/raid1/www/Hosts/bankrupt/CAR_Public/991222.MBX
C L A S S A C T I O N R E P O R T E R
Wednesday, December 22, 1999, Vol. 1, No. 226
Headlines
ACTION PERFORMANCE: Stull, Stull Announces Securities Suit
AUTO INSURANCE: State Farm Appeals $1.2B Payment for Aftermarket Parts
BRE-X MINERALS: Can. Paper Says Settlements for Investors on the Way
COCA-COLA: Attorneys Seek to Include More Workers in Racial Bias Suit
HAHN AUTOMOTIVE: Fights Ohio Suit by Former Employees of Bankrupt Subs.
HITSGALORE.COM: Fed Ct for CA Dismisses Securities Complaint
HMO: Humana Charged with RICO/ERISA Violations In Miami, Florida
HMO: Medicaid Lawsuit against Physicians Health Accuses DSS of Neglect
INDIAN TRUST: Gov't Ordered To Fix System; Judge Will Oversee Efforts
MEL FARR: Ct Doesn’t Stop Car-Stopper for Late Payment; Will Rule Later
MICROSOFT CORP: Uncle And Nephew File Separate Suits in California
MONSANTO: Merger, Stock Price, Backfire on Agri Cos by Financial Times
RANKIN AUTOMOTIVE: Settles Securities Complaint in Texas
RIBOZYME PHARMACEUTICALS: Dyer Donnelly Files Securities Suit in Colo.
SOURCE MEDIA: Abbey, Gardy Issues Notice of Pendency of Securities Suit
TEXACO: Whistle-blower Indicted of Destroying Evidence on Racial Bias
TOBACCO LITIGATION: South Carolinians Want Settlement Funds for Health
UICI: Hoffman & Edelson Files Securities Suit in Texas
UICI: Milberg Weiss Files Securities Suit in Texas
UNITED COMPANIES: Stull, Stull Files Securities Suit in Louisiana
VERITY INC: Milberg Weiss Files Securities Suit in California
VESTA INSURANCE: Taft-Hartley Pension Certified in Ala. Securities Suit
*********
ACTION PERFORMANCE: Stull, Stull Announces Securities Suit
----------------------------------------------------------
The following was announced on December 20 by Stull, Stull & Brody:
Last week Action Performance Companies, Inc., ("Action Performance" or
the "Company") (NASDAQ:ACTN) announced that it was indefinitely
postponing the proposed initial public offering of its Internet
subsidiary, goracing.com. The company also said that its first quarter
revenue and earnings would fall below analysts' expectations due to
delays in marketing programs. ACTN has also been recently downgraded by
Banc of America Sec and CIBC World Markets.
On December 3, 1999 a class action lawsuit was filed in U.S. District
Court on behalf of purchasers (the "Class") of ACTN common stock between
July 27, 1999 and November 4, 1999 (the "Class Period").
The defendants include Action Performance, Fred W. Wagenhals, Tod J.
Wagenhals and Christopher S. Besing. The Complaint charges that
defendants violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10-b(5). The action arises from damages incurred by
the Class as a result of a scheme and common course of conduct by
defendants which operated as a fraud and deceit on the Class during the
Class Period. Defendants' scheme included rendering allegedly false
statements about the state of Action Performance's business and the
shipment of certain of its products to Home Depot.
Action Performance is engaged in the design and sale of licensed
motorsports collectible and consumer products. The Company's products
include die-cast scaled replicas of motorsports vehicles, apparel and
souvenirs.
Contact: Marc L. Godino, Esq. Stull, Stull & Brody 888-388-4605
info@secfraud.com
AUTO INSURANCE: State Farm Appeals $1.2B Payment for Aftermarket Parts
----------------------------------------------------------------------
State Farm insurance company is appealing a judgment that would force it
to pay $1.2 billion to policy holders who claim they had no choice but
to repair their cars with so-called ''aftermarket'' auto-body parts. The
appeal was filed December 17 in Williamson County Circuit Court and will
be forwarded to the Illinois Appellate Court in Mount Vernon within 60
days, court officials said on December 20.
In October, a judge and jury found that the parts were substandard
following a class-action lawsuit filed on behalf of as many as 4.7
million policy holders with claims dating as far back as July 1987. A
Williamson County jury awarded $456 million in the breach-of-contract
claim. The judge who oversaw the case added an additional $730 million
after finding the company had defrauded consumers by concealing problems
with the parts.
Among other things, State Farm's appeal claims none of the plaintiffs
named in the lawsuit proved they were injured in cars repaired with
generic parts, according to State Farm spokesman Dave Hurst. ''The
plaintiffs' attorneys also said they would prove that all generic parts
are inferior to brand-name parts and they failed to do so,'' Hurst said.
He said the appeal also cites the company's ''customer satisfaction''
guarantee, which would have allowed the plaintiffs to return parts they
were not happy with. ''If a generic part is put on the car and after
that they have a problem with it, then they can come to us and we will
either repair or replace it,'' Hurst said.
''Aftermarket'' repair parts include hoods, fenders and other body parts
modeled on manufacturers' originals but made without access to factory
specifications. Critics say the parts fail to deliver the same level of
fit, finish, corrosion resistance and _ in some cases safety, as
original parts.
State Farm Mutual Automobile Insurance Co. is the fifth-largest insurer
in the country, with $24.2 billion in assets. Other insurers, including
Allstate, Geico, Nationwide, USAA, Progressive, Metropolitan and Farmers
Group of Insurance Companies, also have been sued in similar cases.
Hurst said there also was evidence disallowed in the original trial that
State Farm attorneys felt they should have been able to present. That
included State Farm's assertion that the use of generic parts benefitted
consumers by forcing auto makers to lower the cost of brand-name parts.
State Farm lawyers also contend they should have been allowed to present
evidence that savings resulting from the use of generic parts were
passed on to policy holders, Hurst said. In the past two years, he said
State Farm has returned $1.5 billion worth of dividends to its policy
holders and has reduced premiums by $2.5 billion. (AP Online December
21, 1999)
BRE-X MINERALS: Can. Paper Says Settlements for Investors on the Way
--------------------------------------------------------------------
Claimants in a class-action lawsuit against Bre-X Minerals could see
settlement cheques within a couple of months, said the local lawyer
heading up the suit. "Early in the new year there are going to be some
settlements in terms of the company and some of the insiders," said
Clint Docken, whose firm represents 150 clients in Alberta.
Docken also said all of deceased Bre-X boss David Walsh's worldwide
assets - an estimated value of $ 100 million -- have been frozen.
He estimates the settlements for local investors, who were swindled by
the Calgary-based company in 1998, will total in the hundreds of
millions of dollars.
Appeal Possible
But claimants may get more cash if a Texas court decision prohibiting
Canadians from getting settlement money out of the U.S. is successfully
appealed. "The appeal hasn't been filed yet ... but in the U.S.
potential for recovery is limitless," said Docken.
Bre-X shot to $ 3 billion in value after claiming its Busang property in
Indonesia contained the world's largest reserves of gold. Investors lost
billions and the company was rendered virtually worthless after an
independent report in spring, 1997 found the amount of gold at Busang
was negligible. Several months later, in June 1998, Walsh died of
complications from a stroke while he was in the Bahamas. (The Calgary
Sun December 21, 1999)
COCA-COLA: Attorneys Seek to Include More Workers in Racial Bias Suit
---------------------------------------------------------------------
Attorneys who filed a racial discrimination lawsuit against the
Coca-Cola Co. asked a federal judge on December 20 to expand the case to
include more workers.
The plaintiffs asked U.S. District Judge Richard Story to allow them to
amend the lawsuit filed late last year, claiming that the soft-drink
company's management has been aware of discrimination against blacks
since at least 1995. ''This knowledge places full responsibility for
current violations of federal anti-discrimination law at the highest
levels of the company,'' their court filing said.
Their motion asks for four more current or former workers, including two
from Coke's Houston-based Minute Maid subsidiary, to be added to the
four people already identified as plaintiffs in the lawsuit. ''Minute
Maid has a very serious problem in terms of how African-Americans are
treated,'' attorney Cyrus Mehri said.
The lawsuit, which seeks unspecified monetary damages, claims that Coke
has denied blacks equal pay and equal promotions into management. It
also says black workers were given less favorable performance
evalutions.
Attorneys are seeking to have the case declared a class action, covering
more than 2,000 salaried black workers, but a ruling on that question is
not expected for several months.
A Coke spokesman said the company had not had the chance to review the
amended court filing. ''We don't tolerate discrimination at the
Coca-Cola Co.,'' said spokesman Robert Baskin. (United Press
International December 21, 1999)
HAHN AUTOMOTIVE: Fights Ohio Suit by Former Employees of Bankrupt Subs.
-----------------------------------------------------------------------
On October 31, 1995 a complaint was filed against Hahn Automotive
Warehouse Inc. by former employees of Autoworks, Inc. seeking class
action status in the United States District Court, Southern District of
Ohio, Western Division (Case Number C-3-95-904). The complaint requests
compensatory damages, liquidated damages and attorney's fees available
under the Fair Labor Standards Act based on an alleged failure to pay
overtime wages to certain individuals classified as exempt employees.
The Company is vigorously defending this action and maintains that the
plaintiffs were employees of its wholly-owned subsidiary Autoworks, Inc.
as discussed below (which previously filed for reorganization under
Chapter 11 of the Bankruptcy Code), and that Autoworks' conduct was
appropriate and not wrongful.
The Company's motion for summary judgment was denied and the trial court
has found the Company liable on the plaintiffs' claim. Following the
commencement of the hearing on damages, and before the hearing was
completed, the parties entered into a stipulation on damages so that the
Company could appeal the finding of liability. On November 23, 1999, the
Company filed its Notice of Appeal and on December 1, 1999, the Company
filed its Designation of Record for Appeal and Certification Regarding
the Transcript with the United States Court of Appeals for the Sixth
Circuit. In the event that the Company is successful in obtaining a
reversal of the trial court's determination of liability, then there
will be no damages payable by the Company. In the event that the
Company's appeal is unsuccessful, then the parties will resume and
continue with the hearing on damages until completed. While the outcome
of this appeal, and any subsequent determination of damages is
inherently uncertain, the Company believes that it is unlikely that any
adverse verdict would have a material adverse effect on its financial
condition; however it could materially adversely affect net income or
cash flow depending upon the fiscal year in which a final judgment is
entered against the Company.
In July 1997, the Company's wholly-owned subsidiary, Autoworks, filed a
petition for reorganization under Chapter 11 of Bankruptcy Code. The
proceeding was brought in and is presently pending in the United States
Bankruptcy Court for the Western District of New York (the "Bankruptcy
Court"). Subsequent to the filing, the Official Unsecured Creditor's
Committee ("Committee") in the proceeding, claimed that there had been
preferential transfers between the Company and Autoworks amounting to
approximately $6.5 million and made further claims based upon the
doctrines of substantive consolidation, and fraud in connection with the
Company's acquisition of Autoworks. On June 18, 1998, the Bankruptcy
Court approved a settlement among Hahn, Autoworks, the Committee and the
Company's secured creditors pursuant to which the Company is required to
pay the Autoworks bankruptcy estate up to a maximum of $2.0 million over
five years. If certain payments are made in a timely manner, the Company
will pay less than $2.0 million, but in no event will the Company pay
the Autoworks bankruptcy estate less than $1.6 million by June 15, 2002.
The parties also provided appropriate releases including any existing
and potential claims which the Committee had against the Company. In
May, 1999, a disagreement and dispute arose between the Company and the
Committee over the terms and provisions to be included in the Plan of
Reorganization. In June, 1999, the Company and the Committee entered
into an amendment to the settlement, pursuant to which the Company would
continue to maintain ownership of Autoworks following the approval of
the Plan of Reorganization, and the Company would make an additional
payment to the Bankruptcy Estate in the amount of $100,000 in three (3)
equal annual installments, without interest, commencing June 15, 2000.
HITSGALORE.COM: Fed Ct for CA Dismisses Securities Complaint
------------------------------------------------------------
Hitsgalore.com, Inc. (OTC Bulletin Board: HITT) announced that on
December 20, 1999, District Judge Manuel L. Real of the United States
District Court for the Central District of California (the "Court")
granted the Company's motion to dismiss the First Consolidated Amended
Class Action Complaint filed against Hitsgalore.com in the action
entitled In re HITSGALORE.COM, INC. SECURITIES CLASS ACTION, Case No.
99-CV-5060.
On May 13, May 16 and June 11, 1999, three separate putative class
action lawsuits (Case Nos. 99-5060, 99-5151 and 99-6925) were filed
against the Company, Steve Bradford and Dorian Reed claiming violations
of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The suits were based on an alleged scheme to
"artificially inflate" the price of the Company's securities during the
periods specified in the complaints. On September 20, 1999, the Court
entered an order consolidating the three lawsuits into one (entitled as
above) and appointing the lead plaintiff and lead counsel for the
consolidated lawsuit. Pursuant to the Court's order, on or about October
8, 1999, a single First Amended Consolidated Class Action Complaint for
the Violation of Federal Securities Laws (the "Amended Complaint") was
filed by the plaintiffs in the consolidated lawsuit.
On November 10, 1999, the Company's attorneys, Carl F. Schoeppl and
Daniel J. Becka of Schoeppl & Burke, P.A. (Boca Raton, Florida), filed a
motion to dismiss the Amended Complaint on the basis that the
allegations stated therein failed to state a claim for relief under the
federal securities laws. "In 1995, Congress enacted the Private
Securities Litigation Reform Act ("PSLRA") in an attempt to eliminate
frivolous class action lawsuits that were being filed by plaintiffs
whenever there was a significant change in the price of a company's
stock, without regard to any actual culpability on the part of the
company and its officer and directors," explained Mr. Becka. The first
of the three consolidated lawsuits against Hitsgalore.com was filed only
two days after the issuance of a Bloomberg article which falsely implied
that the Company fraudulently failed to disclose in a February 1999
filing with the Securities and Exchange Commission the existence of an
FTC complaint brought against Dorian Reed and others relating to
Internet Business Broadcasting, Inc., an online advertising company that
closed in 1997 with which Mr. Reed was associated. The Company's stock
price decreased dramatically as a result of that story.
"The PSLRA, among other things, significantly raised the pleading
standards necessary to state a claim for securities fraud under Section
10(b) of the Exchange Act and Rule 10b-5 by requiring plaintiffs to
plead, in great detail, facts creating a strong inference that the
defendants acted with a fraudulent intent," said Mr. Becka. "Plaintiffs'
attorneys can no longer base securities class action lawsuits on
conclusory allegations and innuendo in the hopes that they might be able
to find actual evidence of fraud through the discovery process. We
believe that the Amended Complaint in this case was a perfect example of
the type of insufficient pleading Congress sought to prohibit when it
enacted the PSLRA," Mr. Becka added.
The Court granted the plaintiffs 20 days to amend their complaint to
again attempt to plead a viable cause of action against the Company
under the securities laws. As stated by Dorian Reed, however: "We don't
know what else they could possibly allege against us. They had five
months from the filing of the first lawsuit against us in May to
investigate their claims and prepare their Amended Consolidated
Complaint. Although the Amended Complaint pretty much claimed that every
press release and SEC filing we made during the 'Class Period' from
February 17 through August 24, 1999 was 'materially false and
misleading,' the Court apparently agreed with us that the plaintiffs
failed to plead actual facts sufficient to support their claims of
securities fraud." The Company continues to deny that it or its officers
engaged in any type of fraudulent conduct during the Class Period and
intends to continue to vigorously contest any claims to the contrary
asserted in the consolidated lawsuit.
Contact: Carl F. Schoeppl, Esq., or Daniel J. Becka, Esq. of Schoeppl &
Burke, P.A., 561-394-8301, for Hitsgalore.com, Inc.
HMO: Humana Charged with RICO/ERISA Violations In Miami, Florida
----------------------------------------------------------------
In a first of its kind class action, subscribers to Humana Inc. sued the
giant health insurer for violations of the Racketeer Influenced and
Corrupt Organizations Act (RICO) and the Employee Retirement Income
Security Act (ERISA), alleging Humana failed to disclose the conditions
of its health coverage and that it paid physicians to deny coverage to
its insureds. Price et al. v. Humana Inc., No. 99-8763 (SD FL, Oct. 4,
1999).
Humana, which insures over six million Americans, faces a multimillion
dollar suit that was filed in the Miami division of the U.S. District
Court for the Southern District of Florida. Seeking treble damages under
RICO, the plaintiff class consists of all those who are or were enrolled
in Humana's health maintenance organizations, preferred provider
organizations, and/or point of service plans operated by the insurer
from Oct. 4, 1995, through the present. A subclass consists of all
Humana subscribers during the same period who seek equitable and other
relief under ERISA.
Plaintiffs allege Humana systematically and intentionally concealed
accurate information about when health care would be provided, when
claims would be approved or disapproved, and what criteria and
procedures were actually used to determine the extent and type of
coverage.
At issue, the complaint states, is whether Humana is liable under
federal law for repeated and continuing fraudulent conduct involving
material misrepresentations and misleading omissions in disclosures to
subscribers. Plaintiffs assert Humana told subscribers that coverage and
treatment decisions would be made on the basis of "medical necessity."
However, the insurer did not provide coverage or review claims solely,
or sometimes at all, on the basis of medical necessity, the complaint
states. Instead, Humana treatment and coverage determinations took
account of a variety of concealed cost-based criteria that were
unconcerned with, and sometimes inimical to, the medical needs of class
members.
Plaintiffs also allege Humana concealed that it:
-- has a set of financial incentives for claim reviewers designed to
encourage denial of claims without regard to the patient's needs;
-- sometimes subcontracts the claims review process to third parties who
base their claim approval decisions on undisclosed criteria to limit
when Humana would approve treatment or claims;
-- allowed persons without appropriate medical training and
specialization to make claims review determinations;
-- provided direct financial incentives to treating physicians to deny
coverage to individuals even where the proposed treatment satisfies the
Humana Medical Necessity Definition set forth in its disclosure
documents; and
-- intended to provide plaintiffs with health insurance benefits of
lesser value than promised and unjustly enriched itself at the class'
expense by millions of dollars.
The complaint alleges Humana's conduct constitutes an open-ended pattern
of racketeering activity in violation of Sec. 1962(c) of the RICO
statute, and plaintiffs seek treble damages for their injuries.
Specifically, Humana participated in the operation and management of
both a national health care network and state and local health care
networks in which the participants were associated in fact for the
common purpose of providing medical services to Humana subscribers and
earning profits from providing those services. Plaintiffs allege
predicate acts of mail and wire fraud to fraudulently induce people to
subscribe to Humana Health Plans for the insurer's benefit.
Plaintiffs also assert Humana has violated the disclosure provisions of
ERISA and has breached the fiduciary duties it owes to the subclass of
subscribers to Humana's ERISA benefit plans. The subclass seeks both
recovery of benefits according to the terms of their plans and equitable
relief, including corrective disclosures, as provided in the ERISA
statute. Attorneys representing the class of Humana health plan
subscribers are Stephen Neuwirth of Boies & Schiller in Armonk, NY, and
Joseph Sellers of Cohen, Milstein, Hausfeld & Toll in Washington, DC.
(Health Law Litigation Reporter November 1999)
HMO: Medicaid Lawsuit against Physicians Health Accuses DSS of Neglect
----------------------------------------------------------------------
On Nov. 17, two plaintiffs seeking to represent 74,000 Medicaid
enrollees of Physicians Health Services (PHS) filed a claim in federal
court for injunctive relief against PHS and against the commissioner for
the Department of Social Services. The claim joins a growing list of
major lawsuits against HM0s, including one filed a week earlier by 16
Connecticut surgeons against Anthem Blue Cross over its alleged
practices denying or limiting necessary medical services.
The Medicaid plaintiffs in this most recent suit claim that PHS, a
for-profit HMO with over 500,000 members in Connecticut, has
systematically failed to provide them with adequate written notice of
its adverse decisions affecting their health care. In many cases, they
claim, no notice at all has been provided by PHS or its subcontractors;
in other cases, notices of decisions are provided, but do not give
reasons for the decisions.
This lawsuit is of interest not only because it is filed on behalf of a
large class of health care consumers, but also because of its claims
that the Department of Social Services has failed to force PHS to comply
with its own contract. According to the plaintiffs' attorneys, the
department's contract with PHS provides for a monthly per-member payment
to PHS, thus providing a financial incentive to PHS to limit the
services it provides. On the other hand, the contract requires a fairly
high level of care, including a requirement to provide notice (including
reasons based on the provisions of the contract) to members when adverse
decisions are made. These requirements are essentially the same as those
owed to Medicaid recipients by the department itself under federal
Medicaid regulations and the Fourteenth Amendment. It is most disturbing
that the department has, according to the complaint, failed to enforce
against PHS the provisions of this contract which require adequate
written notice.
Attorneys have at times been criticized for insisting upon such "
technicalities" as proper written notice. The plaintiffs' attorneys
address this criticism by pointing to the importance of this "right to
know." Without it, PHS Medicaid members are deprived of an effective and
meaningful right to appeal against adverse decisions. Courts have
repeatedly upheld claims for adequate notice of decisions affecting food
stamps and other public benefits on this basis. When health care is at
stake, a meaningful right of appeal is even more important.
When the entity making the decisions is a for-profit company with an
apparent financial incentive to limit the treatments it pays for, this
concern is a very serious one. Taxpayers as well as Medicaid recipients
have an interest in ensuring that Medicaid funds are not diverted from
necessary medical services into corporate profits. The general failure
to provide proper written notice which is alleged by the plaintiffs
makes it difficult to determine whether PHS is using practices which
systematically deny or limit such services. Indeed, the plaintiffs'
legal services attorneys have suggested that such practices do exist,
and would become obvious if proper notice was given to members. They are
seeking further information and examples from Medicaid recipients who
feel their medical care has been improperly denied or limited.
This lawsuit is as yet untested, and an answer has not yet been filed by
the department or by PHS. Nevertheless, the allegations raised by the
complaint should be of serious concern to attorneys and taxpayers as
well as Medicaid recipients in Connecticut. (The Connecticut Law Tribune
December 6, 1999)
INDIAN TRUST: Gov't Ordered To Fix System; Judge Will Oversee Efforts
---------------------------------------------------------------------
The government violated its duty to safeguard trust accounts for more
than 300,000 American Indians, a federal judge ruled on December 21. The
judge will oversee efforts to fix the failed system.
For decades, U.S. District Judge Royce Lamberth ruled, the Interior and
Treasury departments so mismanaged accounts for individual Indians that
no one knows how much money is or should be in the accounts. His ruling
came in a class-action lawsuit by Indian account holders seeking
court-ordered fixes to the trust account system, which currently holds
about $500 million. ''It is fiscal and governmental irresponsibility in
its purest form,'' Lamberth wrote.
But the judge rejected the Indians' request for a court-appointed
official to oversee changes to the trust account system, giving the
federal government one last chance to finally fix the problems. Instead,
Lamberth said he would keep the lawsuit alive for five years and require
progress reports from federal officials every three months.
The Bureau of Indian Affairs, the main Interior Department agency
responsible for the accounts, declared victory. ''We won,'' BIA
spokesman Rex Hackler said. Interior Secretary Bruce Babbitt and BIA
head Kevin Gover had asked Lamberth to give them this final chance to
fix the problems, Hackler said.
Lawyers for the Indians declined immediate comment. The judge wrote that
the Indians might be disappointed he did not appoint a ''special
master'' to oversee trust reform efforts but said his ruling was a
''stunning victory'' for the Indians nevertheless.
The 142-page ruling traces a long history of mismanagement of the
accounts, which handle proceeds of government-approved leases on Indian
land for grazing, logging, oil drilling and the like. Records have been
lost or never kept in the first place, heirs of Indian account holders
have not been tracked and security of the accounts has been lax,
Lamberth wrote. ''It is entirely possible that tens of thousands of
(Indian) trust beneficiaries should be receiving different amounts of
money their own money than they do today,'' Lamberth wrote. ''Perhaps
not. But no one can say, which is the crux of the problem.''
Lamberth has said he will hold a second ''mini-trial'' in the case to
determine how much money Indians should be paid to compensate for the
decades of neglect. Lawyers for the Indians have said they are likely to
seek billions of dollars in damages.
Lamberth had ordered the Indians and the government to try to reach an
out-of-court settlement in the case, and had withheld the ruling for
months while both sides tried to reach an agreement. The judge released
his ruling on December 21, saying lawyers for the Indians said the
negotiation process ''has no hope of success.''
Earlier this year, Lamberth held Babbit, Gover and then-Treasury
Secretary Robert Rubin in contempt of court for failing to turn over
documents to the Indians' lawyers. An investigator appointed by Lamberth
wrote a report saying Treasury Department officials inadvertently
shredded 162 boxes of documents that could have related to the case,
then waited three months to tell Lamberth about it. (AP Online December
21, 1999)
MEL FARR: Ct Doesn’t Stop Car-Stopper for Late Payment; Will Rule Later
-----------------------------------------------------------------------
A Wayne County judge on December 20 refused to halt auto dealer Mel
Farr's use of a high-tech dashboard device that prevents leased cars
from starting if the customer is behind on payments. Circuit Judge Kaye
Tertzag rejected an injunction request by attorneys suing over the
On-Time Device, ruling there was no reasonable likelihood the technology
posed an immediate danger to the vehicles' drivers or other motorists.
Tertzag deferred ruling on the plaintiffs' request that the lawsuit be
granted class-action status to perhaps include several hundred drivers
of the vehicles with the devices.
Farr, a former Detroit Lions running back and among the nation's biggest
car dealers, has suggested the device is a way to offer cars to people
with bad credit and to protect his profits.
The device consists of a keypad and a tiny light. Customers who come to
a payment center once a week get a six-digit code when they pay their
bills. They punch in the code on the keypad and if it matches the proper
code, the light turns green and the car can be started. If more than a
week passes without a new code, the light stays red, a buzzer sounds and
the car won't start. (Chicago Tribune December 21, 1999)
MICROSOFT CORP: Uncle And Nephew File Separate Suits in California
------------------------------------------------------------------
The race to the courthouse by San Francisco class action lawyers to sue
Microsoft Corp. certainly is frenzied. Plaintiffs' lawyers who happen to
be related to each other can't even keep up with the new filings.
Joseph R. Saveri, of that city's Lieff, Cabraser, Heimann & Bernstein
L.L.P., filed a class action complaint on Nov. 24 in state Superior
Court against the software giant. He also filed a petition to coordinate
class actions from around the state. The petition neglected to mention a
Nov. 17 complaint against Microsoft filed by his uncle, Guido Saveri, of
the Saveri Law Group Inc.
"That was, I guess, what you would call an oversight," said Barry R.
Himelstein, of Lieff Cabraser, who practices with the Saveri nephew and
is a co-signator on the Microsoft complaint. "With so many filings, it's
not always possible to catch everything." At least six class actions
have been filed in California since U.S. District Judge Thomas Penfield
Jackson found on Nov. 5 that Microsoft had abused its monopoly power.
The two Saveris practice in the Embarcadero Center, the uncle with his
son, R. Alexander Saveri. "There are a lot of lawyers in Joe's family. I
don't think Joe knew about it," said Mr. Himelstein. "No family feud to
report, sorry," he added.
But is one brewing? Joseph Saveri is already jockeying to become lead
counsel and control the litigation. He crowed to The Recorder, San
Francisco's daily legal newspaper and a National Law Journal affiliate,
about his firm's stellar record and said that the firm will seek a
leadership role. His uncle was unimpressed.
"You can read anything in the papers you want," Guido Saveri said of his
nephew's comments. The petition to coordinate cases will have no impact
on who is ultimately chosen as lead counsel, he said, adding, "My office
has more experience than Lieff Cabraser has." Joseph Saveri said that he
anticipates no feud with his uncle. And both firms are likely to lose
the lead role to San Francisco's Townsend and Townsend and Crew, which
has pursued a class action against Microsoft since February. (The
National Law Journal December 13, 1999)
MONSANTO: Merger, Stock Price, Backfire on Agri Cos by Financial Times
----------------------------------------------------------------------
Why should Pharmacia & Upjohn, which has spent the past two years
focusing on pharmaceuticals, want to get tangled up in genetically
modified foods? After all, it has only just emerged from a troubled
period following the initially disastrous merger of Sweden's Pharmacia
with Upjohn of the US. Surely, as the negative market reaction implied,
the last thing it needs now is to plunge back into complexity and
controversy?
The answer is twofold. First, P&U's management appears to believe that
observers have taken too negative a view of Monsanto's agrochemicals
business, which is actually more profitable than many pharmaceutical
companies. Second, it thinks the arguments for greater scale in the
consolidating pharmaceuticals business are compelling. It may even
believe that it has got hold of Monsanto's drugs unit - dubbed "Searle
the Pearl" by some observers - at a bargain price, locked as it was
inside the controversial agribusiness.
Fred Hassan, who will be president and chief executive, put a brave face
on Monsanto's agro-biotechnology business. Although he stressed that the
motivation of the deal was to create a "pharmaceuticals powerhouse" - a
little hyperbole never hurt anyone - he said he was confident that the
environment for biotechnology would improve. "There is a PR problem with
biotech in Europe," he conceded. More, it was showing signs of spreading
to the US. "But if it is managed correctly, I believe the right message
can get through," he said.
The US was so diverse and its regulatory authorities so trusted that he
doubted the issue would snowball there. Some observers believe that
might be wishful thinking given the recent class action suit against
Monsanto and the potential for issues to gather momentum, particularly
in an election year.
Mr Hassan countered that agro-biotechnology, which he described as "a
sunrise industry", was a "softer" environmental option than using "toxic
chemicals". It was vital to get consumers on board by stressing benefits
such as "better-tasting foods, better protein, better oil". He also
downplayed Monsanto's Dollars 6bn debt, racked up largely thanks to its
seed-business buying spree. (A further acquisition, the Dollars 1.3bn
purchase of Mississippi-based Delta & Pine, could yet founder for
anti-trust reasons). Monsanto, said Mr Hassan, was selling off older
businesses to raise money, while Roundup, the herbicide used in
conjunction with its GM crops, was a "cash machine". Floating a fifth of
company would raise more money to pay down debt, he said.
In short, Mr Hassan hopes the merged company will be able ride out
environmental protests and gradually improve its financial postion. By
2001, analysts say, prospects for the agricultural sector should have
improved, potentially making the unit more valuable if the new company
wants to spin it off altogether.
By making it a separate entity, Mr Hassan hopes not to get too embroiled
in the day-to-day running of the business, although he is bound to be
sucked in from time to time. One criticism of the life science strategy
is that it is managerially distracting to worry about both drugs and
agriculture.
The merger is undoubtedly a gamble. But the need for scale in the
pharmaceuticals business has persuaded Mr Hassan to take it. With a
market capitalisation of less than Dollars 30bn, P&U was never more than
an also-ran despite its improving performance.
The merger will give P&U/ Searle an R&D budget of Dollars 2bn,
comparable with that of the UK's Glaxo Wellcome. It will have one of the
biggest US salesforces with nearly 4,000 reps. It will have 56 per cent
of its sales in the US, boosting P&U's exposure to the world's most
lucrative market. It will also have a significant presence in Europe
where Searle lacks clout. The enlarged presence on both sides of the
Atlantic will help the company push sales of Celebrex, Searle's
anti-arthritis drug that registered sales of Dollars 1.4bn in its first
year, plus other P&U medicines including Xalatan for glaucoma and Detrol
for bladder problems.
Mr Hassan said the merged company would have one of the strongest
portfolios and pipelines in the industry. Its "freshness ratio" - the
percentage of total sales from drugs launched less than five years ago -
was a creditable 33 per cent, against a measly 9 per cent when he took
over P&U.
That is the rationale. The merged company will not be short of nice
charts to show analysts and investors. But, as Mr Hassan himself said,
80 per cent of a successful merger is down to execution.
There are bound to be surprises along the way. That is clearly what the
markets are worrying about. But Mr Hassan appears to believe that
whatever surprises arise, they will, in the main, be pleasant ones.
Additional reporting by Christopher Bowe
Shares In Monsanto And P&U Fall Sharply
Shares in Pharmacia & Upjohn and Monsanto both fell sharply on December
20 as the markets took a dim view of their merger, announced late the
day before.
Concern centred on the lack of a premium in the all-share deal and the
future of Monsanto's agricultural business arm.
The unit, caught up in controversy and class-action litigation over
genetically modified crops and operating in a depressed agribusiness
environment, will be set up as a separate business.
A public offering of up to 19 per cent of the unit is planned as soon as
is practical.
The pharmaceuticals companies made their case yesterday for the
agribusiness plan. Fred Hassan, who will head the new company, said:
"One can unlock a lot of value by making it standalone, transparent and
accountable."
But the markets were unimpressed. Tom Brakel, at research group Mehta
Partners in New York, said "There is uncertainty over the agribusiness
and the lack of an acquisition premium for Monsanto shareholders will
not make them happy. They may not vote for the deal." Analysts did not
rule out a counter-offer for either company. Hostile activity is rare in
the drugs business, but Pfizer's unsolicited offer for Warner Lambert
last month may have changed the environment. P&U and Monsanto disclosed
details of defence arrangements to deter rival bids. There is a break-up
fee of Dollars 575m and cross-stock options of 14.9 per cent of each
other's stock, but the total value cannot exceed Dollars 635m.
Possible Backfire on Large Argribusiness Companies
Efforts by many large agribusiness companies to obtain strict GM crop
and food regulations could backfire on them in more ways than one.
Opponents of the latest developments in biotechnology launched a
manoeuvre to curb the spread of genetically-modified (GM) foods - a
class-action lawsuit that accuses Monsanto, the US agribusiness group,
of conspiring to monopolise the world's seed trade. Sadly, the charge
has some merit, although not in the ways alleged by the plaintiffs.
Monsanto and other large agribusiness companies have brought many of
their miseries on themselves. By insisting their own GM crops and the
foods derived from them merited extraordinary government monitoring,
they elicited regulation that lessened competition and slowed the
product flow through the development pipeline.
In the early 1980s, a few big agrochemical-biotechnology companies led
by Monsanto asked senior Reagan administration officials to impose more
restrictive regulation than could be justified on scientific grounds. As
now-retired Monsanto employees admit, the motive was to use it as a
market entry barrier to competitors - in particular, seed companies and
biotech start-ups - that were less able to bear the high costs of
unnecessary regulation.
They achieved their goal. The US Department of Agriculture and the
Environmental Protection Agency promulgated new policies that focused
specifically on, and discriminated against, plants and micro-organisms
crafted with GM techniques. The regulatory policies put federal
bureaucrats in the middle of virtually all field trials of GM plants
during the past 15 years, spelling disaster for small businesses and
especially academic institutions, whose scientists lack the resources to
comply with burdensome, unnecessary regulation.
As a result, the cost of field-testing gm plants soared to as much as
twenty-fold higher than for virtually identical plants crafted with
older, less precise genetic techniques. Limited R&D resources were
siphoned away from productive research by paperwork and gratuitous field
test requirements.
Seed and entrepreneurial biotech companies for the most part failed to
compete successfully on this tilted playing field, and subsequently many
were bought at a fraction of their true value by Monsanto, Novartis and
Dupont. Few of the agbiotech companies launched in the 1980s exist
today.
But Monsanto and the few others remaining have won only a Pyrrhic
victory. The over-regulation they demanded fed the anti-biotechnology
mythology that has poisoned the views of consumers, particularly in
Europe and Japan. And now their strategy may be examined in court,
although the suit just filed in the US concentrates on other issues -
namely, whether Monsanto collaborated with other companies to fix prices
and to force farmers to use GM seed.
The agbiotech industry as a whole is arguably complicit in any
anti-competitive activities related to over-regulation. Its trade
association, the Washington DC-based Biotechnology Industry Organization
(BIO), has lobbied tirelessly for overregulation in the US and
internationally for more than a decade. In 1994, for example, in a
letter to the FDA, BIO requested that the agency develop a special
notification scheme for GM foods, even though there was no evidence
these posed any health risk, and such foods were already (and still are)
subject to the FDA's routine, rigorous policing of the marketplace.
Industry has advocated other unscientific, even bizarre, regulatory
proposals, including one from the EPA to begin regulating garden and
crop plants as pesticides. Under this policy, case by case regulatory
review will be required for even small-scale field trials of familiar,
innocuous plants genetically improved to enhance their pest-or
disease-resistance. And they will have to be labelled "pesticide".
Imagine the shelf-appeal to shoppers of a box of strawberries or tin of
fruit salad bearing the label "pesticide".
Globally, Monsanto and BIO have lobbied for United Nations-based
biosafety regulations under the 1992 Convention on Biological Diversity,
which are expected to be finalised during the next year.
Under this unscientific and draconian regulatory regime, no biologist,
plant breeder or farmer will be allowed to grow and test a GM crop or
garden plant regardless of how small the test-plot - without prior, case
by case approval from the UN bio-police.
Whatever its legality, the industry's strategy of using unnecessary
government regulation as market-entry barriers is self-defeating and
morally bankrupt. However, its transgressions pale beside the actions of
the ideological opponents of biotechnology. The lawsuit is only the
latest salvo in a deceitful, mendacious campaign against a useful, safe
and widely applicable technology.
The anti-GM campaigners are trying to have it both ways. On one hand
they argue that Monsanto has conspired to monopolise trade in GM seeds;
on the other, that the technology is worthless and dangerous. Jeremy
Rifkin, the activist who recruited a team of law firms to handle the
suit, has characterised GM soya beans, canola and the like as "a form of
annihilation every bit as deadly as nuclear holocaust".
No matter what the outcome of this legal process, there will be few
winners. But consumers, food producers and believers in the wisdom of
the market place are already losers. (Financial Times (London) December
21, 1999)
RANKIN AUTOMOTIVE: Settles Securities Complaint in Texas
--------------------------------------------------------
Rankin Automotive Group, Inc. (Nasdaq: RAVE) ("the Company"), reported
on December 21 the Company settled a legal proceeding, case No.
98CI-04310 originally filed on May 28, 1998 in the 150th Judicial
District Court, in Bexar County, Texas.
The plaintiff filed a securities class action alleging violations of the
Texas Securities Act and the Securities Act of 1933 arising out of
alleged misrepresentations and omissions regarding the Company's
operations and future prospects. The Company denied all wrongdoing
alleged in the suit and is pleased with the terms of the settlement, as
it is not material to the Company's operating results or financial
position.
Rankin sells automotive parts, products and accessories to commercial
and retail customers in Texas, Louisiana, Mississippi, Alabama, and
Arkansas through its six distribution centers 67 stores and two machine
shops. The Company also serves over three hundred independent jobber
stores through its distribution network.
RIBOZYME PHARMACEUTICALS: Dyer Donnelly Files Securities Suit in Colo.
----------------------------------------------------------------------
The law firm of Dyer Donnelly announced on December 21 that a class
action has been commenced in the United States District Court for the
District of Colorado on behalf of all purchasers of Ribozyme
Pharmaceuticals, Inc. ("Ribozyme") (Nasdaq: RZYM) common stock between
the close of trading on November 15, 1999, and the close of trading on
November 17, 1999, (the "Class Period").
The complaint alleges that Ribozyme and its CEO and President Ralph E.
Christoffersen misled investors by issuing a false press release on
November 15 headlined "Colorado Pharmaceutical Co. Makes Cancer Drug
History," stating that Angiozyme, one of the Company's drugs in
development, "has taken an important step forward ... making both
clinical history and industry news" and that a press conference will be
held on November 17 at which the Company's "CEO and President, Ralph E.
Christoffersen, Ph.D. ... will explain Angiozyme and its recent
history-making leap, an achievement which may be of great significance
to cancer patients everywhere." As a result, Ribozyme common stock
increased from $ 10-5/8 to as high as $22 per share. Ultimately,
investors discovered the company had no "history-making progress" to
report but was merely announcing that Angiozyme had entered Phase I/II
testing - a development the company had twice previously indicated would
occur before the end of 1999. Ribozyme shares then declined to close at
$9-5/16 per share on November 17, 1999. The lawsuit seeks to recover
damages suffered by Ribozyme investors as a result of defendants'
improper conduct.
Contact: plaintiff's counsel, Kip B. Shuman at Dyer Donnelly at
303/861-3003 or toll-free at 800/711-6483 or via e-mail at
KShuman@DyerDonnelly.com Facsimile: 303/830-6920
SOURCE MEDIA: Abbey, Gardy Issues Notice of Pendency of Securities Suit
-----------------------------------------------------------------------
Summary Notice of Pendency of Class Action; United States District Court
Northern District of Texas Dallas Division; Case No.: 398-CV-1980-R
Class Action; Brandon Hartsell, Alexander and Jacqueline Berlin, Abe
Kassin, Mark Geis, Bruce Sousa and Kurt Paige, on Behalf of Themselves
and All Others Similarly Situated, Plaintiffs; vs.; Source Media, Inc.,
Timothy P. Peters, W. Scott Bedford, Barry Rubenstein, Michael J.
Marocco, James L. Greenwald, Robert H. Alter, Robert J. Cresci, Paul
Tigh, John J. Reed, David L. Kuykendall, and Daniel D. Maitland,
Defendants
The following statement was issued December 21 by the law firm of Abbey,
Gardy & Squitieri, LLP:
To all persons who purchased or otherwise acquired common stock,
warrants and/or call options, and/or who sold put options, of Source
Media, Inc. ("Source Media") between January 20, 1998 and August 14,
1998 inclusive:
This Summary Notice is to advise you of the pendency of the above
litigation, now pending on behalf of (i) purchasers of common stock,
warrants and/or call options, and/or sellers of put options, of Source
Media (the "Class") during the Class Period, and (ii) persons who
purchased Source Media common stock on May 19, 1998 and May 20, 1998
(the "Sub-Class"). The Class and Sub-Class exclude the individual
defendants, members of the immediate family of each of the individual
defendants, any entity in which any defendant has a controlling
interest, and the legal representatives, heirs, successors, or assigns
of any such excluded party.
The Court has determined that this action may proceed as a class action.
The class action may affect certain rights you have if you are member of
the Class or Sub-Class.
This notice does not indicate any expression of opinion by the Court
concerning the merits of any of the claims or defenses asserted in the
action. This notice is merely to advise you of the pendency of the
action.
If you are or may be a member of the Class and/or Sub-Class and have not
received a copy of a detailed printed Notice of Pendency of Class
Action, you may do so by writing to the following address: In re Source
Media Securities Litigation, c/o David Berdon & Co. LLP, P.O. Box 4173,
Grand Central Station, New York, New York 10063. PLEASE DO NOT WRITE OR
CALL THE COURT OR THE CLERK'S OFFICE.
If you have any questions please call Plaintiffs' Co-Lead Counsel listed
below:
Abbey, Gardy & Squitieri, LLP
212 East 39th Street
New York, New York 10016
212-889-3700
Milberg Weiss Bershad Hynes & Lerach, LLP
One Pennsylvania Plaza, 49th Floor
New York, New York 10119
212-594-0500
Weiss & Yourman
10940 Wilshire Boulevard, 24th Floor
Los Angeles, California 90024
310-208-2800
Source: Abbey, Gardy & Squitieri, LLP
Contact: Abbey, Gardy & Squitieri, LLP, 212-889-3700; or Milberg Weiss
Bershad Hynes & Lerach, LLP, 212-594-0500; or Weiss & Yourman,
310-208-2800
TEXACO: Whistle-blower Indicted of Destroying Evidence on Racial Bias
---------------------------------------------------------------------
The laid-off "Texaco man" who triggered a national black boycott by
releasing his secret tapes of company meetings -- and in the process got
himself indicted -- can't bring himself to sever his last ties to the
oil giant. "I've kept some Texaco stock," Richard Lundwall said in his
first interview since his acquittal on obstruction of justice charges 18
months ago. "I suppose I should trade it in for Exxon, just to make the
separation, but I don't want to pay the fees. Besides, it keeps me from
wishing them all kinds of bad luck."
Lundwall claims to be content. He is doing what he calls general office
work, writing a book about the experience and earning "a lot less" than
the $ 100,000 he would be making at Texaco. But he's not about to
endorse a whistle-blower's life.
Ambivalence toward the giant oil company was a recurring theme for
Lundwall. The company "worked hand-in-glove with the prosecution" in the
federal case against him, he says.
In 31 years, he worked his way up from gas jockey to personnel
executive. In that job, he sat in on meetings about what evidence should
be handed over in a racial discrimination suit filed in 1994 by Texaco's
black employees. He taped those meetings, with a microcassette recorder
in his shirt pocket. Texaco was downsizing at the time and he wanted to
protect himself from any unjust accusations that might cost his job,
said Lundwall, 58.
When he was let go anyway, he told the race-case plaintiffs about his
recordings -- even though the tapes put him among executives who seemed
to be scheming to destroy evidence and belittling black employees.
Lundwall could be heard criticizing a Kwanzaa ceremony and saying about
one document: "Let me shred this thing." Bari-Ellen Roberts, the lead
plaintiff in the civil suit, says she thinks Lundwall offered the tapes
"not to help us, but to hurt the company."
The black employees' lawyers gleefully put the tapes in evidence and the
case exploded onto the front pages in 1996, partly because an early
transcript erroneously put an offensive racial term in the mouth of one
executive.
Black leaders called for boycotts and demonstrations and Texaco quickly
settled, for a record $ 176 million. Lundwall was indicted, accused of
destroying evidence in the racial suit -- with his own tapes the key
evidence against him. (The Detroit News December 20, 1999)
TOBACCO LITIGATION: South Carolinians Want Settlement Funds for Health
----------------------------------------------------------------------
The American Lung Association of South Carolina (ALASC), in partnership
with the American Cancer Society, released the results of a statewide
survey designed to determine how South Carolinians believe monies from
the state's tobacco settlement should be spent. Overall, South
Carolinians are most supportive of using funds from the tobacco
settlement for statewide programs that would affect children, including
smoking prevention, health education in schools, and insurance coverage
for uninsured children.
Support of the tobacco farmers was the least popular option, with non-
health care needs a close second. Almost half of the respondents said
none of the settlement funds should be used to support tobacco farmers.
"The people of South Carolina obviously recognize that tobacco use has
enormous health and economic consequences. Using this money to reduce
the hundreds of millions spent annually on preventable diseases is a
smart long- term investment," stated James Weber, Executive Director,
ALASC.
The release of this survey comes at a time when legislators are
considering how best to use the more than $2.3 billion that tobacco
companies will pay the state over the next twenty-five years as part of
a class action settlement.
ALASC has joined with more than thirty organizations to ensure that
lawmakers invest the majority of the money in health care with a large
portion supporting a comprehensive tobacco control program to prevent
future generations from becoming casualties of tobacco. Tobacco-related
health problems result in an estimated $760 million in public and
private expenditures annually in South Carolina. South Carolina's
Medicaid payments directly related to tobacco averages about $140
million a year.
The 1999 South Carolina State Survey is compatible with a nationwide
poll that showed 84% of respondents favored spending tobacco settlement
money to reduce tobacco use among kids.
Respondents were asked how much of the money, if any, from the tobacco
settlement should be spent on ten social programs options. The ten
options included: help adults who wish to stop smoking or chewing
tobacco; support scientific research on tobacco and health; provide
medical and dental insurance for uninsured children; prevent children
from starting smoking; support community development and community
projects; support tobacco farmers; support hospitals; help pay Medicaid
costs for those in poverty; provide health education in schools; pay for
non-health needs.
The South Carolina State Survey is a cost-shared random probability
survey of citizens age eighteen and older living in South Carolina that
is conducted biannually by the University of South Carolina's Institute
of Public Affairs.
Source: American Lung Association of South Carolina
Contact: Greg White of the American Lung Association of South Carolina,
803-779-5864
UICI: Hoffman & Edelson Files Securities Suit in Texas
------------------------------------------------------
Hoffman & Edelson (toll free 877-537-6532) announced that on December
16, 1999, it filed a class action lawsuit for violations of the federal
securities laws in the United States District Court for the Northern
District of Texas against UICI (NYSE: UCI) and two of its highest
officers, on behalf of all persons who purchased UICI common stock
between May 5, 1999, and December 9, 1999, inclusive. Case No.
3-99CV2860-X.
The Complaint charges that UICI and two of its officers violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
Complaint alleges that defendants issued materially misleading financial
statements which overstated corporate earnings by recording inadequate
reserves for credit card losses at UICI's United CreditServ subsidiary.
The Complaint further alleges that one of the defendants utilized his
inside information regarding the artificial inflation of the Company's
stock price to sell significant amount of his personal UICI stock
holdings.
Contact: Marc H. Edelson or Jerold B. Hoffman at Hoffman & Edelson, 45
W. Court Street, Doylestown, PA 18901 at 877-537-6532 (toll free), fax
number 215-230-8735 or by e-mail at Hofedlaw@aol.com
UICI: Milberg Weiss Files Securities Suit in Texas
--------------------------------------------------
Milberg Weiss (http://www.milberg.com)announced on December 21 that a
class action has been commenced in the United States District Court for
the Northern District of Texas on behalf of purchasers of UICI ("UICI")
(NYSE:UCI) common stock during the period between April 16, 1999 and
December 9, 1999 (the "Class Period").
The complaint charges UICI and certain of its officers and directors
with violations of the federal securities laws by making
misrepresentations about UICI's business and earnings growth in its
CreditServ division. The complaint alleges that in order to inflate the
price of UICI's stock, the defendants caused the Company to falsely
report its results for the first, second and third quarters of 1999
through the use of unjustifiable assumptions to calculate its reserves
for credit card losses, thereby materially overstating its net income
and EPS in at least the first three quarters of 1999. On December 9,
1999, UICI's scheme unraveled as it was forced to reveal that it would
record a charge in the fourth quarter of 1999 of $79 million
attributable to increased charges to reserves for credit card losses and
a write-down of certain assets associated with its ACE Credit Card
program which began in the fourth quarter of 1998. This revelation
caused trading in UICI stock to be halted on the New York Stock Exchange
and ultimately the stock plummeted to $9-7/8 per share, a decline of 66%
from its Class Period high.
Contact: plaintiff's counsel, William Lerach or Darren Robbins of
Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com
UNITED COMPANIES: Stull, Stull Files Securities Suit in Louisiana
-----------------------------------------------------------------
The following was announced December 20 by Stull, Stull & Brody:
Notice is hereby given that a class action lawsuit was filed on Dec. 17,
1999 in the United States District Court for the Middle District of
Louisiana on behalf of all persons who purchased or otherwise acquired
the common stock, preferred stock, and/or call options of United
Companies Financial (OTC:UCFNQ) ("United Companies Financial" or the
"Company") between April 30, 1998 and Feb. 2, 1999 (the "Class Period").
Shareholders assert that certain officers and directors of United
Companies Financial issued false and misleading statements and public
filings during the Class Period. Specifically, the Complaint alleges
that defendants misled the investing public to believe that the Company
was generating strong revenues and positive earnings quarter after
quarter when, in reality, defendants were overstating income and assets
by applying materially erroneous loan loss, discount and prepayment rate
assumptions in violation of Generally Accepted Accounting Principles and
the Securities Exchange Act of 1934. Not until September 1999 did
defendants reveal the extent of the errors, announcing write-offs to the
Company's 1998 year-end financial statements in the amount of $605.6
million attributable to the Company's Interest-only and residual
certificate asset. As a result, shareholder equity dropped from $505
million as of September 30, 1998, to negative $114 million as of
December 31, 1998.
Contact: Tzivia Brody, Esq. at Stull, Stull & Brody by calling toll-free
1-800-337-4983, or by e-mail at SSBNY@aol.com or by fax at 212/490-2022,
or by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY
10017.
VERITY INC: Milberg Weiss Files Securities Suit in California
-------------------------------------------------------------
Milberg Weiss (http://www.milberg.com)announced on December 21 that a
class action has been commenced in the United States District Court for
the Northern District of California on behalf of purchasers of Verity,
Inc. ("Verity") (Nasdaq:VRTY) securities during the period between
December 1, 1999 and December 14, 1999 (the "Class Period").
The complaint charges Verity and certain of its officers and directors
with violations of the federal securities laws by making
misrepresentations about Verity's business and earnings growth and its
ability to continue to achieve profitable growth. During October 1999
and November 1999, Verity saw its stock price soar from around $30 per
share to nearly $60 per share as Verity reported better-than-expected
1stQ F00 results and hyped its expanding product line and strong order
pipeline. (All share and per-share amounts are adjusted to reflect
Verity's two-for-one stock split paid on December 3, 1999.) Based on
Verity management's statements, analysts projected revenues of more than
$21 million and EPS of $0.06 for 2ndQ F00, ending November 30, 1999. By
the end of the 2ndQ F00, however, Verity had been unable to close three
major sales which translated into a minimum $5 million shortfall.
Notwithstanding Verity's past practice of preannouncing earnings
shortfalls, Verity said nothing about this problem and, on the contrary,
Verity management confirmed with market participants on December 1, 1999
that business continued to be strong and the pipeline remained as strong
as ever. These false statements stemmed the decline in Verity's stock
price, which between November 29, 1999 and December 1, 1999 had declined
from $ 59-9/16 to $46-23/32, and caused the stock to trade in the $50 -
$56 range during the following two weeks. On December 14, 1999, Verity's
stock price dropped more than $5 per share on heavy volume of 1.6
million shares on seemingly no news. Then, after the markets closed,
Verity announced a devastating revenue and earnings shortfall, reporting
revenues of $16.7 million and EPS of$0.45 per share which the Company
attributed to the failure to close three large deals. On a subsequent
conference call, Verity management admitted they had not disclosed the
shortfall sooner in hopes of being able to announce that some of the
deals had closed in December 1999 in order to stave off total
devastation of its stock price. As a result of these disclosures, on
December 15, 1999, Verity's stock price utterly collapsed, falling by
46% to as low as $ 24-7/8 on enormous volume of 22.2 million shares.
Contact: plaintiff's counsel, William Lerach or Darren Robbins of
Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com
VESTA INSURANCE: Taft-Hartley Pension Certified in Ala. Securities Suit
-----------------------------------------------------------------------
For the first time ever, a federal judge has certified a Taft-Hartley
pension fund as a Class Representative in a securities fraud lawsuit.
Judge William Acker of the United States District Court for the Northern
District of Alabama ruled that the Pointers Cleaners and Caulkers Local
1 Pension Fund (the "PCC") could act as one of three Class
Representatives in a federal securities fraud lawsuit pending against
Vesta Insurance Group, Inc. (NYSE: VTA) and others.
Vesta was sued by a number of shareholders in June and July of 1998
after the Company announced that it was investigating "possible
accounting irregularities" and that its President and CEO had resigned.
Subsequently, the Company restated its financial results for a
three-year period, resulting in a downward adjustment of revenue by some
$176.4 million and net income by some $ 61.9 million. During the period
in which Vesta's financials were overstated, Company insiders sold $13
million of stock at inflated prices. Once the fraud was revealed,
Vesta's stock price collapsed, dropping over sixty percent in one month.
Defendants in the case opposed plaintiffs' certification, arguing, inter
alia, that the PCC was precluded from acting as a Class Representative
because they hired a professional money manager to invest their funds
and because of an alleged conflict between the interests of the Fund's
participants and the other members of the Class. Judge Acker made short
shrift of defendants' arguments.
First, the Court held that simply because the PCC, like almost all
Taft-Hartley funds, hired a money manager did not mean that the PCC had
no involvement in the purchase of the stock at issue. The Court held
that "reliance on portfolio managers... is entirely reasonable and
appropriate... Use of such assistance does not indicate an abdication of
responsibility, nor does it indicate any lesser degree of reliance on
the integrity of the market."
With respect to the alleged conflict of interest argument, the Court
noted that virtually all institutional investors -- who by definition
invest money on behalf of a select group of persons -- will have
interests that, on some levels, diverge with those of the class as a
whole. However, such "potential conflicts" in no way affect such an
investor's ability to act as a representative for a larger and more
diverse class.
Lon Best, one of the trustees of the PCC who testified on its behalf in
connection with the certification motion, praised the judge's ruling:
"This case marks the first time that a Taft-Hartley pension fund has
been certified as a class representative in a federal securities fraud
case. The PCC is committed to taking whatever steps are necessary to
protect and preserve its assets, upon which a great many workers rely
for their retirement." Christopher Lometti, a partner with the New
York-based Schoengold & Sporn, which specializes in the representation
of Taft-Hartley funds in securities fraud litigation, explained: "Since
the enactment of the PSLRA, a number of institutional investors have
stepped forward to become Lead Plaintiffs in securities fraud cases. It
makes sense. When fund assets have been depleted by fraud, it is in the
trustees' best interest to take whatever steps are necessary to recoup
those assets."
While the defendants have filed a petition for immediate appellate
review of Judge Acker's ruling, the PCC is confident that the ruling
will be upheld. (Source: Pointers Cleaners & Caulkers Local 1)
*********
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
reliable, but is not guaranteed.
The CAR subscription rate is $575 for six months delivered via e-mail.
Additional e-mail subscriptions for members of the same firm for the
term of the initial subscription or balance thereof are $25 each. For
subscription information, contact Christopher Beard at 301/951-6400.
* * * End of Transmission * * *