/raid1/www/Hosts/bankrupt/CAR_Public/990917.MBX
C L A S S A C T I O N R E P O R T E R
Friday, September 17, 1999, Vol. 1, No. 158
Headlines
AAVID THERMAL: Stockholders Sue In Delaware Over Heat Holdings Merger
ADVANCED HEALTH: Decries Merit Of Securities Suits In New York
ARM FINANCIAL: Gold Bennett Extends Period For Securities Suit In Kent.
ASCENT ASSURANCE: Bankruptcy Ct Oks Texas Securities Suit Settlement
BEAR STEARNS: Victims Of Nevada Investment Advisor Win Arbitration Case
BOSTON WATER: Sewage-Flooded Residents Might Sue Or Stop Paying Taxes
ED BOARD: Sued Over Holding Back Kids; Tells Of Botching Of Test Scores
FEN-PHEN: AFX Says AHP Reportedly Close To $ 3 Bil Parital Settlement
FEN-PHEN: Defense at Trial Says Risks Stop One Year After Use Ends
FEN-PHEN: Penn Ct Conditionally Certifies Nationwide Class For Check-Up
GENERAL MOTORS: Lawyers Forgo Damages In Exchange For Fixing Of Defects
HARBINGER CORP.: Milberg Weiss Announces Securities Suit In Georgia
HOLOCAUST VICTIMS: Prepared Testimony Of Claims By Burt Neuborne
IBM: Agrees to Pay Retirees $ 15 Mil, Middleton & Reutlinger Announces
IBM: Some Employees Wage Suit Over Change In Pension Plan
MOHAMMAD DOLLAH: No Change Of Jury And No Retrial Over Stock Sale Fraud
PAYDAY LENDERS: Edelman, Combs Sues Short Term Loans In Chicago
SBARRO INC: Settles For Shareholders’ Suits Over Merger
UNUMPROVIDENT CORP: Sued In MA Re Paul Revere’s Former Work Contracts
US LIQUIDS: Charged With Misleading Investors In Suit Filed By Berman
WAR VICTIMS: Ex-P.O.W.'s Sue 5 Big Japanese Companies Over Forced Labor
********
AAVID THERMAL: Stockholders Sue In Delaware Over Heat Holdings Merger
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On August 23, 1999, Aavid Thermal Technologies Inc. entered into an
Agreement and Plan of Merger by and among the Company, Heat Holdings
Corp., a corporation newly formed by Willis Stein & Partners, II, L.P.,
and Heat Merger Corp., a wholly owned subsidiary of Purchaser ("Merger
Sub").
The Merger Agreement contemplates, among other things, that following
approval of the Company's stockholders, Merger Sub will merge with and
into the Company, the Company will become a wholly-owned subsidiary of
Purchaser and the Company's stockholders will receive $25.50 per share
in cash. The Merger is conditioned upon, among other things, the
expiration of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and approval of the
Company's stockholders. Although the Merger is also conditioned upon the
closing of the Company's acquisition of the thermal management business
of Bowthorpe, the Purchaser has agreed that in the event the Company for
any reason does not consummate the acquisition, it will still acquire
the Company pursuant to the Merger Agreement, but at a price of $24.50
per share. In such event, either the Company or the Purchaser may elect
to have the Purchaser commence a tender offer for the Company's shares.
The Merger Agreement may be terminated under certain circumstances,
including without limitation in connection with the Company's entering
into a definitive agreement with respect to another acquisition
transaction which the Company's Board of Directors has concluded in good
faith, after consulting with its financial advisor, is more favorable to
the Company's stockholders than the Merger and is reasonably capable of
being financed. In such event and certain other circumstances, the
Company would be obligated under the Merger Agreement to pay Purchaser a
termination fee of $8.3 million.
Certain of the Company's directors and executive officers, beneficially
owning an aggregate of 1,275,970 shares of the Company's common stock
(including 899,176 shares issuable upon exercise of outstanding
options), entered into voting agreements with Purchaser pursuant to
which they agreed to vote their shares in favor of the Merger. A copy of
the Merger Agreement is attached as Exhibit 2.2 hereto, the text of
which is incorporated by reference under this Item 5.
Following the public announcement of the Merger, lawsuits were filed
against the Company, Willis, Stein & Partners, the Company's directors
and one former director in the Court of Chancery of the State of
Delaware by stockholders of the Company. The complaints allege, among
other things, that the Company's directors have breached their fiduciary
duties and seek to enjoin, preliminarily and permanently, the Merger and
also seek compensatory damages. The stockholder plaintiffs, on behalf of
the Company's public stockholders, also seek class action certification
for their lawsuits.
PRESS RELEASE DATED AUGUST 23, 1999
[AAVID THERMAL TECHNOLOGIES, INC. LOGO]
CORPORATE HEADQUARTERS - ONE EAGLE SQUARE, SUITE 509, CONCORD, NH 03301
TELEPHONE (603) 224-1117 FAX (603) 224-6673 FOR IMMEDIATE RELEASE
AAVID THERMAL TECHNOLOGIES ANNOUNCES IT WILL BE ACQUIRED BY WILLIS STEIN
& PARTNERS
AAVID THERMAL TECHNOLOGIES ANNOUNCES IT WILL PURCHASE THERMAL MANAGEMENT
BUSINESS OF BOWTHORPE
CONCORD, NH, AUGUST 23, 1999 - Aavid Thermal Technologies, Inc. (NASDAQ:
AATT) announced today that it has entered into a definitive agreement
pursuant to which a new company formed by Willis Stein & Partners will
acquire Aavid in a merger for $25.50 per share in cash, or approximately
$260 million. The transaction was approved by Aavid's Board of Directors
after it conducted a review of Aavid's strategic alternatives. The Board
received a fairness opinion with respect to the proposed transaction
from Hambrecht & Quist LLC, which the Board had engaged to assist it in
its review and evaluation of strategic alternatives.
The transaction is subject to a number of customary closing conditions,
including stockholder and regulatory approval. In addition, the
transaction at $25.50 is conditioned on the Company's acquisition of the
thermal management sector of Bowthorpe plc as set forth below. The
Company intends to hold a special meeting of its stockholders to approve
the transaction as soon as possible following the completion of the
acquisition of the thermal management sector of Bowthorpe. The Company
expects to complete the transaction with Willis Stein in the fourth
quarter of 1999.
The Company also announced today that it has entered into a definitive
Stock Purchase Agreement to acquire the thermal management sector of
Bowthorpe for approximately $79.5 million in cash, subject to certain
closing date adjustments. Prudential Securities Incorporated advised the
Board with respect to the acquisition. The proposed acquisition, which
is expected to close in the fourth quarter of 1999, is subject to
various conditions, including expiration of applicable Hart Scott Rodino
waiting periods. Willis Stein has agreed to proceed with the acquisition
of the Company even if the acquisition of Bowthorpe's thermal management
sector does not occur, although at a price per share of $24.50.
Bowthorpe's thermal management sector provides heatsinks and associated
products for the cooling of semiconductors, power hybrid circuits, high
power electronics, and other electronic devices. Upon closing of the
stock purchase agreement, Aavid will acquire Bowthorpe's thermal
management product manufacturing facilities in Dallas, Texas; Monterey,
Mexico; Swindon, England; Corby, England; Milan, Italy; Hong Kong and
Malaysia. As part of the acquisition from Bowthorpe, Aavid will also
acquire 65.2%, representing Bowthorpe's entire shareholding, of Curamik
Electronics GmbH, a German corporation which manufactures direct bonded
copper substrates used in the packaging and cooling of high power
electronic devices. The sector, including Curamik, had revenues of
approximately $102 million for the year ended December 31, 1998 and $50
million for the first half of 1999. The acquisition is not expected to
be accretive to Aavid's earnings for twelve months following the
closing.
Company Background
Aavid Thermal Technologies is a leading provider of thermal management
solutions for dissipating potentially damaging heat from digital and
power electronics. Aavid serves a highly diversified range of markets,
principally in North America, Europe, and the Far East. Aavid's 1998
sales totaled $209 million, driven by the company's operations in two
distinct markets: thermal management solutions and computational fluid
dynamics software.
Thermal management solutions include products and services for problems
associated with the dissipation of unwanted heat in electronic and
electrical components and systems.
Computational fluid dynamics (CFD) software involves developing software
for computer modeling and flow analysis of products and processes that
would otherwise require time consuming and expensive physical models and
the facilities to test them.
Ongoing increases in silicon and system integration, higher processing
speeds and frequencies, smaller form factors, more sophisticated power
requirements and other advances in chip technology create excessive heat
in microprocessors and IC's (semiconductors) in electronic and
electrical components and systems. Microprocessors and integrated
circuits operate efficiently only in a narrow temperature band.
The excessive heat generated by these semiconductors not only harms
their own performance, but also degrades system performance and
reliability and can cause system failure. The increasingly wide range of
environmental conditions, including temperature extremes, in which
electronic systems are expected to operate, exacerbates these negative
effects.
The use of Aavid's thermal solutions helps maintain device and system
performance and reliability, and help avoid premature component and
system failure.
ADVANCED HEALTH: Decries Merit Of Securities Suits In New York
--------------------------------------------------------------
From July 1 through August 17, 1998, eleven putative class actions were
filed in the United States District Court for the Southern District of
New York, all of which have been consolidated under the caption In re
Advanced Health Corporation Securities Litigation. The consolidated
complaint, filed in February 1999, seeks, among other remedies,
certification as a class action and unspecified damages resulting from
defendants' alleged violations of federal securities laws. The
consolidated complaint alleges that the Company and its current or
former officers or directors, Jonathan Edelson, M.D., Steven Hochberg,
Alan B. Masarek, Robert Alger and Michael W. Rogers are liable for
certain misrepresentations and omissions regarding, among other matters,
the Company's operations, performance, and financial condition. The
litigation is still in the preliminary stages, and the Company believes
that the plaintiffs' claims are without merit and intends to defend
against the action vigorously.
On September 16, 1998, Bukstel & Halfpenny, Inc. ("B&H") commenced an
action in the Supreme Court of the State of New York entitled Bukstel &
Halfpenny, Inc. v. Advanced Health Corporation. In addition to the
Company, the complaint names as defendants Advanced Health Med-E-Systems
Corporation, Advanced Health Bukstel & Halfpenny Corporation, Jonathan
Edelson, M.D., Alan Masarek, and Michael W. Rogers.
The Complaint asserts violations of the federal securities laws, common
law fraud and other common law claims in connection with the Company's
September 17, 1997 purchase of certain assets from B&H, and seeks
rescission of the asset purchase agreement or unspecified damages. On
October 30, 1998, B&H obtained an order to show cause and temporary
restraining order, which temporarily prevents the Company from
transferring certain software source code to Mayo Medical Laboratories
and from including certain "software escrow" provisions in certain
software licensing agreements for the Dr. Chart(R), Clinical Data
Repository(TM), Clinical Data Exchange(TM) and Application Interface
Engine(TM) products (the "TRO"). On November 17, 1998, the Court held a
hearing on the Company's motion to dismiss the complaint and for
sanctions on plaintiff's motion for expedited discovery and a
preliminary injunction. No decision has been rendered to date. The
Company believes that the plaintiffs' claims are without merit and
intends to defend against the action vigorously.
ARM FINANCIAL: Gold Bennett Extends Period For Securities Suit In Kent.
-----------------------------------------------------------------------
Gold Bennett & Cera LLP has filed a class action to recover damages in
the United States District Court for the Western District of Kentucky on
behalf of all purchasers of ARM Financial Group, Inc. ("ARM") common
stock (formerly NYSE: ARM; currently OTC: ARMGA) during the period
October 27, 1998 to August 26, 1999, inclusive.
The complaint alleges that certain ARM officers and directors violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by,
among other things, misrepresenting and/or omitting material information
about ARM's results of operations and financial condition. Specifically,
the complaint alleges that defendants issued a series of false and
misleading public statements during the Class Period which, among other
things, misrepresented or failed to disclose the true facts concerning
the Company's financial condition and results of operations. Among other
things, the complaint alleges that defendants failed to disclose or
misrepresented that: (1) ARM lacked sufficient surrender protection on
its institutional business and related portfolios given the rise in
interest rates; (2) there was a huge mismatch between assets and
liabilities on ARM's balance sheets which created a potentially
dangerous unrealized loss that could only be alleviated by transferring
over $ 3.5 billion in institutional liabilities and matched assets to
the liabilities' guarantor; and (3) ARM's public statements concerning
its financial security and the purported "strength of its business
operations" were materially false when made in light of the material
decline in the value of ARM's portfolio and the material impairment of
its assets.
On August 26, 1999, The New York Stock Exchange said it would suspend
trading in shares of ARM immediately and said it would apply to the U.S.
Securities and Exchange Commission to delist ARM, because of its
"unsatisfactory" financial condition and its abnormally low share price.
The plaintiff is represented by the San Francisco law firm of Gold
Bennett & Cera LLP. If you purchased ARM common stock during the Class
Period you may no later than 60 days from August 18, 1999 move the Court
to serve as lead plaintiff, if you so choose. To serve as lead
plaintiff, however, you must meet certain legal requirements. Contact
Steven O. Sidener or Joseph M. Barton of Gold Bennett & Cera LLP, 595
Market Street, Suite 2300, San Francisco, California 94105, by telephone
at (800) 778-1822 or (415) 777-2230, by facsimile at (415) 777-5189 or
by e-mail at jbarton@gbcsf.com TICKERS: OTC:ARMGA
ASCENT ASSURANCE: Bankruptcy Ct Oks Texas Securities Suit Settlement
--------------------------------------------------------------------
On September 16, 1998 (the "Petition Date"), Westbridge Capital Corp.
(former conformed name of Ascent Assurance Inc.) commenced a
reorganization case (the "Chapter 11 Case") by filing a voluntary
petition for relief under Chapter 11, Title 11 of the United States Code
in the United States Bankruptcy Court for the District of Delaware,
along with a disclosure statement and a proposed plan of reorganization.
The filing of the Disclosure Statement and Plan culminated months of
negotiations between Westbridge and an ad hoc committee (the "Creditors'
Committee") of holders of its 11% Senior Subordinated Notes due 2002
(the "Senior Notes") and its 7-1/2% Convertible Subordinated Notes due
2004 (the "Convertible Notes"). The Disclosure Statement and the Plan
were amended on October 28, 1998, and the Disclosure Statement was
approved by entry of an order by the Bankruptcy Court on October 30,
1998. Following the approval of the Plan by the holders of allowed
claims and equity interests, the Bankruptcy Court confirmed the Plan on
December 17, 1998. The Plan became effective March 24, 1999.
In connection with its emergence from Chapter 11, Westbridge changed its
corporate name to "Ascent Assurance, Inc." Pursuant to the Plan, the
Company's Board of Directors was reconstituted as of the Effective Date
into a classified board consisting of six directors (with two directors
in each class), three of which were appointed by Credit Suisse First
Boston Corporation ("CSFB"), one of which was appointed by the
Creditors' Committee and two of which were appointed by the Company.
Until June 24, 1999, the holders of the New Preferred Stock (as defined
below) have the right to designate one additional director. Also on the
Effective Date, the Company's certificates of incorporation and by-laws
were amended and restated in their entirety, copies of which are filed
as an Exhibit hereto.
Westbridge's capital structure was realigned and deleveraged. In
connection with the approval and effectiveness of the Plan, the Company
settled a putative class action brought on behalf of certain purchasers
and sellers of Westbridge's Convertible Notes and Old Common Stock
during the period October 31, 1996 through October 31, 1997.
Westbridge's Plan was confirmed by the Bankruptcy Court on December 17,
1998 and, after the satisfaction of a number of conditions, the Plan
became effective on March 24, 1999.
Notwithstanding the confirmation and effectiveness of the Plan, the
Bankruptcy Court continues to have jurisdiction to, among other things,
resolve disputed prepetition claims against Westbridge, resolve matters
related to the assumption, assumption and assignment, or rejection of
executory contracts pursuant to the Plan, and to resolve other matters
that may arise in connection with or relate to the Plan.
On December 17, 1997, a purported class action complaint, naming
Westbridge, three former directors of Westbridge, and two underwriters
of the Westbridge's Convertible Notes as defendants, was filed in the
United States District Court for the Northern District of Texas on
behalf of persons who purchased securities of the Company during the
period October 31, 1996 through October 31, 1997. The complaint alleged
that Westbridge materially overstated its earnings due to the
establishment of inadequate reserves for pending insurance claims.
In October 1998, a preliminary settlement agreement was reached by and
among the parties to the complaint. The final settlement agreement was
approved by the Bankruptcy Court on December 17, 1998 and by the
District Court pursuant to a final judgment entered on January 20, 1999.
The settlement did not involve an admission of liability by any party.
BEAR STEARNS: Victims Of Nevada Investment Advisor Win Arbitration Case
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About two dozen investors, including several in Southern California,
have won a long-running arbitration case against Bear Stearns Cos.,
which was ordered to pay $ 2.5 million for its role in a failed trading
scheme, attorneys said Tuesday.
The ruling by a panel of the National Assn. of Securities Dealers is
unusual because it holds a brokerage firm liable for the losses of
investors who were not its customers and did not have accounts at the
company.
The 22 victims entrusted about $ 4.6 million to a Nevada investment
advisor, Robert Schmidt, who invested the money in a failed options
trading program at Bear Stearns. Schmidt was convicted of embezzling
some of the money and is serving a prison term.
The New York-based brokerage argued it should not be held accountable
for the losses of investors who were not directly its clients.
But the arbitration panel found that Bear Stearns acted negligently and
breached its fiduciary duty because its brokers helped Schmidt attract
investors by attending sales seminars and providing him with Bear
Stearns documents, according to Jeff Ferentz, the Newport Beach attorney
who represented the investors. The panel also found that Bear Stearns
should have noticed and investigated suspicious activities in Schmidt's
account, including the movement of funds to offshore accounts, Ferentz
said.
Bear Stearns "was helping Schmidt do what he did," said Ferentz, a
partner at Greenbaum and Ferentz. "This ruling shows that the brokerage
firms are responsible." The ruling also names Bear Stearns brokers
Stephen Ackerman, Barry Ganz and Mark Seruya. (Los Angeles Times
9-15-1999)
BOSTON WATER: Sewage-Flooded Residents Might Sue Or Stop Paying Taxes
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Alice Fisher went away last weekend confident that the $10,000 she had
spent to flood-proof her home, including buying a sump pump, would
prevent a repeat of last year's flood, when 30 inches of water ravaged
her house. No such luck. Following last Friday's deluge, Fisher, like
hundreds of other residents in Boston's South End, found that once again
her home was devastated.
The culprit wasn't just rainwater - it was sewage, hundreds of gallons
of filthy sludge that poured into some of the most expensive real estate
in the city. The garden level of Fisher's Tremont Street home, for
example, was filled with 3 feet of black, murky sewer water. Destroyed
were a computer, books, the floors, walls, kitchen cabinets, and the
dishwasher. Flopped over, "kaput" on the kitchen floor was the brand-new
refrigerator she bought to replace one destroyed in a flood in June
1998. "I love where I live, but this is a terrible price to pay to live
there," said Fisher, 58, a caterer, adding that her home sustained
between $90,000 to $ 100,000 in damage after a city pumping station
failed around 11 p.m. Friday following a day of steady, heavy rain. As
many as 300 homes in the South End, many along Tremont and Washington
streets and surrounding side streets, were flooded, residents say.
Whether the city will compensate residents for property damage or loss
has yet to be determined.
After three major floods in as many years, South End residents feel
besieged by the physical damage as well as potential health threats and
the trauma of having to repeatedly deal with water woes. Even in this
superheated real estate market, residents say the floods have made their
homes hard to sell - despite their desirable location. "Every time we
hear the pitter-patter of little raindrops our hearts go into our
throats and our stomachs go into a knot," said Edward Allen, 51, whose
Milford Street home was flooded once again last weekend. "It's fear,
fear of what are in effect manmade disasters."
But officials at Boston's Water and Sewer Commission, which is still
investigating what caused the pump to fail, say machines can
malfunction. "I know it's a lame answer, but machines do break down,"
said Janet Mainieroc, a spokeswoman for the commission.
A short-circuit in the electrical system at the Union Park Pumping
Station last Friday night disabled three of the station's four pumps,
causing a backup that allowed sewer water and ground water to spill into
homes through drains, toilets, windows, and walls.
The fear of what they may come home to makes some South Enders avoid
going away. They watch weather reports religiously and have already
started panicking about Hurricane Floyd. And they are concerned that
children may be at risk from E. coli bacteria and Hepatitis A by
exposure to fetid water.
Officials say they are doing everything possible to solve the persistent
flooding problem. After last year's disaster, the Water and Sewer
Commission funded a $1 million study to find out why the South End is
prone to flooding. The engineering firm conducting the study is expected
to present an interim report next month.
In the meantime, officials recommend that residents take flood
precautions such as installing a backflow valve to keep water out of
their homes. But many South Enders said such devices are of little use.
Brian Marsh, 28, had only 2 inches of sewer water in his house last
weekend, but that follows $23,000 in losses he suffered in a September
1996 flood and the $60,000 he spent in 1998 to gut his house and take
every precaution possible, including installing an "industrial strength"
sump pump. "I lost baby pictures, I lost my college diploma and my high
school diploma," Marsh said, about the previous two floods. "I sunk
literally every penny I had on this earth into this house, and when I
bought it in '93 no one ever warned me that the South End is the lowest
point in the city, that basically I'm living on the beach."
Michael Burke, 60, who lives on West Canton Street, invested $10,000 to
try to keep water out of his house. But 18 inches of sewage poured into
his home's lower level last weekend. "I have absolutely no faith in
them," he said, referring to the Water and Sewer Commission. "The city
shows no indication they have a handle on the problem."
Prompted by Mayor Thomas M. Menino, the Sewer Commission and city
officials opened a command center at the Cyclorama on Tremont Street
Monday night to offer health and cleanup information. But the command
center is not enough to temper the "absolute rage" in the neighborhood,
said Judith Watkins, organizer of the Ad Hoc Committee to End Chronic
Flooding in the South End. "It's a little late, since we've been
standing in sewage now for three days," said Watkins, who says she had
15 inches of stinky, dirty water in her home. "The city's infrastructure
is letting us down in the worst way again and again and again."
Fed up with the recurring problem, some residents have discussed filing
a class-action lawsuit or banding together to stop paying city taxes and
sewer bills. "If my house is uninhabitable, I shouldn't have to pay
taxes on it, or I shouldn't have to pay my sewer bill," Marsh said. "The
amount of stress this has caused is unmeasurable, and they can't
reimburse me for that." (The Boston Globe 9-15-1999)
ED BOARD: Sued Over Holding Back Kids; Tells Of Botching Of Test Scores
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Thousands of city kids may have been sent to summer school or denied
promotion unfairly because a test publisher goofed in scoring exams, the
Board of Education said.
The exact number of kids affected by the scoring snafu was not
determined, but the unofficial estimate is that 3,000 youngsters - about
1 percent of the 300,000 who took the tests - were mandated to attend
summer school erroneously. And many may have been held back a grade
because they failed or didn't take an end-of-summer test.
"We feel horrible," said Steve Weiss, a spokesman for testing company
CTB/McGraw-Hill, which admitted it used "bad data" to rank kids.
Schools Chancellor Rudy Crew called for an independent audit of the
company - to which the board paid more than $2 million last year to
devise and score city tests. Board officials will review the scores of
all 300,000 kids in grades 3, 5, 6 and 7 who took the exams. "Obviously,
the first group we're going to look at are those who may have been held
back unfairly," said spokeswoman Pam McDonald.
Testing experts blasted Crew for relying too heavily on the tests. "It
shows how totally fallible these tests are, and how stupid it is to base
major life decisions on them," said Bob Schaeffer, public-education
director for the National Center for Fair and Open Testing in Cambridge,
Mass.
But McDonald noted that the kids sent to summer school were very
low-performers - error or not - and still benefited from the extra
instruction.
Crew announced this month that 21,000 students in grades 3, 6 and 8
would be held back because they failed or didn't take a test at the end
of summer school. It wasn't clear whether some of those kids would now
be promoted.
Crew said he would report on the whole mess to the board - and that he
asked CTB/McGraw-Hill representatives to attend "to explain their
error."
Weiss said the error caused "slight" changes. When rescored, he said, "a
majority" of the lowest-performing pupils will actually rank several
percentage points higher compared to a national average. And many of the
highest performing kids will come out a couple of percentage points
lower. "The number of right and wrong answers remains the same," he
said. "It solely affected how the test scores were translated into
national rankings."
But those rankings were used to decide whether kids would be required to
attend summer school.
The stunning announcement came as the board was in court fighting a
class-action suit by parents of failing kids who contend Crew violated
regulations by holding back kids without advance notice or extra
tutoring to help them improve. "It's another indication of how hurried
and slapdash this whole process has been," said Jill Chaifetz, executive
director of Advocates for Children, which filed the suit.
McDonald said Crew has been working on the policy for at least a year
and "didn't rush into this ... Just because there's an error in the test
doesn't mean there's an error in the policy."
Parents were shocked and angry to learn about the scoring slip-up on
citywide reading and math tests. "How could they have messed up like
this? Aren't they doing their jobs down there at the Board of Ed?" asked
Tammy Stokes, whose 8-year-old son, Brandon, was forced to go to summer
school after being told he failed both the reading and math tests. He is
now repeating the third grade at PS 97 in Manhattan - and his mom
wonders if he was held back unfairly.
Stokes said parents will rebel if that's the case. "We'll go to the
district office and protest," she said.
A Queens mother whose son was told a couple of weeks ago he had to
repeat fourth grade was also upset. "He felt like a failure," said the
mom, who asked to remain anonymous. "He told me, 'Ma, I try so hard and
I get left back.'" She said the boy has reading problems. He scored in
the 10th percentile - 5 percentage points below a passing grade. "He
gets so nervous when he takes a test," she said. "He's not really a
test-taker."
Rosa Cassese said her eighth-grade son, James Sanchez, took part in
graduation ceremonies at his Manhattan school - in red cap and gown -
and proudly brought home a diploma on a Friday afternoon. But that
Monday, she got a letter saying he had to attend summer school because
he had failed the tests. He went. And at the end of summer school, he
was told he had failed another test and would have to repeat the eighth
grade. "He was devastated. He couldn't understand what he did wrong,"
Cassese said. "He was humiliated and embarrassed to have to return to
his old school."
Cassese joined a class-action suit against the board, saying she was
never notified he might be held back - depriving her of a chance to help
him bone up. "Not once did anyone mention to me that he had a reading
problem," she said. (The New York Post 9-15-1999)
FEN-PHEN: AFX Says AHP Reportedly Close To $ 3 Bil Parital Settlement
---------------------------------------------------------------------
American Home Products Corp will announce within days a partial
settlement with plaintiffs' lawyers for about $ 3 bil of litigation
surrounding the Pondimin and Redux diet drugs, the Wall Street Journal
Interactive said, citing people close to the situation. A spokesman for
AHP's Wyeth-Ayerst Laboratories division in Radnor, PA, declined to
comment, as did Christopher Placitella, a plaintiff's lawyer in
Woodbridge, NJ.
AHP has proposed to pay for medical check-ups for thousands of people
who took the diet pills and offered some cash awards to those who have
been injured to varying degrees, lawyers familiar with the situation
said. The proposal would allow people who consider the awards to be
inadequate to "opt out" of the settlement and pursue cases on their own.
Some lawyers said they think tentative deal has already been reached and
that it could be presented for approval as soon as tomorrow to a U.S.
district judge in Philadelphia who has been overseeing the diet pill
cases in federal court, the Journal reported.
According to the lawyers familiar with the situation, the proposal does
not address the claims of scores of people with some of the most serious
disorders caused by the drugs, including an often-fatal lung disease
known as primary pulmonary hypertension. These claims could cost AHP up
to 500 mln to $ 1 bil, analysts say. Moreover, plaintiffs who reject any
settlement and pursue separate claims may further run up the company's
tab.
At issue are the drugs Pondimin and Redux. About 6 mln people took the
pills in the 1990s, before AHP pulled them from the market in Sept 1997,
following studies linking the drugs to heart-valve disease.
AHP faces more than 4,000 diet-pill injury suits covering about 8,000
people around the country, and the number of suits filed has been
growing rapidly.
The company said about 130 plaintiffs have had heart-valve surgery, with
more than 100 allegedly diagnosed with primary pulmonary hypertension.
The company acknowledged that other patients may have PPH who have not
yet been diagnosed.
The deal would settle a national class-action suit certified last month
in which people who took the drugs are demanding the company pay for
regular "medical monitoring" -- essentially doctor visits to keep tabs
on their health.
In addition, the two sides are preparing a "matrix" that would offer
payments to settle cases brought by those who claim they were injured by
the drugs.
The federal "medical monitoring" class includes people who took the
drugs for at least 30 days. It might also include residents of a handful
of states, including New Jersey, Texas and New York, where state courts
have approved their own monitoring classes.
Many lawyers and analysts believe AHP is under growing pressure to put
its diet-pill woes behind it as it grapples with other issues. As
reported, the FBI has begun interviewing employees of the Food and Drug
Administration to determine whether AHP or FDA officials committed any
improprieties in hearings that led to Redux's approval in 1996. (AFX
News 9-16-1999)
FEN-PHEN: Defense at Trial Says Risks Stop One Year After Use Ends
------------------------------------------------------------------
American Home Products' former top medical executive tried to strike at
the core of a class action over fen-phen last week by testifying that
the risk of heart and lung disease disappears a year after patients stop
taking the diet drugs. The testimony by Dr. Marc Deitsch, former senior
vice president of medical affairs at AHP subsidiary Wyeth Laboratories
who was called by the plaintiffs as a hostile witness, was key because
the class is made up of people who used the drug but are asymptomatic.
The 94,000 plaintiffs in the case, Vadino v. American Home Products,
MID-L-425-98MT, are seeking medical monitoring for potential health
injury from using fenfluramine (Pondimin) and dexfenfluramine (Redux).
"You would have to practice for 40 years at 500 patients a year to see
one case of pulmonary hypertension," Deitsch said during
cross-examination in Middlesex County Superior Court. Quoting a study of
151 former fen-phen users, published in August 1996 in the New England
Journal of Medicine, the retired medical executive said there was only
one incident of pulmonary hypertension in patients a year after
treatment ended. In that case, the symptoms did not arise until six
years after the patient stopped taking the drug. Deitsch said the
information was not included in data presented to doctors because the
Food and Drug Administration did not think it was useful. He added that
health care providers are in the best position to make recommendations
about individual patients.
The study indicated that one of every 20,000 people who used a diet drug
for more than three months will develop primary pulmonary hypertension.
The study also said there is no increased risk for people who used the
drug for less than three months or stopped using it for more than a
year. The testimony and Deitsch's interpretation of the study constitute
the Madison drug manufacturer's defense: If former users are
asymptomatic a year after stopping the drug, they are not at risk for
developing heart or lung problems.
Should the jury believe Deitsch, it could take the teeth out of the
class action suit because the plaintiffs are symptom-free and have not
taken the diet drug since it was removed from the market in September
1997. "No one in this class is at risk, and most of the people were
never at risk because most people did not take the diet drug for more
than three months," says Peter Bleakley, a partner with Washington,
D.C.'s Arnold & Porter who is AHP's lead counsel.
Of the three named plaintiffs, two took fen-phen for less than three
months, and the third took it for five months, Bleakley says.
Nonetheless, the plaintiffs tried to cast a pall over the testimony by
Deitsch, who had been on the stand for five days since the trial began
on Aug. 11. Deitsch "said that as many as one in 20,000 people are at
risk of getting pulmonary hypertension.
When you consider the case started with the defense saying one or two in
a million are at risk, this is some leap," says one plaintiffs' attorney
in the case. The attorney also took satisfaction in Deitsch's testimony
later Wednesday that 151 cases of secondary pulmonary hypertension may
have been valvular disease caused by the diet drugs. One hundred of
those cases were in France, where AHP has a subsidiary, Servier.
During redirect by the plaintiffs' lead counsel, Sol Weiss, a partner
with Philadelphia's Anapol, Schwartz, Weiss, Cohan, Feldman and Smalley,
Deitsch said that AHP was unaware of that possibility because it had
grouped those cases with others that could have been caused by
congenital defects, obesity or herb treatments.
Three months after the Mayo Clinic discovered in June 1997 that fen-phen
could have caused heart and lung problems, the company took the drugs
off the market.
Deitsch testified that reports of side effects caused by the drugs had
been passed to the FDA. But one plaintiffs' attorney says AHP gave the
FDA only as much information as was necessary. "The valvular problems
were evident from the beginning. Their AHP's French subsidiary knew
about it, and American Home Products chose to ignore it," he says.
But Bleakley says the plaintiffs are muddying the data that was in the
reports. He says, "The overwhelming majority of people that reported
problems had some kind of congenital heart disorder to begin with and
the secondary pulmonary hypertension could have been a result of their
obesity, or any of the other diet cures they had tried." Bleakley adds,
"there is no basis by which anyone reviewing these case reports would
have seen a connection between the drug and a valvular problem."
The company's FDA disclosures apparently have drawn scrutiny from other
quarters as well. According to a story Thursday in The Wall Street
Journal, the Federal Bureau of Investigation began interviewing FDA
employees last month about whether the AHP disclosed everything it knew
about adverse reactions to Redux.
An FDA advisory committee initially rejected Redux in 1995 because of
safety concerns, though it reversed its decision the next year. The FDA
approved the drug in 1996 when the committee changed its mind and said
it believed the benefits for the drugs' target market -- the clinically
obese -- outweighed the risk.
AHP's general counsel, Louis Hoynes, says the company is unaware of any
investigation by the Department of Justice or the FBI. Mark Farley, a
partner with Newark's Gibbons, Del Deo, Dolan, Griffinger & Vecchione
who represents AHP, says that even if the FBI is conducting a
preliminary investigation, it does not mean anything. "I can tell you,
as a former prosecutor, agents can look into anything they want," says
Farley, a former assistant U.S. attorney in Newark who worked on health
fraud cases for eight years. "It doesn't have to be substantial. Agents
can take phone calls, respond to letters, and follow up on leads that
don't lead to any action. "They may be investigating to determine if an
investigation is necessary," Farley added. The trial continues Monday
before Judge Marina Corodemus. (New Jersey Law Journal 9-13-1999)
FEN-PHEN: Penn Ct Conditionally Certifies Nationwide Class For Check-Up
-----------------------------------------------------------------------
In re Diet Drugs Products Liability Litig., PICS Case No. 99-1688 (E.D.
Pa. Aug. 26, 1999) Bechtle, J. (41 pages).
The district court conditionally certified a nationwide class action for
medical monitoring on behalf of persons who took the "fen-phen"
diet-drug combination for at least 30 days, despite defendant's
arguments that too many of plaintiffs' claims would be unique or that
variances in state laws would make the class action unmanageable. Motion
for class certification granted.
Plaintiffs, consumers who had taken the diet-drug combination
"fen-phen," filed a class action suit against defendant American Home
Products, the seller of the "fen-phen" drugs phentermine, fenfluramine
and dexfenfluramine. Medical studies revealed that ingestion of fen-phen
could lead to primary pulmonary hypertension and valvular heart disease.
Plaintiffs' suit sought medical monitoring for those persons who had
taken fen-phen, but who had not yet manifested symptoms. The district
court granted plaintiff's motion for certification.
The court found that the proposed class met the requirements of
Fed.R.Civ.P. 23(a) for numerosity, commonality, typicality and adequacy
of representation. With regard to the requirements of Fed.R.Civ.P.
23(b), the court found that the class claims were cohesive because
defendant had acted in such a way as to create liability to the class as
a whole and the injunctive relief that plaintiffs were seeking was
applicable to the class as a whole. In so ruling, the court rejected
defendant's assertions that there were factual issues that differed from
class member to class member that destroyed cohesiveness and that the
state law applicable to each class member varied to such a degree that
class treatment was not appropriate. The court agreed that individual
issues such as duration of use and combination of drugs might present
some difficulty in treating the claims in a single class, especially
with regard to the affirmative defenses that defendant might raise. The
court stated that such difficulties could be surmounted either through
the development of subclasses or through exclusions to the class.
The court rejected defendant's argument that Barnes v. American Tobacco
Co., 161 F.3d 127 (3d Cir. 1998) foreclosed the possibility of class
treatment here. Unlike the smokers in Barnes who used hundreds of
different brands of cigarettes, the class members here consumed only two
related chemical compounds. Also, the class members' ingestion of
fen-phen was "discrete and ascertainable" through medical records and
fact sheets.
With regard to defendant's argument that variances in state law would
make the class unmanageable, the court stated that it could exclude
those persons whose state law did not recognize an asymptomatic
plaintiff's claim for medical monitoring and that it could create a
number of subclasses based upon the variances in medical monitoring law
and the underlying claims of strict liability, negligence and breach of
warranty. Finally, the court decided to exclude from the conditional
class those persons who already are class members of a certified class
action for medical monitoring filed in a state court. (Pennsylvania Law
Weekly 9-13-1999)
GENERAL MOTORS: Lawyers Forgo Damages In Exchange For Fixing Of Defects
-----------------------------------------------------------------------
It's not often that a lawyer gets the chance to leave $4.5 billion on
the table. But when plaintiffs' lawyer Brian Panish proposed to forgo
most of the punitive damages his client had won in a suit against
General Motors, he joined a small but significant trend: Offering to
trade big punitive damages for a corporate defendant's promise to make
changes that may prevent future injuries.
In addition to Panish's clients, two plaintiffs in separate cases
represented by a single Corpus Christi, Texas, firm have offered similar
deals-to forgo millions rather than billions-in an auto crash case and a
gas rig explosion.
All this adds up to plaintiffs' lawyers behaving contrary to the image
their adversaries often paint of them and giving up money to promote
safety. Scott H. Bice, dean of the University of Southern California Law
School, says trading punitive damages for safety is better than
providing a huge windfall to a small number of plaintiffs and their
lawyers. The approach is similar to that in some class actions, in which
part of the damages is given to charity, he says.
Some defense lawyers approve of the trend, with a measure of caution.
"If there has been a true defect and it deserves correction, and if the
company corrects it, and they do it at some substantial cost ... I think
the trade is worthwhile," says Victor E. Schwartz, an expert on tort law
who is counsel to the American Tort Reform Association. On the other
hand, he says, juries sometimes find a defect where there really is
none, in which case a useful product may be withdrawn needlessly.
Others, however, contend that plaintiffs' lawyers know that most large
damages awards are reduced on appeal, and thus most of what they're
offering to give up they never would have collected. Regardless, not
every case lends itself to trading punitives for safety. "You need to
have a case in which there is something reasonably specific that you can
make a demand on the defendant to make the world safer," says David
Perry, one of the Texas lawyers who offered givebacks in two cases.
Rene Haas, Perry's law partner and wife, says, "Most of all, you have to
have a really fine client" who is willing to forgo millions of dollars.
In Panish's GM case, the idea to give back some of the huge award
started with his clients, he says.
Panish, of Santa Monica, Calif.'s Greene, Broillet, Taylor, Wheeler &
Panish L.L.P., in July won the largest personal injury verdict in
history-$4.9 billion-for Patricia Anderson, her four children and a
family friend who were horribly burned when their 1979 Chevy Malibu
exploded in flames after being rear-ended on Christmas Eve 1993.
On Aug. 20, Panish offered to cut the award by $4.5 billion if GM would
recall the Malibu and other GM cars with the fuel tank design problem he
blamed for his clients' injuries. " The clients said, 'How can we do
something to help other people so they don't have to go through what we
did?' " he recalls.
However, GM turned down the offer, just a day before trial judge Ernest
Williams cut the punitive award to $1.09 billion while upholding a $107
million compensatory damages award. GM says that there is nothing wrong
with the Malibu and is appealing both the verdict and the award.
But in another case, Perry and Haas of Corpus Christi's Edwards, Perry &
Haas L.L.P., negotiated safety improvements with a defendant in exchange
for punitive damages awarded to their client, John Caballero.
Caballero, then a 42-year-old father of two, was working on a gas well
owned by Esenjay Petroleum Corp. in 1995 when an explosion caused him
permanent injuries, including brain damage. A Texas jury awarded
Caballero $12.3 million in compensatory damages and $30 million in
punitives. (Based on a state law limiting punitive liability, the latter
award was reduced to $6 million.)
Perry and Haas then got Esenjay to agree to a safety plan intended to
prevent future accidents in exchange for Caballero's agreement to
decline the punitive damages. Then, when Esenjay was sold to another oil
company last year, Perry and Haas sued to ensure that the new company
would put the safety plan in effect.
For their efforts, the lawyers and Caballero were presented in July with
the 1999 Steven J. Sharp Public Service Award by the Association of
Trial Lawyers of America. "It may be we kind of blazed a trail and other
people will follow," says Perry.
Some observers have suggested that, in the wake of last year's $246
billion in settlements between the tobacco industry and state attorneys
general, juries are less reluctant to respond with a large punitive
damage award when plaintiffs' lawyers urge them to send "messages" and
deliver "wake-up calls."
So, will offers to trade punitive damages for safety improvements become
more common? Plaintiffs' and defense lawyers say that it is too early to
know. But Panish says that he has received many calls from lawyers who
are interested in the punitives-for-safety exchange. "People think it's
a great idea" he says. (Fulton County Daily Report 9-15-1999)
HARBINGER CORP.: Milberg Weiss Announces Securities Suit In Georgia
-------------------------------------------------------------------
The following was released by Milberg Weiss Bershad Hynes & Lerach LLP:
Notice is hereby given that a class action lawsuit was filed on
September 13, 1999, in the United States District Court for the Northern
District of Georgia, on behalf of all persons and entities who purchased
the common stock of Harbinger Corporation (NASDAQ: HRBC), between
February 4, 1998 and October 1, 1998, inclusive.
The complaint charges Harbinger and certain of its officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The
complaint alleges that Harbinger and certain of its officers and
directors issued a series of materially false and misleading statements
regarding its business, operations and integration of certain
acquisitions. As a result of these materially false and misleading
statements, plaintiff alleges that the price of Harbinger common stock
was artificially inflated during the Class Period. Prior to the
disclosure of the adverse facts described above, certain insiders of
Harbinger sold thousands of shares of their personally-held Harbinger
stock to the unsuspecting investing public at artificially inflated
prices and the Company was able to complete several corporate
acquisitions using its artificially inflated common stock as currency.
Plaintiff is represented by the law firm of Milberg Weiss and the Law
Offices of Bruce Murphy, among others. If you are a member of the class
described above you may, not later than sixty days from September 13,
1999, move the Court to serve as lead plaintiff of the class, if you so
choose. In order to serve as lead plaintiff, however, you must meet
certain legal requirements. Contact, at Milberg Weiss Bershad Hynes &
Lerach, Steven G. Schulman or Samuel H. Rudman at One Pennsylvania
Plaza, 49th Floor, New York, New York 10119-0165, by telephone
1-800-320-5081 or via e-mail: endfraud@mwbhlny.com or visit website at
http://www.milberg.comTICKERS: NASDAQ:HRBC
HOLOCAUST VICTIMS: Prepared Testimony Of Claims By Burt Neuborne
----------------------------------------------------------------
PREPARED TESTIMONY OF BURT NEUBORNE, JOHN NORTON POMEROY PROFESSOR OF
LAW, AND LEGAL DIRECTOR OF THE BRENNAN CENTER FOR JUSTICE NEW YORK
UNIVERSITY SCHOOL OF LAW BEFORE THE HOUSE COMMITTEE ON BANKING AND
FINANCIAL SERVICES SUBJECT - CLAIMS BY VICTIMS OF THE HOLOCAUST FOR
DISGORGEMENT OF UNJUST ENRICHMENT SUBMITTED SEPTEMBER 14, 1999
Mr. Chairman, and Members of the Committee: Good morning. My name is
Burt Neuborne. I am grateful for this opportunity, to appear before you
this morning to discuss moral and legal claims by victims of Nazi
oppression for compensation from German corporations that reaped
significant unjust profits at their expense by knowingly and willingly
participating in Nazi-era crimes against humanity. I am the John Norton
Pomeroy Professor of Law at New York University, where I have taught
Constitutional Law, Federal Courts, Evidence and Civil Procedure for the
past 26 years. I have also litigated widely as a civil rights-civil
liberties lawyer, serving from 1982-86 as National Legal Director of the
American Civil Liberties Union, and currently as Legal Director of the
Brennan Center for Justice at NYU. I make no claim to academic
neutrality on these issues. I currently serve as lead settlement counsel
in the federal class action seeking relief against Swiss banks for
unjust profits earned as a result of Holocaust-connected activities. The
Swiss banks case has been settled for $1.25 billion. I am also serving
as an attorney for the plaintiffs in numerous federal class actions
seeking relief against German corporations in connection with claims
arising out of knowing use of slave labor, knowing participation in the
Aryanization of Jewish property, and knowing failure to account for
insurance policies owned by Holocaust victims.
I appear this morning to acquaint the Committee with the nature of the
victims' claims for compensation, and with the current status of ongoing
efforts to negotiate a consensual resolution of the outstanding claims
of Holocaust victims. I will not attempt to develop a legal claim in
this forum on behalf of victims.
The parties disagree vigorously on the merits of any legal claim for
relief, and that dispute is best dealt with by a federal court. But the
parties are in agreement that, whether or not a legal claim for relief
exists, humanitarian and moral issues of the highest order are raised by
the plight of uncompensated victims of the Holocaust. It is those
humanitarian and moral issues that I hope to discuss this morning.
Before beginning my formal testimony, I am delighted to acknowledge the
invaluable achievement of Deputy Secretary of the Treasury Smart
Eizenstat in helping to document the facts underlying these claims, and
in working tirelessly to persuade all affected parties to find a way to
resolve the claims in a just and expeditious manner. I also acknowledge
the extraordinary efforts of my co-counsel Melvyn Weiss and Michael
Hausfeld, and the numerous other lawyers who have worked intensely on
these issues over the past several years, as well as the valuable
contribution of Dr. Israel Singer and the World Jewish Restitution
Organization.
The Nature Of The Unresolved Holocaust-Era Claims
Against German Corporations
Three sets of claims are currently being pursued against German
corporations on behalf of victims of Nazi-era crimes against humanity.
One set of claims is on behalf of the millions of individuals throughout
Europe who were forced to perform involuntary labor for German industry
and the German government during the Nazi era, and who have never been
compensated for the value of their labor, or for the appalling
conditions of their confinement. A second set of claims is on behalf of
the millions of Germans and Austrians whose property was confiscated in
connection with the Nazi Aryanization program, under which virtually all
Jewish-owned businesses in Germany and Austria were involuntarily
transferred to persons of more acceptable racial stock through forced
sales at a fraction of the business' real value. A third set of claims
is on behalf of owners of insurance policies who failed to survive the
Holocaust, and whose insurance proceeds were retained by faithless
insurance companies that simply ignored their duty to locate appropriate
beneficiaries.
A common moral thread unites the three seemingly disparate sets of
claims against German corporations. In each setting, victims of Nazi
oppression charge that German corporations, acting in close cooperation
with Nazi officials, knowingly and unlawfully earned substantial unjust
profits from the exploitation of innocent victims.
In the slave labor context, the unjust profit was the value of the
victims' involuntary labor, and the enormous profits earned by wartime
corporations through the exploitation of slaves. In the Aryanization
context, the unjust profit was the substantial fees charged by German
and Austrian banks for acting as the financial agents for the massive
forced transfer of ownership of Aryanized property, and the huge profits
reaped by the banks in retaining choice Aryanized properties for their
own accounts. In the insurance context, the unjust profit was the
economic benefit reaped by European insurance companies that made no
effort to pay off on insurance policies owned by persons who failed to
survive the Holocaust, simply keeping the proceeds as an unjust
windfall.
In each of the three settings, German corporations reaped unjust profits
by unlawfully exploiting the victims of Nazi persecution. Fundamental
principles of restitution and unjust enrichment that have undergirded
our legal and moral values since Aristotle teach that no one should be
permitted to profit by committing an unlawful act at the expense of
another. Instead, the wrongdoer is universally obliged to disgorge the
unjust profit to the victim. Victims of the Holocaust now invoke those
fundamental tenets of restitution and unjust enrichment. They demanding
an accounting of the unjust profits earned by German corporations as a
direct result of their unlawful exploitation of Holocaust victims, and
the disgorgement of all such unjust profits to the victims.
The Scope and Nature of the Slave/Forced Labor Claims Historians have
reached a consensus concerning the massive used of involuntary labor by
German industry during WWII. As the manpower demands of the German army
accelerated, and as the demands for the production of war materiel
increased, German industry found it impossible to staff its factories
through the traditional method of voluntarily attracting male laborers.
German industrialists initially considered widespread appeals to German
women to staff the factories voluntarily, similar to the remarkable
voluntary mobilization of America's women that took place in this
country during WWII. They were hampered, however, by Nazi ideology that
envisaged a rigid role for Aryan women as wives and mothers, not factory
workers. Instead, Germany turned to the exploitation of involuntary
labor. Although involuntary labor has been documented as early as the
improper use of French prisoners of war in 1939, the German slave labor
program reached its nadir in 1942 after the appointment of a Nazi
official whose principal responsibility was the extraction of
involuntary labor from conquered populations in blatant violation of
international law. From and after 1942, SS units combed conquered
Europe, forcibly rounding up inhabitants for deportation to forced labor
camps, where they were required to perform industrial labor under
appalling conditions without compensation.
German corporations, anxious to meet production schedules and consumed
with greed in an effort to earn enormous wartime profits, competed with
one another for access to the pool of involuntary labor,often lobbying
high Nazi officials for preferential treatment in labor allocations, and
actually buying laborers from the SS in formal slave auctions. In
company after company, the percentage of the labor force staffed with
involuntary workers increased to over 50%. By 1944, twelve million
persons had been impressed into involuntary servitude by the SS. The
unjust enrichment flowing to German corporations as a result of its use
of unpaid. involuntary labor was immense. Imagine the economic benefit
to a wartime economy of being relieved from the obligation of paying
wages to more than 50% of your labor force. The fruits of the unpaid
slave and forced labor were realized in enormous wartime profits, much
of which was paid out to large shareholders as dividends, much of which
was reinvested in capital equipment that paved the way for post-war
corporate profitability.
The victims of the Nazi slave labor program have never received
compensation for their labor. At the close of the war, the Allies
initially decided to compensate the victims of Nazi oppression by
physically dismantling the German industrial plant, and transferring its
assets to the victorious nations for re-distribution to the victims of
Nazi crimes against humanity. The Treaty of Paris of 1946 codified the
policy of physical liquidation of German industry, and provided an
elaborate formula for transferring German industrial property to the
victors as the core of the reparations process. If the policy
exemplified by the Treaty of Paris of 1946 had been carried out, victims
of Nazi slave labor would have looked to the proceeds of the liquidation
of German industry for compensation. But the consequences of such a
Draconian approach to German reparations would have made it impossible
for Germany to re-emerge as an industrial power.
By 1948, second thoughts had arisen over the wisdom of a policy that
condemned Germany to decades of poverty. Instead of a punitive program
of physical liquidation of the German industrial plant, the Western
Allies adopted a new policy of reconstruction that sought to rebuild
Germany as a stable, prosperous democracy. The Western Allies decided to
postpone consideration of claims by slave laborers until German industry
was able to recover its economic health, and a comprehensive peace
treaty ending WWII was signed. The new policy was codified in the London
Debt Agreement of 1953, that explicitly "postponed" consideration of
claims against German corporations arising out of the Nazi era until
sometime in the indefinite future when a final settlement of the
reparations issues would be achieved pursuant to a general peace treaty.
Thus, in 1946, slave laborers were initially told to look to the
proceeds of the liquidation of German industry for their compensation.
When the liquidation approach failed, slave laborers were told, from and
after 1953, that their claims had been postponed until the indefinite
future. When the Cold War made it impossible to achieve a final peace
treaty ending WWII, the postponement provisions of the London Debt
Agreement remained in effect for more than 50 years. Finally, in 1991,
the Allies entered into the 2+4 Treaty with the then two Germanies,
ending the reparations phase of WWII, and finally lifting the
"postponement" of slave labor claims imposed by the London Debt
Agreement. Nor were slave laborers compensated pursuant to internal
German reparations programs.
Several German firms made token payments to slave laborers in the 1950's
and 60's, but the amounts involved were nominal. Germany itself made
token payments to Eastern European Reconciliation Foundations in the
1990's, but, once again, the amounts were nominal. Germany itself
expended substantial sums in reparations, but the rns programs
explicitly excluded Eastern European slave laborers, and explicitly
declined to provide compensation for the value of involuntary labor,
even for Germans. Thus, a combination of the "postponements" imposed by
the international community from 1946-91, and the failure of the German
reparations programs to include compensation for forced laborers, left
the involuntary labor population with no remedy for more than 50 years.
To its credit, the German Federal Constitutional Court ruled in 1996
that claims against German corporations by slave laborers were no longer
blocked by international law.
Numerous legal claims for relief were filed in the wake of the decision
of the German Federal Constitutional Court. Faced with numerous legal
claims by slave and forced laborers in both German and United States
courts, and cognizant of strong moral claims that transcend any legal
theory, Chancellor Schroeder pledged during his successful election
campaign to attempt to find a means of resolving the outstanding claims
of slave laborers.
Representatives of German industry, responding to Chancellor Schroeder's
concerns, and to the increasingly large number of lawsuits filed against
German corporations doing business in the United States, suggested the
creation of a massive German foundation, governed by a Board of
Directors of eminent international persons and funded by contributions
from German industry and the German government, that would make
expeditious payments to surviving involuntary laborers in complete
satisfaction of present and future legal claims against German
corporations.
Interested parties, including lawyers for the victims, representatives
of German industry, representatives of interested governments, and
non-governmental organizations representing the victims, have been
meeting in Bonn and Washington., D.C., under the auspices of the United
States and Germany, since March in an effort to reach a negotiated
resolution of the slave labor claims. The United States delegation has
been ably headed by Under Secretary Stuart Eizenstat. The German
delegation is currently headed by Dr. Otto Graf Lambsdorff, whose candor
andcommon sense have provided significant assistance to the negotiators.
The next negotiating session is scheduled for Washington, D.C., on
October 4, 5, and 6. It is fair, I believe, to report that the
negotiators have made substantial progress on every issue except the
size of the fund. Although more work remains to be done, the negotiators
have successfully discussed the nature of the foundation, its governance
structure, criteria for eligibility for payment, and methods of assuring
German industry future legal peace.
Without intruding into the negotiations process, I will attempt to
explain the difficulties the negotiators are experiencing in reaching
agreement on the appropriate contribution to the fund. The negotiators
quickly agreed that Nazi era involuntary laborers should be divided into
categories that respond to the severity of the conditions of labor.
Three categories appear to be appropriate: (1) slave laborers, who were
confined to concentration camps and subjected to the harshest conditions
of labor; (2) forced laborers, who were deported or displaced from their
homes and compelled to perform industrial labor; and (3) other
involuntary laborers, including agricultural laborers.
The parties have agreed that payments from the fund should contain a
differential between slave, forced and other laborers designed to
reflect the relative harshness of the conditions of labor.
The negotiators then turned to the task of quantifying the number of
laborers falling into each category. Negotiators for the victims
reluctantly agreed that it was impossible to provide compensation for
all 12 million involuntary laborers. Tracing the heirs of persons who
failed to survive, and the sheer number of persons involved, would have
rendered the plan impracticable. Accordingly, the negotiators agreed to
restrict direct payments to surviving laborers. The negotiators agreed
that the most appropriate method of acknowledging persons who failed to
survive was the creation of a substantial "future and remembrance" fund
designed to honor their memory by supporting programs designed to assure
that the evils of the Nazi era never occur again.
Negotiators for the victims then attempted to identify the number of
surviving laborers in each category. They were aided in their efforts by
Professor Lutz Neithammer, a distinguished German academic teaching at
the University of Florence, who conducted a painstaking analysis of the
number of surviving involuntary laborers at the request of the German
government. Extrapolating from Professor Neithammer's latest report, I
estimate that approximately 300,000 slave laborers are currently alive.
While it is possible to identify the German companies that used slave
labor, and even to identify the particular concentration camps that
provided labor to each German company, it is impossible at this stage to
allocate the number of survivors per company, or even to allocate the
surviving slave laborers who worked for German industry and slave
laborers who worked for a German government entity. The best estimate
appears to be 50% allocated to German industry, and 50x/'0 allocated to
the German government. The figure is relevant only insofar as it guides
the relative contribution to the fund from government and industry.
It also appears that there are approximately 1.25 million surviving
forced laborers, consisting of approximately 700,000 deportees, and
500,000 displaced workers. Once again, substantial records exist of the
location of work camps, and the companies that received labor from the
camps, but it is impossible to allocate forced labor survivors to
particular companies at this stage, or to allocate the surviving
laborers between government and industry. The best estimate allocates
70% to industry, and 30% to entities of the German government.
Finally, it appears that approximately 825,000 deported or displaced
forced agricultural laborers have survived. The sheer volume of
surviving laborers makes it clear that any defensible effort to provide
a modicum of compensation to the involuntary labor population will
require a significant contribution to the fired from both German
industry and the German government.
Whatever the amount, however, it will be considerably smaller than the
amount that would have been necessary to compensate the millions of
workers who did not survive the 50 years it has taken to deal with this
issue. Using the $20,000 figure awarded by the United States to the
thousands of Japanese-Americans placed in detention camps during WWII as
the closest analogy, negotiators for the victims have suggested that
each surviving slave laborer should receive $30,000; each surviving
forced laborer $10,000, and each surviving agricultural laborer $6,500.
The per capita figures suggested by negotiators for the victims are
quite modest, translating into a $3,000 principal payment to each slave
laborer, and an interest component for 50 years delay in payment of
$27,000. The similar calculation for forced laborers yields a principal
payment of $1,000, and an interest component of $9,000. Agricultural
laborers would receive a principal payment of $650, with an interest
component of $5,850. We have also suggested that the future and
remembrance fund, designed to honor the many millions of workers who
failed to survive, should not be less than $4 billion.
Negotiators for German industry claim to be surprised by the magnitude
of the numbers, despite the fact that we are using the figures provided
by the German government's expert, and despite the fact that our
suggested per capita amounts are based on the closest analogue - the
American treatment of interned Japanese-Americans. Thus far, German
negotiators have declined to respond to our suggested figures, stating
that a $20 billion fund jointly financed by German industry and the
German government is out of the question. By declining to respond to our
reasoned effort to quantify the fund's size, the German negotiators have
made future negotiations extremely difficult.
Although the parties are scheduled to meet again in Washington, D.C., on
October 4, 5, and 6, I am saddened to report that, in the absence of a
good faith response to our effort to quantify the fund, negotiations
will be at an impasse.
Negotiators for German industry have also informed us that no payments
will be made to slave and forced laborers unless an agreement is reached
insulating German industry from litigation concerning profits from
Aryanization, and failure to account for insurance policies owned by
Holocaust victims. There is no principled reason why such a resolution
should not take place, but a reasoned assessment of the unjust profits
earned by German banks by acting as the financial agents for the
Aryamzation program, and an assessment of the unjust profits earned by
German insurance companies as a result of the failure to have responded
to Holocaust-era insurance policies must be calculated. Such a
calculation will undoubtedly add significantly to the size of the fund,
especially its "remembrance and future" component. Initial calculations
suggest that German banks reaped at least $2 billion in unjust profits,
and that German insurance companies reaped at least $1 billion in unjust
profits. cts for the Future Count Lambsdorff closed the most recent
round of discussion in Bonn with the dramatic observation that "we are
doomed to succeed. Fate demands it." All parties accept the wisdom of
Count Lambsdorff's words.
Having made real progress during the past seven months toward resolving
moral and legal issues arising out of the Nazi era that have resisted
resolution for 50years, it would be tragic if the negotiators were
unable to find reasoned avenues to compromise with our goal in sight. It
is impossible, however, to fashion cut-rate solutions to real moral
problems. The willingness of German industry and the German government
to recognize their respective moral obligations to deal with the unjust
profits earned by German industry during WWII, regardless of a binding
legal obligation, deserves genuine admiration. A voluntary decision by
German industry that seeks to atone for past moral wrongs creates an
enormously important and highly visible precedent that will help to make
the future a more civilized place. But the German moral gesture loses
its significance if the material consequences of the gesture do not
match the suffering and the unjust enrichment that made it necessary.
German industry reaped immense unjust profits during WWlI. A moral
gesture of atonement that does not disgorge a portion of those profits
to the surviving victims, and set aside another significant portion of
those profits to remember those who did not survive, cannot purport to
put an end to the moral controversy in this millennium. Indeed, it is
almost certain to precipitate increased bitterness, and calls for
reprisals.
I look forward to receiving a reasoned counter-offer from my German
colleagues so that we can attempt to reach an expeditious and honorable
solution to this controversy. An historic opportunity for moral growth
is within our grasp. If, however, no reasonable counter- offer is
forthcoming, let there be no misunderstanding. Those of us who have
devoted the past several years to an effort to provide Holocaust
survivors with a modicum of justice will not give up the struggle. If
courts can provide relief, we will seek justice in court. If government
sanctions can obtain relief, we will seek government sanctions against
corporations that fail to disgorge unjust enrichment. If popular
disapproval can stimulate just behavior, we will conduct a public
education campaign designed to acquaint our fellow citizens with the
facts. If current negotiations fail to reach a just resolution of these
issue, we will exhaust every lawful avenue open to us in a search for
justice for the victims of the Holocaust. (Federal News Service
9-13-1999, Federal News Service is a private firm and is not affiliated
with the federal government.)
IBM: Agrees to Pay Retirees $ 15 Mil, Middleton & Reutlinger Announces
----------------------------------------------------------------------
Middleton & Reutlinger announces that approximately 300 IBM retirees
will receive benefits totaling over $ 15 million as the result of a
settlement approved on Monday by the United States District Court in
Lexington, based upon a decision rendered earlier this year by the Sixth
Circuit Court of Appeals in this case.
The lawsuit centered on IBM's breach of fiduciary duties under the
Employee Retirement Income Security Act (ERISA) of 1974. Although the
topic of "serious consideration" has been addressed before, this case is
the first time a federal appellate court has so clearly defined the
subject. "Serious consideration" was the central focus of the lawsuit
because IBM encouraged a group of employees to take an early retirement
package while it was seriously considering a major change in its
retirement plans that would have benefited the retirees.
The plaintiffs are all retired employees of the IBM Lexington facility,
which was sold to Lexmark in 1990. Prior to the sale, IBM had encouraged
these employees to voluntarily take early retirement packages. The plans
approved by IBM allowed an employee to take a five-year leave of absence
to reach his/her full retirement date. The dispute, and ensuing legal
battle, focused on IBM's efforts to discourage its retirement eligible
employees from exercising the LOA option. The plaintiffs charged that
IBM produced and distributed written statements to these employees
saying they would suffer financially if they did not choose retirement
dates prior to Jan. 1, 1991.
It was claimed that IBM made these statements at a time when it knew the
statements would be false and when it already was seriously considering
changes to its retirement plan that would greatly benefit employees
retiring on or after January 31, 1991. "This settlement is a victory for
employees everywhere," said Ken Hall, the lead counsel for the
plaintiffs and an attorney with the Louisville-based law firm of
Middleton and Reutlinger. "Through the tenacity of this group of
retirees, we have forced a large corporation to correct this wrong. The
case will also give guidance to both companies and employees on future
occasions to help avoid this type of misrepresentation." This suit also
has significant legal repercussions. Under the ERISA law, once "serious
consideration" of enhanced benefits under a plan has occurred, a company
must correct written materials that are no longer accurate.
The appellate court said that if information that has been disseminated
to a group of employees changes, the company is required to correct
those materials and disseminate them to the employees. The company
becomes liable for making the change as soon as it begins to "seriously
consider" the new alternative, even though the information may have been
correct at the time it was originally written.
Contact Middleton & Reutlinger Kristin Back, 502/584-1135 or by e-mail
at kjb@middreut.com
IBM: Some Employees Wage Suit Over Change In Pension Plan
---------------------------------------------------------
IBM's reputation is looking black and blue these days. Big Blue, one of
the nation's more revered employers, is taking an unprecedented pounding
as scores of workers lash out at its recent pension plan change. The
bruising battle is pitting an American business icon against irate
workers who say IBM's credibility is at stake.
Hundreds are attending unionization meetings. Some are donning matching
shirts for Blue Shirt Tuesdays, a color-coordinated show of solidarity.
Others are taking their activism to new heights: Employees in Rochester,
Minn., hired an airplane to fly the banner "IBM's Pension Theft Could
Happen to You" over corn-dog-eating crowds at the state fair.
The grass-roots efforts could have profound implications. Already, some
lawmakers say the shift from traditional pension to so-called
cash-balance plans amounts to age discrimination. Unionization efforts
at IBM are so heated that some labor experts wonder whether similar
efforts could spread like a brushfire to other high-tech and Fortune 500
companies.
And while an IBM spokeswoman and some employees say morale remains
strong, the public outcry is giving a company once known for its culture
of trust and loyalty a stinging black eye. "I will fight this fight
until they fire me," says Andy Maher, a customer engineer in Pinon
Hills, Calif., with 23 years at IBM, who says he could lose half or more
of his pension. "It destroyed my retirement plans. IBM has always
presented itself as an honorable company, and that's not true anymore.
That's why I'm ashamed of the company."
The feud began in May, when about 140,000 of IBM's employees in the USA
were informed that their lifetime pension would be halted in favor of a
cash-balance plan.
In traditional pensions, retirees generally get monthly payments based
on their years with the company and the highest pay in the five years
before retirement. But under cash-balance plans: Employers contribute 4%
to 7% of a worker's pay to an account with a guaranteed rate of return.
In IBM's case, the company contributes 5% of a worker's pay, plus
interest, each month into a personal pension account. The return often
is generally tied to the 30-year Treasury bond. In IBM's case, it's tied
to the 1-year T-bill plus 1%. Money typically accumulates over time, and
lump-sum payments can be taken when employees change jobs, a portability
that many younger workers prefer because they may change jobs more
often.
Some companies let employees choose whether to take a cash-balance or
traditional pension. Under the IBM switch, workers must go with
cash-balance plans unless they have more than 25 years of service or 10
years of service and are at least age 50.
Employees Divided
Some midcareer employees say they will lose up to half of their
pensions, forcing them to delay retirement and face unplanned financial
hardships. Other employees say they stand to gain. "The change,
personally, I like it," says Vince Catalano, of Boulder, Colo., who
works in technical support and has been an IBM employee for about 19
years. "It allows me to manage my own financial future."
As IBM officials see it, nothing is being taken away. Instead, they say,
resources are being diverted into compensation in a vital effort to
recruit top technology talent in today's tight labor market. The company
shows no sign of backing down or changing its stance.
Employees in the USA already have gotten more than $ 1 billion in salary
boosts in the past two years, the company reports. And 25,000 worldwide
employees will get stock options this year, about double the number in
1998.
Employee relations, they say, remain healthy. A June survey found that
workers are more satisfied with their jobs now than in 1998. "Morale is
larger than any one program," says Jana Weatherbee, an IBM spokeswoman.
"We acknowledge there are some people who are not happy, but there are
others who are happy. It was a necessary move we thought was balanced
and fair. . . . Our plan doesn't violate any age-discrimination laws."
Some IBM employees even say the change will make the company, based in
Armonk, N.Y., a benefits leader. "Not only a leader but also an
innovator," says Bill Lansford, a manager in IBM's software group in
Dallas. "I've worked with IBM for 24 years and always thought IBM has
gone out of its way to do what's right for individuals."
But others disagree, saying IBM's pension switch could endanger its
image and become a flash point leading to legislation to restrict
similar pension changes. "We believe that it's age discrimination. If
IBM can get away with it, what's to stop another company?" says Rep.
Bernard Sanders, I-Vt. "The whole issue of pension insecurity is
sweeping across the country."
In August, 40 members of Congress sent a letter to the Internal Revenue
Service, the Equal Employment Opportunity Commission (EEOC) and the
Department of Labor urging an investigation into whether pension plan
changes like IBM's violate the law.
A Senate committee hearing on pension plans is slated for Sept. 21. On
Tuesday, a delegation of lawmakers met with EEOC Chairwoman Ida Castro
to discuss whether plan conversions break age-discrimination laws.
The debate is taking hold from the halls of Congress to employee
cafeterias. On on-line Web sites and in gatherings in neighborhood
parks, a number of IBM employees who stuck with the company through
layoffs and financial belt-tightening in the early 1990s now are
speaking out.
Many employees also say the bitter debate will tarnish the image of IBM
chief Louis Gerstner Jr., heralded as a leader who has helped turn the
company into an information services leader. In a July letter to
Sanders, however, Gerstner wrote that "the choices we have made are not
simple or easy, but they are critical to the future success of our
company."
Meanwhile, some employees who are contacting lawyers say they plan to
file class-action lawsuits in coming weeks. Many say they feel angry and
betrayed. "Trust has been decimated. What they've done to people --
people will never recover from that," says Evelyn Adams, an
international projects manager in Miami Beach, and a nearly 23-year IBM
veteran. "It's put IBM in a different light than people are used to
seeing it. It's the first time in the history of the company IBM
employees have gotten so organized."
Employees in such areas as Poughkeepsie, N.Y.; Raleigh, N.C.; and
Burlington, Vt., are holding meetings to discuss unionizing. One recent
gathering drew 500 workers. "A lot of people have contacted our unions
to form committees to see what can be done," says Candice Johnson at the
Communications Workers of America (CWA) in Washington. In a typical
campaign, unionization efforts are handled by employees at specific
sites who join to build their own organizations. After about 65% of
employees sign a petition of support, CWA reports, the union files with
the National Labor Relations Board for an election. "This is the most
widespread unionization effort I've seen. It's a real groundswell," says
Doug Garr, author of IBM Redux, which looks at IBM under Gerstner. "I
think the suits in Armonk are sweating on this one."
Cultural Shift
Others are taking different tactics. A recent town meeting on the change
at a college in Vermont drew an overflow crowd of about 700 workers. In
Rochester, employees have tied signs bearing slogans such as "Think
About Pensions" to a 6-foot plastic bull. The oversized bovine has
become a movable billboard aimed at rallying support around town. thers
are fielding calls from reporters, politicians and radio talk shows.
Employees say the activities are a far cry from the days where IBM was
considered such a family that "union" was an unspeakable word, and
corporate singalongs included choruses of "Hail to IBM." "The culture
has already changed at IBM," says Ken Buckingham, a software engineer in
Charlotte, N.C., who has spent nearly 19 years with Big Blue. "Now,
they're just another company. IBM has always been a fair player until
now."
IBM Defends Plan
But IBM officials say the plan is fair and the corporate culture strong.
They stand by the decision.
In an effort to inform and educate employees about the change, IBM has
set up a call center that answers workers' questions, Weatherbee says.
Outside companies have been hired to provide financial planning
seminars. "We continue to have meetings with employees to make sure they
understand why we made the change," Weatherbee says. "I don't mean to
say we're unconcerned, but employees feel there are good things about
this company. IBM has a lot to offer as an employer."
But critics say the pension switch could do more to hamper IBM's
retention and recruitment efforts than to help. New hires, they say, may
worry that the company is not to be trusted. Current employees may walk
away in their anger over the change. "The whole thing made me so mad
that I quit in July," says Janet Krueger, a Rochester software
consultant who worked for IBM for 23 years. "A lot of employees are very
angry, a lot of them are questioning their loyalty. It's damaging IBM's
reputation." (USA TODAY 9-15-1999)
MOHAMMAD DOLLAH: No Change Of Jury And No Retrial Over Stock Sale Fraud
-----------------------------------------------------------------------
Defendants were charged with conspiracy to commit fraud and with fraud
in connection with the offer and sale of the common stock of
ConnecTechnologies Inc and Vital Signs Inc. They were convicted and
moved for a new trial, claiming in part that the court's refusal to
strike three jurors for cause was reversible error. Denying the motion,
the court found that two of those jurors expressed a predisposition to
bias but assured the court that their inclinations would not prevent
them from deciding the case solely on the evidence. As to the third
juror, the court believed that he was seeking to be excused because of
the potential inconvenience of a three week trial and would not vote for
a verdict that was not based on the evidence. It concluded that
defendants' claim failed, since they could not show that the jury chosen
was "infected with prejudice."
Judge Carter
UNITED STATES v. MOHAMMAD DOLAH and MARSHALL WEINBERG, QDS:02761491
Mohamad Dolah and Marshall Weinberg were charged, in an eleven count
indictment, along with William Stem, Nelson Walker, Jeremy Crittenden
and Eric Martinez, with conspiracy to commit fraud in connection with
the offer and sale of the common stock of ConnecTechnologies, Inc. and
Vital Signs, Inc. from July, 1997 to February, 1998 in violation of
Title 18, United States Code, @ 371, and fraud in connection with the
offer and sale of the common stock of the two corporations in violation
of Title 18, United States Code, @@ 77q and 77x. Only Dolah and Weinberg
went to trial; the other defendants pleaded guilty to one or more
counts. The trial commenced on April 26, 1999, and concluded on May
14,1999, with a jury verdict convicting defendants on the remaining ten
counts of the indictment.
At the conclusion of the trial, count seven of the indictment was
dismissed on the government's motion. (Tr. 1378-79). "Tr." refers to the
trial transcript.
Weinberg moves for a new trial on the grounds that the court committed
reversible. error in refusing to strike three jurors for cause, in
curtailing defendants' cross examination of government witnesses as to
their good faith belief that they were engaged in legitimate
transactions and their reliance on the good faith of various persons not
charged in the indictment, refusing to read a theory of the defense
charge, disparaging counsel throughout the trial and in taking a partial
verdict from the jury. Dolah joins in the motion as to the court's
refusal to strike three jurors for cause.
Determination
The testimony supporting the jury verdict was straight forward,
establishing beyond a reasonable doubt that defendants had knowingly
engaged in a scheme to interest susceptible members of the public into
buying worthless common stock of ConnecTechnologies, Inc. and Vital
Signs, Inc., and in knowingly offering and selling them such worthless
common stock of the (corporations with the intent to defraud in
violation of Title 18, United States Code, @@ 77(q) and 77(x).
Dolah elected to take the witness stand, and, by his performance, doomed
whatever hopes he might have entertained that the jury might find that
the government had not met its beyond a reasonable doubt requirement. He
told blatant and transparent lies on the witness stand and made
foolishly absurd assertions, all of which did not aid his cause.
Weinberg did not testify.
Jury Selection
When a panel of 36 prospective jurors was initially seated in the jury
box, the court announced that the trial was expected to last three weeks
and asked whether there was anyone who would find it an undue hardship
to serve on the jury for three weeks. As the record will show a
relatively large proportion of the jury panel sought to be excused. (Tr.
6-41). Those seeking to be excused were examined at the sidebar - some
were excused for reasons the court regarded as legitimate, and others
were not since the given reasons did not in the court's view justify
their being dismissed. At the conclusion of this phase of the
proceedings, with 36 prospective jurors once again seated in the jury
box, the court completed the voir dire examination. In the course of the
examination, several prospective jurors had stated that they did not
think they could be fair. They were then examined in the court's robing
room. (Tr. 61-66). After the examination in the robing room, the court
refused to excuse Ernesto Santa, Margo Zomback, and Paul Grandpre for
cause which defendants now challenge as reversible error.
The total called is equal to the number of jurors and alternatives to be
selected, plus the number of jurors equal to the peremptory challenges
allowed.
The record shows conclusively that these three prospective jurors had no
desire to serve on the jury and offered a variety of reasons as the
bases for being excused. In his initial examination at the sidebar,
Ernesto Santa asked to be excused because he had two children of seven
years and 16 months. Taking care of them was "too much on [his wife]."
(Tr. 17). When the court refused to excuse him, he said "all right" and
asked how many days the trial was expected to last. Jr. 18). When
examined individually after being seated, Mr. Santa said he had been
involved in class action suits against companies where there had been
stock manipulation and that he knew a Marshall Weinberg but not the
defendant. It was confirmed by defense counsel that the Weinberg Santa
knew were not related to the defendant. (Tr. 39-40). Thereafter, he
answered "yes" to the question "did he think he could be fair?" (Tr.
57). It appears that Mr. Santa was called into the robing room for
further examination by mistake. The court and counsel must have confused
him with someone else. At any rate, in the robing room. Mr. Santa voiced
a bias against Arabs as a basis for not serving, a sentiment that he did
not express during the voir dire examination in open court.
When Paul Grandpre was first seated, replacing a juror who had been
excused (Tr. 21), he was asked if he had a problem. He replied that he
did not. (Id.) When individually examined, Mr. Grandpre, an investment
banker, married, with two children and a masters degree in business
administration, said he might have trouble being fair because his
parents were victims of overzealous brokers. Jr. 46).
At her sidebar examination, Margo Zomback, an elementary school teacher,
sought to be excused since standardized tests were scheduled to be given
in her school. She was told she could not be excused for that reason.
She then said she was scheduled for gum surgery and was told that was a
second thought, and that she could not be excused for that reason. (Tr.
11-12). When examined individually and asked if she could be fair, she
replied that she did not think so. (Tr. 45).
Ms. Zomback was the first of the three to be examined in the robing
room. (Tr. 72). Excerpts from that examination are set out below.
By the Court:
I think, Ms. Zomback, you had a problem about being fair?
I just don't know that I can be fair. I just have a sense of feeling
one-sided.
Why?
You want to know how I feel? Do you care if I feel that they are guilty
or not?
No, but the point I want to know, you say you have a sense of feeling on
one side. All you have before you right now is you have seen the people
and you heard what the charges are.
I just have a sense of seeing FBI men and the government making a case,
I see a huge shopping cart full of folders, which I am assuming, whether
right or wrong, I am assuming that that has to do with evidence in the
case.
You have never been on a jury before?
Have I been selected for a jury before? No.
Any criminal case you are selected for, even if it is a one-day or
two-day case, you might find the government with charts and FBI persons.
That's nothing.
I am trying to just be honest, sir. You asked me do I have any
prejudices, and I had to admit that I did.
My sons and my husband are all in the business world, as far as banking
and securities. I know that they are scrupulously honest.
I had a friend years ago who served time for Medicaid fraud, and the FBI
was in on the case.
I just have sense that these young men are guilty. Not that I-if you put
me on the jury I would try my best to see both sides.
You strike me as being a very intelligent woman.
Thank you.
You do know that your obligation is to make your decision based upon the
evidence presented to you?
If I am on this jury, I promise you I will listen to the evidence and I
will make my judgment based on the evidence that is shown to me. But if
you ask me if I have a sense or a prejudice beforehand, I would have to
say - you asked me to be honest and I am being honest. Would I serve on
the jury? Of course I would serve on the jury, and would I listen and
try to be fair, of course I would.
The point is, that's all I can ask for you to do, to be fair, to listen
to the evidence and make your decision based on the evidence.
I see two young men out there, I wouldn't want to jeopardize them unless
there was a reason. But on the other hand, you asked me if I felt this
way in advance, and that's as honest as I can be.
Well, you have been very honest, and you have been frank, and I
appreciate it. Thank you very much.
Thank you.
(Juror leaves.)
(Tr. 72-74).
Mr. Grandpre was interviewed next in the robing room. (Tr. 74). He
repeated the concerns expressed in open court about his parents being
hurt by an overzealous broker as the basis for his belief that he would
have difficulty being fair. He spoke of Ivan Boesky and Michael Miliken
and the need to make examples "of some of these people." (Tr. 75). After
being told that his obligation was to analyze the evidence and on that
basis make a fair determination, he replied, "I understand. I am just
trying to be honest in terms of this type of business, it is very
difficult for me to remain objective." The colloquy continued with the
court asking, "if the evidence is such that the government has not
proved these men to have done anything wrong, beyond a reasonable doubt,
would you come in with a verdict of not guilty?" His response of "I am
not sure I could " was not found believable by the court: "I am not
going to accept that... I am not going to accept that. I think that Mr.
Grandpre is looking at three weeks and trying to find a way out. I am
not going to excuse him period. Jr. 76).
Mr. Santa was next (Tr. 77) and for the first time expressed a bias,
saying he was against Arabs. After counsel confirmed that Dolah was an
Arab, the following colloquy took place:
By The Court:
Are you telling me that you would be on a jury and if a man is an Arab,
and you have to decide the case based on the evidence in the case,... if
the evidence in the case was not sufficient to convict, because he is an
Arab, you would convict him?
No, I don't think so.
Of course you wouldn't. You judge (sic) the case based on the evidence,
would you not?
Right, by the evidence.
And you-whatever the evidence is in this case, whether it is sufficient
to if you are on this jury, to convict this man or let him go, you would
weigh the evidence, correct?
Weigh the evidence, yes.
Okay, thank you.
That's it.
Yes.
(Tr. 77-78).
The defendants' challenge of the three for cause was rejected Jr.
80-81), and defendants used three of their peremptory challenges to
excuse Ms. Zomback, Mr. Grandpre, and Mr. Santa.
In response to the government's inquiry as to whether the court's
rejection was its disbelief in what the jurors had said, the answer was
that the three had indicated that "they were going to weigh the evidence
and... make the decision based on the evidence." (Tr. 81). The record is
clear, however, that in Mr. Grandpre's case, the court had refused to
believe or accept his statement that he was not sure he would base his
decision on the evidence. (Tr. 76). Apparently, the court had forgotten
that Mr. Grandpre, unlike the other two, had-not said that he would
weigh the evidence and base his decision on the evidence, and that his
response of doubt that he would find the man not guilty even if the
evidence called for it was not credited by the court.
The court rejects out of hand any claim that it was required to excuse
Ms. Zomback and Mr. Santa for cause. Both did express a predisposition
to bias: Ms. Zomback against both defendants ("I have a sense of felling
one sided" (Tr. 72); "a sense of seeing FBI men and the government
making a case" (id.); "a sense that these young men are guilty" (Tr.
73); and Mr. Santa against Dolah because he is an Arab - "I am against
the Arabs" (Tr. 78). However, when reminded of their obligation as
jurors to weigh the evidence and base their decision the evidence, both
agreed that they would do so. Ms. Zomback stated, "Of course I would
serve on the jury, and would I listen and try to be fair, of course I
would. (Tr. 73). Mr. Santa stated that he would not convict on
insufficient evidence because defendant was an Arab; he would judge the
case based on the evidence. (Tr. 78). No more than that can be asked of
any juror. The issue is not whether a prospective juror is free of
prejudice, since very few if any of us are, but "whether the juror's
views would 'prevent or substantially impair the performance of his
duties as a juror in accordance with his instructions and his oath"'
Wainwright v. Witt, 469 U.S. 412, 424 (1985) (citations omitted). Both
Ms. Zomback and Mr. Santa assured the court that their predispositions
or inclinations would not prevent them from fulfilling their sworn
obligation to weigh and decide the case based on the evidence. Under
such circumstances, defendants have no viable claim that their rights
were violated because the court refused to excuse Ms. Zomback and Mr.
Santa for cause. See United States v. Ploof, 464 F.2d 116,118 (2d Cir.),
cert. denied, 409 U.S. 952 (1972) (no error in court's refusal to excuse
for cause a juror who initially stated his thinking might be affected by
an outside event, but after being pressed by the court said he would do
his best to be fair). Even United-States v. Martinez-Salazar, 146 F.3d
653 (9th Cir. 1998), on which defendants rely and which will be
discussed more fully below, is to the same effect. Id. at 656 ("We have
upheld a district court's decision not to dismiss for cause a juror who
initially admits bias as long as he or she ultimately asserts an ability
to be fair and impartial.") (citations omitted). Accordingly, the motion
for a new trial as it relates to the court's refusal to dismiss Ms.
Zomback and Mr. Santa for cause is denied.
The refusal to excuse Grandpre for cause requires a fuller discussion
since he did not assure the court that he would be fair. The court did
not believe he would vote for a verdict not based on the evidence;
rather, the court believed that he was seeking to be excused from a
potential three week jury trial which would cause him an inconvenience
that he did not want to suffer.
Defendants rely on Martinez-Salazar, 146 F.3d 653, which stated that the
United States Supreme Court's decision in Ross v. Oklahoma, 487 U.S. 87
(1988), left open the question whether a 5th Amendment violation occurs
when a defendant is required to use up all the peremptory challenges to
which he is entitled because of the erroneous refusal of the court to
excuse a juror for cause. The Ninth Circuit held that in such
circumstances, the defendant's 5th Amendment due process rights have
been violated.
That decision, however, is not the law of this circuit. In applying
Ross, 487 U.S. at 88 (loss of peremptory challenge not an infringement
of constitutional right to impartial jury: "So long as the jury that
sits is impartial, the fact that the defendant had to use a peremptory
challenge to achieve that result does not mean the Sixth Amendment was
violated."), this circuit has held that there can be no viable claim of
the violation of a defendant's Fifth or Sixth Amendment rights because
of loss of use of peremptory challenges unless the sitting jury
ultimately chosen was itself biased. See United States v. Rubin, 37 F.3d
49, 54 (2d Cir. 1994); United States v. Towne, 870 F.2d 880, 885 (2d
Cir. 1989 ); United States v. Brown, 644 F.2d. 101, 103-04 (2d Cir.
1981).
Since defendants do not and cannot claim that the jury ultimately chosen
was biased or infected with prejudice, the prerequisite in this circuit
for their claim to succeed has not been met. See Rubin, 37 F.3d at 54
("[Defendant] cannot prevail because he has not made the requisite
showing that the jury eventually empaneled was not impartial. Under this
court's precedents, without such a showing his claim must fail.")
(citations omitted); United States v. Morales, No. 971496, slip op. at
4985 (2d Cir. July 26, 1999). Accordingly, their claim that the court's
refusal to dismiss Mr. Grandpre for cause entitles them to a new trial
is dismissed.
Weinberg's Sundry Claims of Prejudice in Re: Court's Conduct of Trial
and Jury Charge
Weinberg contends that he was denied his 6th Amendment right to present
a defense by being prevented from questioning various witnesses as to
their good faith beliefs. The defendant's good faith belief was
relevant, and the jury was charged that the defendant's good faith
belief was a complete defense. Testimony as to the good faith belief of
the various government witnesses was irrelevant, a waste of time, and
could have caused the jury to be needlessly confused. Nonetheless, the
record shows that defendant's cross-examination was not curtailed to any
appreciable degree and that some inquiries into a witnesses' beliefs
were permitted, as is set forth in the government's brief at 28-30.
Weinberg also claims that after "nearly two-and-one half weeks of
trial... over one thousand pages of material... including impeachment
materials, investigative leads and other... favorable [evidence]... were
provided just two days prior to closing argument," too late to allow
their effective use by defendant. (Bondy Aff. at 8). This is an
appreciable misstatement of the record. When the complaint about the
late production of the material by the government and the prejudice to
defendants was made on May 6, 1999, the court took the material home to
examine it over the weekend to determine whether defendants had been
prejudiced and to determine what relief should be afforded. (Tr.
1113-17). After examination, the court determined that none of the
materials contained exculpatory or Brady material and that defendants
had not been prejudiced. (Tr. 1396-97). Very little of the material was
found to be pertinent and what was pertinent was allowed to be
introduced. Subsequently, other documents were examined, which
defendants claimed had exculpatory material (Tr. 1415), and again none
such was found. Jr. 1427). The court agreed to review any specific
portions of a deposition which defendants designated as containing
exculpatory material. (Tr. 1442-45). There was no follow-up on this
matter. Misstatements and inaccuracies are allowable to a point but in
this instance, the assertions are outrageously inaccurate. The court
will rely on the record.
Weinberg also contends that a new trial is warranted based on the
court's refusal to give the defendant's theory of defense charge. (Bondy
Aff. at 15). Although the court did charge the jury on intent and good
faith and more than adequately covered the substance of Weinberg's
defense, it did not give the charge in the precise language proffered by
defendant. the jury was told that good faith on the part of the
defendant was a complete defense to a charge of securities fraud and
that defendant did not have to establish his good faith as a defense. It
was the government's burden to prove fraudulent intent and consequent
lack of good faith beyond a reasonable doubt. The charge was sufficient
and fully satisfied defendant's entitlements.
Jury's Return of a Partial Verdict
The final claim is that the court "erred in forcing the jury to return a
partial verdict." This again both misstates and distorts the record. The
jury began its deliberations on May 13, 1999 at 1:14 p.m. (Tr. 1901).
The court called the jury to the courtroom at 5:25 p.m. (Tr. 1910),
preparing to dismiss them for the day. The foreperson, James J. Rosso
was asked if the jury had been able to complete any of its deliberations
Jr. 19 10). He advised the court that the jury had completed part of its
deliberations and asked, "Can we report one charge or is that
permitted?" He was told that if the jury had completed any of its
deliberations, it could be reported, but it had to be in writing. There
followed this colloquy:
A Juror: We will do that.
The Foreperson: Fine
A Juror: You have to get it. We already voted.
The Foreperson: Can I just go out and bring it in to you?
The Court: But it has to be in writing. Your determination has to be in
writing.
The Foreperson: Right. I'm saying does the rest of the jury have to
leave now?
The Court: No, I don't think so. If you have it in writing, you can
bring it in.
(Tr. 1911).
Mr. Russo left the courtroom and returned with the special verdict form
on which had been recorded the jury's verdict finding the defendants
guilty on count one. The verdict was read, and the jury was polled,
dismissed for the day, and requested to return at 9 a.m. the next
morning to continue its deliberations.
Weinberg contends that the court acted improperly in taking a partial
verdict; that the court "surprised " the jurors by asking for their
partial verdict; "ordered the foreman to return to the jury room to
write out the oral verdict that he and the other jurors had arrived at
together previously." (Bondy Aff, at 11). There is no support in the
record for these inflated assertions.
Prior to calling the jury to the courtroom, the court advised counsel
that it "was going to find out how they progressed, and if they haven't
reached any conclusions, I am going to dismiss them for the night." (Tr.
1909 ). The record is clear that the jury was not ordered to report
anything. The foreperson said they had finished part of their
deliberations and asked whether they could report one charge. He was
told he could do so and that it had to be in writing. Mr. Russo then
went to the jury room, retrieved the special verdict form, and brought
it into the courtroom.
In accepting the partial verdict, no error was committed. See United
States v. Levasseur, 816 F.2d 37, 45 (2d Cir. 1987) ("This court has
long allowed partiaI jury verdicts which resolve less than all counts as
well as those which resolve all counts against less than all
defendants") (citations omitted). The considerations of concern in
United States v. DiLapi, 651 F.2d 140, 146-47 (2d Clr. 1981) were not
present. The jury had reached a verdict as to both defendants on one
count, and had recorded their decision on the special verdict form. It
were ready to announce its partial verdict if permissible. They were
advised that their verdict could be reported if they had concluded their
deliberations and if their verdict was in writing. What occurred was
consistent with Rule 3 1(b), F.R. Cr. P., and the law of the circuit.
The court did not commit error in accepting the partial verdict.
Therefore, Weinberg's claim in that regard provides no basis for a new
trial.
The remaining claims raised by Weinberg are without merit and need not
be discussed.
Conclusion
In sum, the motion for a new trial on behalf of defendants Dolah and
Weinberg because the court refused to dismiss jurors Zomback, Santa, and
Grandpre is denied. The motion on behalf of Weinberg is denied in all
other respects. It is So Ordered. (New York Law Journal 8-26-1999)
NJ DEPT OF CORRECTIONS: Law School Wins $18 Mil Settlement For Inmates
A 16-year-old, mentally ill inmate spent six years in and out of
solitary confinement, repeatedly being sent back as punishment for his
violent behavior. Other inmates ate their own feces or set fire to
themselves. Not all inmates in New Jersey's toughest lockdowns are
mentally ill. But for those who are -- at least 2,000 -- conditions like
those are certain to improve.
A law school clinical litigation class teamed up with a New York law
firm to get the state of New Jersey to agree to provide mental health
treatment -- medicine and therapy -- to at least 2,000 mentally ill
inmates. The settlement, struck in federal court, commits New Jersey to
spending $ 18 million for mental-health treatment in the first year.
Patricia P. Perlmutter, assistant professor of clinical law at the
Center for Social Justice at Seton Hall University School of Law in
Newark, N.J., and Sandra L. Cobden, a senior associate at New York's
Debevoise & Plimpton, both 36, led the three-year legal battle. "When
the Center for Social Justice decided they were going to do this, they
decided they were going to need a large firm with significant resources.
They asked us, and we were glad to help," said Ms. Cobden, whose
400-lawyer firm has offices in New York, Washington, D.C., London,
Paris, Hong Kong and Moscow. "The state was very good at delaying," Ms.
Perlmutter said. "We could never have pursued this case by ourselves."
The New Jersey Department of Corrections' settlement with the plaintiffs
in the class action was approved by federal Magistrate John J. Hughes in
Newark on July 30.
'Deplorable' Treatment
Promised improvements include an agreement by the state to hire
psychiatrists, psychologists and licensed clinical social workers.
Ms. Perlmutter said that the conditions and treatment of the mentally
ill were deplorable. In one case, an inmate burned himself in his cell,
spent several months in a burn unit and then was sent back to the same
prison area, known as the Administrative Segregation Unit in East Jersey
State Prison at Rahway.
Claims were made under the Eighth Amendment for cruel and unusual
punishment, the 14th Amendment for failure to observe due process, and
the Americans With Disabilities Act and the Rehabilitation Act.
Manpower on the case included 25 Seton Hall law students, some of whom
argued in court under the federal student practice rule. Ten lawyers
from Debevoise & Plimpton were involved. Settlement included payment of
$ 1.22 million in attorney fees. The lawyers said that the money paid
less than half of their time and expenses.
The case was filed in April 1996, the result of an investigation
involving Ms. Perlmutter, while she was at the now-defunct state Office
of Inmate Advocacy, into assaults on inmates by correctional officers at
Rahway.
She said that meetings with corrections officials led to some
improvements but that the problems of the severely mentally ill remained
unsolved. "It became clear that the only way there was going to be
change was through litigation," she said. Ms. Perlmutter cast about for
a strong partner who could handle what promised to be a demanding case.
William Fauver, then the state corrections commissioner, was known for
fighting every case filed by inmates. Debevoise & Plimpton agreed to
work pro bono. Even though the case never went to trial, it involved at
least 40 federal court appearances, more than 30 depositions and
testimony by psychiatric experts.
The administration tried to limit discovery under the "self-critical
analysis privilege." "The court recognized a qualified privilege, but
most of the documents we were able to obtain," Ms. Cobden said.
The lawyers said a key piece of evidence proving that they had a
meritorious case was a 98-page statement by psychiatrist Dennis Korson,
a specialist in correctional mental health.
The blockbuster report was in response to a motion for summary judgment
by the Department of Corrections and formed the basis for a
countermotion for summary judgment, "which we thought we had a good
chance of winning on," Ms. Cobden said.
Mr. Fauver resigned on Nov. 7, 1997, and was replaced by Jack Terhune, a
former county sheriff who moved to settle the case. Mr. Terhune said
that the settlement was not an admission of wrongdoing, but he did
acknowledge that the settlement "provides for modernization of mental
health treatment for New Jersey state inmates." (The National Law
Journal 8-30-1999)
PAYDAY LENDERS: Edelman, Combs Sues Short Term Loans In Chicago
---------------------------------------------------------------
The Chicago law firm of Edelman, Combs & Latturner has filed a class
action lawsuit against a "payday loan" firm, Short Term Loans, LLC, for
violating the Truth in Lending Act in connection with 365% "payday
loans."
The lawsuit also alleges violation of the Fair Debt Collection Practices
Act. Short Term Loans filed a collection suit in the Circuit Court of
Cook County seeking to collect $1,057.90 plus attorney's fees and costs
on a $396.25 loan. Its collection lawyer then sent a letter to the
debtor stating that Short Term Loans "have reached an agreement with the
judge," to not collect an additional $300 in interest.
Plaintiff's attorney Daniel A. Edelman said that "This was one of the
most outrageous collection tactics I have seen. Any debtor who got that
would think that his case had already been decided and that there was no
point in resisting the lawsuit."
The case was filed in federal district court in Chicago. O'Brien v.
Short Term Loans, LLC, 99 C 6091.
"Payday loans" are short term, very high interest rate loans. The loans
are typically two weeks in duration and carry annual percentage rates of
100% to over 1,800%. The lender generally obtains a post-dated check as
a means of repayment. The loans are typically "rolled over" on multiple
occasions.
"Payday loans" are generally made to consumers facing financial
emergencies. Once a consumer obtains a "payday loan," he or she will
often be unable to pay it off except from the proceeds of additional
"payday loans." Often, the "payday loans" force the borrowers into
unnecessary bankruptcies.
Edelman, Combs & Latturner concentrates in representation of consumers
against lenders, car dealers, debt collectors, and other businesses.
SOURCE Edelman, Combs & Latturner CONTACT: Daniel A. Edelman of Edelman,
Combs & Latturner, 312-739-4200, or fax, 312-419-0379
SBARRO INC: Settles For Shareholders’ Suits Over Merger
-------------------------------------------------------
On January 19, 1999, the Company entered into a merger agreement for the
merger of a company formed by members of the Sbarro family, the
Company's principal shareholders, with and into the Company in which all
outstanding common stock of the Company not owned by those shareholders
are to be converted into the right to receive $28.85 in cash. The shares
to be purchased comprise approximately 65.6% of the Company's
outstanding shares of common stock. In addition, all outstanding stock
options, including those held by members of the Sbarro family, will be
terminated. For each such option, the holder thereof will be paid the
difference between $28.85 and the exercise price per share, multiplied
by the total number of shares of common stock subject to such option.
Following the Company's announcement of the proposal by members of the
Sbarro family for the merger, seven class action lawsuits were
instituted by shareholders against the Company, those members of the
Sbarro family who are directors of the Company and all or some of the
other directors of the Company. In a memorandum of understanding entered
into on January 19, 1999, which was confirmed by a subsequent formal
stipulation of settlement, counsel for the plaintiffs and counsel for
the defendants agreed to settle all of the lawsuits, and the Sbarro
Family agreed to increase the merger consideration from $27.50 per share
to $28.85 per share.
On July 16, 1999, following a hearing held on June 29, 1999, an order
and final judgment was entered which, among other things, approved a
stipulation of settlement and related settlement of the class actions
and awarded plaintiffs' counsel attorneys' fees and disbursements of
approximately $1.6 million in connection with the settlement, subject
to, and payable upon, completion of the merger. Those fees and
disbursements will be capitalized, and not expensed for financial
reporting purposes. On August 16, 1999, the appeal period related to the
order and final judgment expired. No appeals were filed. The settlement
remains subject to consummation of the merger.
The merger was approved at a Special Meeting of Shareholders held on
August 13, 1999. The merger agreement remains subject to, among other
things, receipt of financing for the transactions contemplated by the
merger agreement and the continued suspension of dividends by the
Company.
UNUMPROVIDENT CORP: Sued In MA Re Paul Revere’s Former Work Contracts
---------------------------------------------------------------------
On March 27, 1997, the Company acquired Paul Revere, a provider of life
and disability insurance products, at a price of approximately $1.2
billion. The transaction was financed through common equity issued to
Zurich Insurance Company, a Swiss insurer, and its affiliates in the
amount of $300.0 million (13,904,763 shares of common stock), common
equity of $437.5 million (17,038,200 shares of common stock) and cash of
$2.5 million issued to Paul Revere shareholders, internally generated
funds of $145.0 million, and borrowings on the Company's revolving
credit facility of $305.0 million.
In 1997, two alleged class action lawsuits were filed in Superior Court
in Worcester, Massachusetts (the Court) against the Company - one
purporting to represent all career agents of Paul Revere whose
employment relationships ended on June 30, 1997 and were offered
contracts to sell insurance policies as independent producers, and the
other purporting to represent independent brokers who sold certain Paul
Revere individual disability policies with benefit riders. Motions filed
by the Company to dismiss most of the counts in the complaints, which
allege various breach of contract and statutory claims, have been
denied, but the cases remain at a preliminary stage. To date, no class
has been certified in either lawsuit. The Company has filed a
conditional counterclaim in each action which requests a substantial
return of commissions should the Court agree with the plaintiff's
interpretation of the contract. The Company has strong defenses to both
lawsuits and will vigorously defend its position and resist
certification of the classes.
In addition, the same plaintiff's attorney who has filed the purported
class action lawsuits has filed 42 individual lawsuits on behalf of
current and former Paul Revere sales managers alleging various breach of
contract claims. Subsequent to the date of the consolidated financial
statements presented herein, two additional lawsuits have been filed to
bring the total number of individual lawsuits to 44. The Company has
filed a motion in federal court to compel arbitration for 16 of the
plaintiffs who are licensed by the National Association of Securities
Dealers and have executed the Uniform Application for Registration or
Transfer in the Securities Industry. The Company has strong defenses and
will vigorously defend its position in these cases as well.
US LIQUIDS: Charged With Misleading Investors In Suit Filed By Berman
---------------------------------------------------------------------
Berman, DeValerio & Pease, LLP a law firm specializing in representing
shareholders in class action lawsuits, issues the following press
release:
A class action lawsuit has been filed against US Liquids, Inc. (Amex:
USL) in the United States District Court for the Southern District of
Texas. The lawsuit was filed by the law firm Berman, DeValerio & Pease,
LLP on behalf of persons who purchased USL securities in the open market
during the period May 28, 1998 through August 25, 1999.
The Complaint charges that defendants violated the U.S. securities laws
by issuing materially false and misleading statements and by omitting to
disclose material facts, required to be disclosed, in order to make the
statements issued not materially false and misleading throughout the
Class Period. In particular, the Complaint alleges that defendants
falsely represented that the Company was in material compliance with
applicable environmental laws when defendants knew, or were reckless in
not knowing, that certain of the Company's employees, including the Vice
President in charge of the company's Detroit, Michigan facility, had
ordered and supervised an illegal hazardous waste disposal program
involving the discharge of untreated toxic liquid waste directly into
the Detroit sewer system. It was reported on August 25, 1999, the EPA
and FBI executed a search warrant and temporarily closed the Detroit
facility pending an investigation into allegations made by current and
former employees that officials at the plant were illegally disposing of
hazardous waste. It was further reported on September 10, 1999 that PCB
contamination was found at the Detroit facility, delaying its reopening.
Any member of the proposed class who desires to be appointed lead
plaintiff in this action must file a motion with the Court no later than
sixty (60) days from August 31, 1999. Class members must meet certain
legal requirements to serve as a lead plaintiff. Contact Norman Berman,
Esq. Jeffrey C. Block, Esq. Jennifer L. Finger, Esq. Berman, DeValerio &
Pease LLP One Liberty Square, Boston, MA 02109 at 800-516-9926 or by
e-mail at bdplaw@bermanesq.com or visit website at
http://www.bermanesq.com
WAR VICTIMS: Ex-P.O.W.'s Sue 5 Big Japanese Companies Over Forced Labor
-----------------------------------------------------------------------
A group of former American prisoners of war from World War II have filed
a class-action suit against five major Japanese corporations contending
that the prisoners were beaten and forced to work in Japanese factories,
mines and shipyards after they had been captured on the battlefield,
their lawyers announced yesterday. The suit, in Federal District Court
in Albuquerque, N.M., lists 11 plaintiffs. About 500 others have agreed
to be part of the suit, said a lawyer for the former prisoners, Eli J.
Warach.
The former P.O.W.'s said in the suit that they were beaten, starved and
denied medical attention and that they continued to suffer physical and
mental problems, particularly recurring nightmares.
Mr. Warach said although the legal team had pursued five companies --
Kawasaki Heavy Industries, the Mitsubishi International Corporation,
Mitsui and Company, Nippon Steel and Showa Denko K.K. -- many other
Japanese companies used prisoners of war to work in their factories. "We
wanted to fire a rifle instead of a shotgun," Mr. Warach said.
He said recently declassified documents had made it easier to
corroborate some allegations about torture and other abuses. Some
plaintiffs said they had waited to come forward because after they had
been released American intelligence officials made them sign documents
that forbade them to discuss how the Japanese had treated them.
A lawyer for Nippon Steel, Robert Sacks, said that the company took the
charges seriously, but that he could not comment on the specifics
because he had not seen the suit. Mr. Sacks said many of the charges had
been dismissed in similar suits. "There are a number of issues you're
dealing with," he said. "It raises several substantial and complex
international and constitutional issues."
A spokeswoman for Mitsui, Jessica Barist, said she could not comment
because Mitsui had not seen the suit.
Since the end of the war, scores of suits have been filed about prisoner
abuse. Japanese laws and the San Francisco Peace Treaty, under which
Japan agreed to pay some reparation to war victims, has seemed to make
it almost impossible to win a case in which the Japanese Government was
a defendant. The new case focuses only on the companies.
A similar suit has been filed in Japan against Japanese corporations by
50 Chinese who contend that they suffered harsh treatment in the
Japanese occupation. People who have followed that case said their
chances were slim. Seven plaintiffs in the new case, all in their late
70's and early 80's, gathered at a news conference in Manhattan. Wearing
medals, they recounted horrors that they said they faced in captivity.
Alvin Silver, 20 when he joined the Army on March 1941 and who lives in
Massapequa, N.Y., said he was captured a year later in the Philippines
and was taken to various Japanese camps. He said he spent more than 40
months in captivity, performing hard labor and eating tainted food. By
the end of his incarceration, he had lost 50 pounds. "This was a
degradation of a lifetime," said Mr. Silver, 78. "I have nightmares
about it."
The former prisoners, many decorated veterans, drew a distinction
between requiring prisoners to work under humane conditions, which they
termed forced labor, and their treatment, which they termed slave labor.
(The New York Times 9-15-1999)
*********
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. Theresa Cheuk and Peter A. Chapman, editors.
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
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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
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