenced a securities class action lawsuit on behalf of securities holders of McKesson HBOC, Inc. (NYSE: MCK) intends to expand the class period in an amended complaint. The expanded class period will include all persons, other than HBO & Company (NYSE: HBOC) shareholders, who purchased McKesson securities between October 19, 1998 and May 25, 1999. Similarly, The Law Offices of Steven E. Cauley, P.A. will modify its complaint to include purchasers of the common stock of McKesson HBOC Inc. between January 12, 1999 and May 25, 1999. AP described McKesson as the nation's largest pharmaceutical supply management and health care information technology company. It bought HBOC in January. On April 28, McKesson restated its fourth-quarter operating income to 56 cents a share, down from 62 cents, and its full-year operating income to $1.97 a share, down from $2.06. The fourth-quarter net loss was revised to 27 cents a share from 22 cents, and the full-year net income was revised to 75 cents a share from 84 cents. The Associated Press wrote that on April 22, McKesson reported a net loss of $60.4 million for the fourth quarter ended March 31, and net income of $237.1 million for the full year. The company said it also reduced its earnings goal for its fiscal year ending March 2000, because it expects its software revenue to fall. MICHIGAN PRISONS: New Boss Takes on Female-Offender Issues ---------------------------------------------------------- The Detroit News reports that the Michigan Department of Corrections settled a federal lawsuit alleging abuse by male guards of female prisoners and agreed to a six-month moratorium on pat-down searches of women by male guards. Under the 19-page settlement agreement with the U.S. Justice Department, the Corrections Department will hire a special administrator who will be responsible for addressing female-offender issues, including sexual misconduct and invasions of privacy, and who will conduct random interviews with inmates. The administrator will report to the corrections department director. The Detroit News reports that the state also will: * Prohibit male staff from being alone with female inmates in settings that are not clearly visible to other staff or inmates. * Require male officers to announce their presence in any areas where inmates could be in a state of undress. * Strengthen its pre-employment screening of correctional staff to include a search for a history of domestic violence and stiffen security screens for noncorrectional staff. They also will conduct background checks every five years. Matt Davis, a spokesman for the state Department of Corrections, called the settlement a victory for the state. "They've essentially told us to keep doing what we're doing and found no widespread pattern of abuse as they claimed," Davis told The Detroit News. "Has there been abuse in the past? Of course there has, and we've prosecuted offenders accordingly." Mellie Nelson, the deputy section chief of the U.S. Department of Justice's civil rights division, strongly disagreed. "We have found widespread, systematic sexual misconduct, including rapes and sexual assault in Michigan. That certainly was proved over and over again during the course of discovery," Nelson told The Detroit News. "We're very pleased and proud with the outcome of the agreement." Michigan has two prisons for women, the Scott Correctional Facility in Plymouth and the Crane Correctional Facility in Coldwater. The agreement doesn't affect ongoing class-action sexual harassment lawsuits by 32 female prison inmates against the Department of Corrections and several prison officials. (The Detroit News; May 26, 1999) NEW ORLEANS: Sheriff Investigated for Pregnant Inmates' Abuse ------------------------------------------------------------- A court will examine how pregnant women are treated in the Orleans Parish Prison amid allegations that some are shackled during labor and are denied doctor visits when they are bleeding and in pain. According to the Advocate (Baton Rouge LA), the American Civil Liberties Union is bringing the allegations in its ongoing lawsuit against Sheriff Charles Foti Jr. over conditions inside the 7,000-bed jail complex. Foti already is under legal and public pressure over last month's death of a diabetic inmate. A federal magistrate has set a July 13 hearing to examine the treatment of pregnant inmates, said Joe Cook, executive director of the ACLU of Louisiana. Cook said the group may request sanctions at the hearing. He said interviews with 100 women revealed violations of previous consent agreements. "It's important to us because he's blatantly violating a lawful order of the court," Cook told the Advocate. "When the sheriff is not obeying the law, how can he expect citizens to obey the law? It's hypocritical, and it's putting women's lives in danger." Cook said his staff interviewed female inmates late last year, then followed up by hiring a doctor as an expert witness to conduct follow-up interviews and review medical records. He described the findings as "unconscionable." In a statement issued Monday, the Sheriff's Office said: "We are accredited by the National Commission on Correctional Health Care and have been for the past six years. In addition, our medical program is monitored by the federal court and their medical experts. We routinely provide quality medical care for all of our inmates, including pregnant females." The issue of medical care in the prison was thrust into the spotlight after the April 6 death of JoAnn Johnson, a 21-year-old diabetic who died when her blood sugar skyrocketed while she was jailed on drug possession charges. Foti said that, although Johnson received insulin during her three-day incarceration, he is conducting a thorough investigation. According to the Advocate story, the ACLU lawsuit originated in 1969 as a prisoner complaint, but later mushroomed into a class- action suit covering a wide range of civil rights issues. While many issues have been resolved through consent decrees, medical care at the prison remains unsettled, with the ACLU's National Prison Project pursuing litigation. (Advocate Baton Rouge LA; 05/05/99) QUALMED: Federal Judge Seeks Order for Additional Viagra Doses -------------------------------------------------------------- The Guidepost reports that federal bankruptcy judge David Scholl says he plans to file a class action suit in an attempt to force his health care provider, QualMed, to cover the cost of more than four Viagra pills each month under a health benefits program for federal employees. Scholl was recently reported to say by the Washington Post that he thinks eight Viagra pills per month "is fair," though he conceded that the number deemed necessary "is a value judgment really." Attorney Stephen Madra, who represents QualMed, is quoted in the same article as saying that if the HMO agreed to pay for additional pills, "everyone in the plan is going to pay more for their premiums [because] these costs are always passed through to consumers." (Guidepost; June, 1999) SOFTWARE AG: Bernstein Liebhard Files Complaint in Virginia ----------------------------------------------------------- A securities class action lawsuit was commenced by the law firm of Bernstein Liebhard & Lifshitz, LLP on behalf of purchasers of the common stock of Software AG Systems, Inc. (NYSE:AGS) between November 17, 1997 and April 5, 1999 in the United States District Court for the Eastern District of Virginia. The complaint charges Software AG and certain of its officers and directors with violations of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleges that the defendants issued materially false and misleading financial statements in the Company's press releases and filings with the U.S. Securities and Exchange Commission. During this time defendants sold their own shares of Software AG at artificially inflated prices for millions of dollars in illicit personal profits. To learn more, contact Sandy A. Liebhard, Esq., or Michael S. Egan, Esq., at 800-217-1522 or 212-779-1414 or write to them at softwareag@bernlieb.com via email. SUNRISE HEALTHCARE: Skilled Nurses Sue for Unpaid Overtime ---------------------------------------------------------- SunRise Healthcare Corporation, a subsidiary of Sun Healthcare Group (NYSE:SHG) is the target of a national class action lawsuit filed on behalf of the company's skilled nursing and long-term care facility employees, claiming SunRise systematically compelled caregivers to work undocumented, uncompensated overtime to boost profits. If certified, the class action will represent all current and former employees of SunRise Healthcare Corporation who were not paid appropriate wages under federal and state laws. The suit, filed May 24 in US District Court in Seattle, states that SunRise gave registered nurses and other employees assignments that it knew they could not complete within their scheduled work hours. In order to meet even minimum levels of care for patients in their charge, the lawsuit claims that caregivers often worked several hours outside their shifts. The lawsuit claims violations of the federal Fair Labor Standards Act, which sets minimum wage and maximum hour standards for all employers. All 28 states in which SunRise operates have state wage and overtime protection statutes that Berman claims were violated when SunRise failed to pay the plaintiff and proposed class appropriately for all the hours they worked. The suit also claims supervisors required employees to clock in and out at regular shift times even if they worked overtime, and reprimanded employees harshly for recording any overtime on their official time sheets. "The caregivers found themselves in a horrible position," said Steve Berman, attorney for plaintiff Karen Minor, RN, and the proposed class. "SunRise employees knew that if they worked overtime, they would be punished, but they also had a moral and professional obligation to give their patients a humane level of care. Sun Healthcare forced this dilemma on caregivers and exploited it mercilessly." In addition to skilled nursing care for the elderly, SunRise provides postacute care for patients recovering from hospitalization for accidents and surgery. According to Berman, if plaintiffs had not worked off the clock, patients would have been left unattended or without medication. SunRise refused to reduce workloads or hire more employees when caregivers raised patient safety concerns with supervisors, he noted. According to documents from parent company Sun Healthcare Group, labor costs at its facilities are cause for internal concern. These documents point out that under tightened insurance regulations, increased labor costs are no longer `pass-through' items but are affecting the company's bottom line. Minor is a registered nurse who worked for SunRise Healthcare Corp. for five years. She claims that she informed SunRise management many times that there was not enough time in a regular shift to adequately care for her patients. SunRise assigns an average of 25 patients per nurse -- a high patient load, and Minor says she worked an average of two to four extra hours each day just to cover their basic needs. On a few occasions, Minor did record her overtime work. She says she was paid, but reprimanded both personally and in meetings by managers who would only repeat a company mantra that "overtime work was not permissible." SunRise operates 392 facilities in 28 states with more than 44,000 beds. SunRise Healthcare is a subsidiary of the publicly held Sun Healthcare Group, with offices in Albuquerque, New Mexico. TEXACO: Amazonians Accuse Oil Company of Dumping Toxic Wastes ------------------------------------------------------------- A landmark legal battle over massive oil pollution of South American Amazon rainforests spilled onto Wall Street today, challenging the proposed takeover of Texaco Oil by Chevron. The takeover faces new hurdles due to a potential multi-billion dollar liability facing Texaco. A group representing more than 30,000 Ecuadoran litigants began an ad campaign in today's New York Times. Under the headline, "A Word of Warning to Chevron Shareholders," the ad charges that Texaco dumped "toxics-laden water produced by oil drilling onto the ground, in nearby rivers and streams, and in ponds, destroying the surrounding environment" of the Ecuador rainforest. Texaco dumped some 4.3 million gallons per day of toxic oil waste water over a period of 20 years, or the equivalent of three Exxon Valdez oil disasters. Texaco also left behind more than 300 open waste pits contaminated with heavy metals and other carcinogenic hydrocarbon compounds. Lawyers for the plaintiffs estimate that Texaco saved $3 to $4 per barrel -- close to $6 billion over 20 years in additional profits -- by dumping the waste water rather than pumping it back beneath the earth's surface, as was the industry practice at the time. In addition, oil spills along the company's Trans- Ecuadoran Pipeline totaled an estimated 16.8 million gallons. Damages caused by Texaco's practices are estimated to be in excess of $1 billion. If the case goes to trial in the state of New York, punitive damages against Texaco could increase that amount significantly. A jury imposed a $5 billion damage penalty on Exxon for it's one-time, unintentional Valdez spill, which was much smaller than the amount of dumping by Texaco in Ecuador. "This is an environmental crime that never would have been allowed to happen in the United States," said Luis Yanza, the president of the Committee for the Defense of the Amazon, an environmental group based in Lago Agria, Ecuador. "Texaco was operating as a rogue corporation, beyond the bounds of all decency and far outside the industry's own announced policies for waste disposal." In a letter sent today to Chevron's CEO and Chairman of the Board, Kenneth Derr, Yanza invited Chevron's directors to visit the Amazon region to see the devastation caused by Texaco's actions firsthand. The 30,000 Ecuadorans are plaintiffs in a class-action suit against Texaco in U.S. Federal District Court in New York (the company is headquartered in White Plains). The plaintiffs cite a wave of deadly cancers, skin lesions, birth defects and other abnormalities among the area's indigenous peoples, and massive die-offs of plants, crops and animals from air and groundwater pollution as well as poisonous "black rain." Six years of pre-trial maneuverings in the case are expected to come to a head any day in the courtroom of Judge Jed Rakoff. Texaco has been fighting to either have the lawsuit dismissed entirely or to have the lawsuit heard in Ecuadoran, rather than U.S. courts. An initial ruling favoring U.S. jurisdiction was reversed when the judge who issued it died and Judge Rakoff took over the case and dismissed it. The U.S. Court of Appeals, however, reversed Rakoff's dismissal last October and sent the case back to him, declaring unanimously that the suit could be transferred to Ecuador only if there was a suitable judicial forum in that country. "Such a forum simply does not exist in Ecuador," said Paulina Garzon of the Center for Economic and Social Rights, with offices in Quito, Ecuador and New York. "Ecuadoran courts have proven they cannot provide any remedy for the devastation that Texaco has caused." The new Ecuadoran government prefers that the case be tried in the United States, and has said that it would likely send the case back to the U.S. if the federal court dismisses it to Ecuador. Meanwhile, Luis Yanza of the Committee for the Defense of the Amazon, which placed today's New York Times ad said, "We will continue to play an active role in educating the American public about the facts of this case and the eventual liability that Texaco and Chevron shareholders will bear for the irresponsible actions of Texaco's top executives." The Committee for the Defense of the Amazon was formed in 1994 and represents all the indigenous tribes and other residents who live in and around the Ecuadoran rainforest region where Texaco operated. (U.S. Newswire; May 25, 1999) TOYS R US: Toy Makers Give Toys to U.S. Marines for Price Fixing ---------------------------------------------------------------- The San Francisco Chronicle quoted California Attorney General, Bill Lockyer, who announced that the $50 million settlement of an antitrust suit against three toy marketing giants, including Toys R Us, will be used to provide toys for needy children in California and other states. Under the agreement, toys will be distributed by the U.S. Marine Corps' "Toys For Tots" program over the next three holiday seasons. "This settlement with the toy companies allows us to brighten the holidays for thousands of needy California children, Lockyer said. California children are expected to receive $3.89 million worth of playthings as the state's share of the overall settlement. The San Francisco Chronicle reports that the settlement stems from a class action lawsuit filed in 1997 by attorneys general for California, 43 other states, the District of Columbia and Puerto Rico. The complaint alleged that Toys R Us and three large toy manufacturing companies had violated federal antitrust laws by conspiring to fix prices for playthings marketed through the 1,400-plus stores Toys R Us operates in the United States and abroad. The antitrust actions were filed after an administrative law judge for the Federal Trade Commission issued a decision against Toys R Us and several other toy companies in September 1997 that found they engaged in unfair business practices that violated a section of the Federal Trade Commission Act. Toys R Us will pay most of the $50 million tab with $27 million worth of toys and an additional $13.5 million in cash that will be used to provide children with toys, books and other educational materials. In addition to the toys and cash from Toys R Us, the settlement provides for a $8.2 million payment from Mattel Toy Company of El Segundo, California, and an additional $1.3 million payment from the Little Tykes Company of South Carolina. Another defendant in the suit, Hasbro, Inc., had earlier agreed to pay $5.9 million in cash and toys. Last year the company began meeting the terms of its own settlement program by contributing $475,000 worth of toys to children in California. (The San Francisco Chronicle; May 26, 1999) TTC: Transit System's Contempt Motion Fails, Costs $96,000 ---------------------------------------------------------- The Toronto Sun reports that a failed contempt of court motion by the TTC will end up costing the transit system about $96,000 in legal costs. The TTC filed the contempt motion against McGowan and Associates after the law firm issued a press release about a class action suit stemming from a TTC fire in August 1997. The Toronto Sun said the TTC lost the class action suit on Dec. 2, 1998. The next day McGowan and Associates issued a press release inviting passengers exposed to the fire to contact the firm about compensation. The TTC filed the contempt motion because it believed the release might encourage exaggerated or fabricated claims. Justice Robert Sharpe found the contempt motion was a "considered and deliberate move by the TTC to raise the stakes" and ordered it to pay McGowan's $46,000 legal costs. The TTC's costs were about $50,000. TTC lawyer Brian Leck said the case dealt with a new area dealing with "notice" under the Class Proceedings Act. "It was a new area of the law and it was a necessity to be addressed," said Leck. "It wasn't something where somebody took a shot in the dark." (The Toronto Sun; May 26, 1999) WWII REPARATIONS: Polish Slave Labor Promised Equal Compensation ---------------------------------------------------------------- Germany has agreed that Nazi-era slave laborers from Poland should get the same compensation as those living in other countries, a Polish official told the Associated Press. Polish government Chief of Staff Jerzy Widzyk said German officials he met with no longer questioned whether Poles who performed forced labor for the Nazis during World War II would get the same compensation as citizens of other countries. "Both sides agreed that the way the compensation issue is solved is of chief importance for the shape of Polish-German relations," Widzyk was quoted as saying by the PAP state news agency. The Associated Press wrote that German Chancellor Gerhard Schroeder's chief of staff, Bodo Hombach, who led the German delegation, provided no details on the meeting, simply saying it was important for maintaining bilateral relations on the subject. AP described the suit, saying that more than 400,000 Poles are seeking a total of more than $2 billion in compensation for their slave labor. Equal compensation for Poles has been at issue in a series of talks involving the United States, Germany, Poland and other nations. AP explained that Poland and other East and Central European countries feared their slave laborers would receive less money than those currently living in the United States and Israel. With the equal-compensation agreement by Germany, the chief remaining obstacle was believed to be class-action lawsuits pending against German industry. Faced with the lawsuits filed in the United States by former slave laborers, 12 of Germany's largest companies pledged in March to set up an industry fund by September to pay reparations. In return, the German companies want the lawsuits dropped. U.S. Undersecretary of State Stuart Eizenstat and German officials have scheduled further meetings beginning in June to resolve related issues. Also participating in discussions on how to set up the fund are Israel, Poland, Russia, Belarus, Ukraine and the Czech Republic, as well as Jewish and industry groups. ********* 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., Princeton, NJ, and Beard Group, Inc., Washington, DC. Peter A. Chapman, Editor. Kent L. Mannis, Project Editor. Copyright 1999. 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 301/951-6400. * * * End of Transmission * * *