/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000414.MBX C L A S S A C T I O N R E P O R T E R Friday, April 14, 2000, Vol. 2, No. 74 Headlines BREAST IMPLANT: Korean Claimants Appeal Their Lower Payments from Dow CHEM INTERNATIONAL: Reaches Settlement with Vitamin Direct Purchasers COCA-COLA: New Lawyer Can't Take Part in Settlement Talks, Judge Rules CONSECO, INC: Cohen & Malad Files Securities Suit in Indiana CONSECO, INC: Weiss & Yourman Files Securities Lawsuit in Indiana CUMULUS MEDIA: Berger & Montague Files Securities Lawsuit in Wisconsin INMATES LITIGATION: Fulton to Improve or Risk Suits, Judge Warns JDN REALTY: NY Times Tells of Disarray after a Series of Disclosures JOHNSON & JOHNSON: Heartburn Drug Propulsid Target of Lawsuit in VA LOCKHEED MARTIN: Class over Contaminated Groundwater in Redlands Denied MTBE LITIGATION: Petroleum Cos. Sued Over Additive NATIONAL AUTO: Announces Settlement for Securities Suit in Ohio PACIFIC GATEWAY: Shapiro Haber Files Securities Suit in California PACIFIC GATEWAY: Schubert & Reed Files Securities Suit in California PACIFIC GATEWAY: Wolf Popper Announces Securities Lawsuit RAVISENT TECHNOLOGIES: Berger & Montague Files Securities Suit in PA TOBACCO LITIGATION: 3 Kansans with Medicaid Sue over Tobacco Money TOBACCO LITIGATION: Smokers Seeking Funds from B&W Denied Cert. in CA ********* BREAST IMPLANT: Korean Claimants Appeal Their Lower Payments from Dow --------------------------------------------------------------------- The first hearing in an appeal of Bankruptcy Judge Arthur A. Spector's decision to allow Dow Corning to pay Korean women much less than American women is scheduled for April 13. Under Dow Corning's Joint Plan of Reorganization, Dow Corning is to pay a combined total of approximately $ 3 million to 177,000 women around the world, but Korean plaintiffs are to receive only 35 percent of the amount set aside for American women. Accordingly, they will receive $ 1,200 to $ 25,000 each, compared with the $ 2,000 to $ 100,000 earmarked for American women. About 1,200 Korean women have joined in the appeal. According to Dow Corning, the discrepancy is justified by Korea's current medical technology level and economic conditions, as well as possible errors in surgical procedures. Despite the court's approval of lower payments for the Korean women, the attorney representing the Korean plaintiffs praised the court's recognition of written diagnoses by Korean physicians as valid supporting evidence. On the Canadian front, a Canadian woman who was the named plaintiff in a 1994 class action against Dow Corning is now suing the Canadian government for failing to protect Canadians from the potential harmful effects of breast implants. Manon Doyer is alleging that Health Canada breached its duty to ensure the safety of all Quebec breast implant recipients. She claims that products like breast implants should not be available for use without the federal government's guarantee of safety and reliability. She is asking for $ 200,000 in general damages and $ 200,000 in supplementary damages for herself and the other plaintiffs. In the meantime, the Royal Canadian Mounted Police are continuing their two-year-old criminal investigation to determine whether Health Canada ignored years of warnings from its own health protection branch. Meanwhile, the debate over whether to ban silicone gel breast implants continues in the United Kingdom. In its March 3 session, the British Commons was urged by Liberal Democrat Tom Brake to ban silicone breast implants. He described the painful experience of one of his constituents who said she ended up feeling suicidal as a result of the problems she had with her implants. Junior Health Minister Gisela Stuart said the government had spent many thousands of pounds on research, monitoring, and improving information on implants. A new booklet with better information is due to be published at the end of March. (Medical Legal Aspects of Breast Implants, March 2000) CHEM INTERNATIONAL: Reaches Settlement with Vitamin Direct Purchasers --------------------------------------------------------------------- Chem International, Inc., (Nasdaq: CXIL, CXILW) announced on April 13 that the Company received a $792,000 cash payment in settlement of a pending class action lawsuit. The Settlement Agreement is with a major vitamin supplier in connection with a multi-district consolidated class action brought on behalf of direct purchasers of vitamin products, in which plaintiffs have alleged violations of Section 1 of the Sherman Antitrust Act and other wrongful anti-competitive conduct in violation of various federal and state laws. This settlement is in addition to the $5.5 million in payments announced earlier this year. The Company anticipates settling with the remaining defendant prior to the end of June. This settlement represents the last significant amount of the lawsuit for the Company. The Company also announced that its Board of Directors has authorized a stock repurchase program whereby the Company may repurchase up to 500,000 shares of its outstanding common stock. The shares may be repurchased from time-to-time in open market or private transactions. Currently, the Company has approximately 5.2 million shares outstanding. "The stock buyback program demonstrates our commitment to increasing shareholder value. With our current market opportunities and our strong cash position, the Board believes that Chem's common stock represents a compelling value at current prices," said Seymour Flug, Chem's president. "We believe that our current capital structure is adequate to fund our growth objectives and this repurchase program. Our board will re-evaluate our repurchase program from time-to-time in view of the current market conditions and the price of our common stock." Chem International manufacturers, markets and sells vitamins, nutritional supplements and herbal products. The Company's subsidiary, Manhattan Drug Company, Inc., manufactures and sells its products for sale to distributors and multi-level marketers. The Company operates a retail store and mail order business under its own private label "The Vitamin Factory" COCA-COLA: New Lawyer Can't Take Part in Settlement Talks, Judge Rules ---------------------------------------------------------------------- A federal judge has weighed in on the confusion created when four plaintiffs in the employee racial discrimination suit against Coca-Cola retained a new lawyer. U.S. District Judge Richard Story ruled Wednesday April 12 that Florida attorney Willie Gary cannot participate in the settlement discussions now under way between Coke and the attorneys who have been handling the case for more than a year. The decision came only a few hours after the four plaintiffs explained to reporters that they hired Gary because of a lack of trust in their previous attorneys, led by Cyrus Mehri. "There was a breakdown in the attorney-client relationship," plaintiff Gregory Allen Clark said at a news conference. "There were insensitive responses to our questions." Clark, a security officer, said that is why he and the three other plaintiffs approached Mehri's legal team two weeks ago and asked that an African-American lawyer be added. They specifically wanted Gary, a prominent attorney known for winning large awards. Instead, Clark said, he and two other plaintiffs received letters from the Mehri team dismissing them as representatives of the 2,000 prospective class members in the case. The class would include current and former black salaried Coke employees in the United States. "They said I was discharged because I was seeking personal gain over the class," Clark said. "That is not true. ... This is not a selfish move. This is a righteous move." But the attorneys who have been handling the case of the eight plaintiffs said they withdrew their representation of Clark and two other plaintiffs for good reason. As prospective "class representatives," each of the plaintiffs is supposed to act in the best interest of everyone who could benefit from a settlement or judgment. But Mehri's team said Clark and the others did not do that. The falling-out may have been caused by a disagreement over how a possible monetary settlement would be divided among the suit's named plaintiffs and the prospective class members. Mehri's team is now pursuing a settlement on behalf of the four plaintiffs who currently speak for the prospective class. As of now, the four plaintiffs represented by Gary no longer speak for the prospective class. Gary said he is only representing them as individual plaintiffs. Gary also said he hoped to work with Mehri's team. A member of Mehri's legal team concurred. Perkins' Birmingham-based firm was brought into the case. The federal suit, filed a year ago, alleges that Coca-Cola has discriminated against African-American employees in pay, promotions and performance evaluations. The company has denied the allegations in the suit. Aside from Clark, Gary is now representing former administrative assistant Motisola Malikha Abdallah, former information systems specialist Ajibola Laosebikan and assistant scientist Wanda Williams. Williams, who was not dismissed by Mehri's legal team, chose to join the other three plaintiffs who were. Larry Jones, a former Coke human resources manager organizing a bus "ride for justice" to the company's annual meeting in Delaware, attended Gary's news conference but said his presence didn't indicate his preference for one legal team over the other. (The Atlanta Journal and Constitution, April 13, 2000) CONSECO, INC: Cohen & Malad Files Securities Suit in Indiana ------------------------------------------------------------ Pursuant to Section 21(D)(a)(3)(A)(i) of the Securities Exchange Act of 1934, Cohen & Malad, P.C., a prominent Indianapolis law firm experienced in securities litigation, hereby gives notice that a class action lawsuit for violations of the federal securities laws has been filed against Conseco, Inc. (NYSE:CNC) and certain of its officers and directors in the United States District Court for the Southern District of Indiana, Indianapolis Division. The lawsuit was brought on behalf of all persons who purchased Conseco common stock between April 28, 1999 and April 5, 2000, inclusive (the "Class Period"). The complaint charges Conseco and certain of its officers and/or directors with violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. Specifically, the complaint alleges that defendants issued a series of materially false and misleading statements concerning the Company's subsidiary, Conseco Finance, which was formerly known as Green Tree Financial Corporation and the value of Green Tree's portfolio of interest-only securities. The complaint charges that because of the issuance of such false and misleading statements and defendants' failure to disclose material information, the price of Conseco common stock was artificially inflated during the Class Period. Contact: Cohen & Malad, P.C. Rich Bell, 317/636-6481 CONSECO, INC: Weiss & Yourman Files Securities Lawsuit in Indiana ----------------------------------------------------------------- A class action lawsuit against Conseco, Inc. (NYSE:CNC) and its senior executives was commenced in the United States District Court for the Southern District of Indiana seeking to recover damages on behalf of defrauded investors who purchased Conseco securities. If you purchased Conseco shares between April 28, 1999 and April 5, 2000, please read this notice. The complaint charges Conseco and its top executives with violations of the antifraud provisions of the Securities Exchange Act of 1934. The complaint alleges that defendants issued false and misleading statements concerning its subsidiary Conseco Finance, which was formerly known as Green Tree Financial Corporation ("Green Tree"), and the value of Green Tree's portfolio of interest-only securities. Contact: Weiss & Yourman James E. Tullman (888) 593-4771 (212) 682-3025 wynyc@aol.com The French Building 551 Fifth Avenue, Suite 1600 New York City 10176 CUMULUS MEDIA: Berger & Montague Files Securities Lawsuit in Wisconsin ---------------------------------------------------------------------- The law firm of Berger & Montague, P.C. on March 24, 2000, filed an amended complaint in a lawsuit on behalf of its client in the United States District Court for the Eastern District of Wisconsin on behalf of all persons who purchased the common stock of Cumulus Media, Inc. (Nasdaq:CMLS - news) during the period of May 11, 1999 through March 16, 2000 inclusive, and on behalf of all persons who purchased Cumulus common stock in a secondary offering at$39 per share pursuant to a Registration Statement and Prospectus dated November 18, 1999. The amended complaint alleges that Cumulus, certain of its officers and directors, and several lead underwriters violated sections 11, 12(a), and 15 of the Securities Act of 1933 and sections 10(b) and 20 of the Securities Exchange Act of 1934. According to the amended complaint, defendants engaged in a scheme to artificially inflate the revenues and profits of Cumulus by improperly recording revenues on contract sales in violation of generally accepted accounting principles in order to accomplish the Company's various stock offerings at the maximum price per share, and to then create the expectation in the market that Cumulus was an increasingly profitable company. To carry out their scheme, defendants issued false financial results which overstated revenues for the first three quarters of 1999. These false financial results were also contained in the November 18, 1999 Prospectus. On March 16, 2000, after the market closed, defendants announced that certain revenues and expenses for the first, second, and third quarters of the year 1999 were misallocated. The misallocation relates principally to revenue associated with contract sales spanning more than one accounting period. As a result, the Company restated results for the first three quarters of 1999, resulting in a decrease in net revenues, and an increase in net losses. In response to this announcement, Cumulus' stock price dropped from $16-15/16 on March 16, 2000, to open at $11 on March 17, a loss of over 30%. Contact: Berger & Montague, P.C. Sherrie R. Savett, Esq. or Michael T. Fantini, Esq. 888/891-2289 InvestorProtect@bm.net or von Briesen, Purtell & Roper, s.c., Beth Kushner, Esq., 414/287-1373 INMATES LITIGATION: Fulton to Improve or Risk Suits, Judge Warns ---------------------------------------------------------------- A federal judge has warned Fulton County officials they might lose immunity to suits if they fail to improve conditions at the jail quickly for all inmates. U.S. District Senior Judge Marvin H. Shoob ordered county officials to comply with the settlement agreement reached in a class action suit brought by HIV-positive inmates complaining about terrible medical care. Foster v. Fulton County, No. 1:99-cv-900 (N.D. Ga. March 24, 2000). Following a March 31 report by Correctional Healthcare monitor Dr. Robert B. Greifinger, Shoob wrote that the settlement agreement should apply to all aspects of medical care that could affect the plaintiffs. The jail should monitor the inmate intake process, physician care, specialty care, medication and communicable diseases for all inmates, he wrote. But Shoob's latest order goes far beyond a narrow focus on medical care to include environmental conditions at the jail that affect inmate health. "The court finds that the scope of the settlement agreement includes overcrowding at the jail because overcrowding poses significant health risks to HIV-positive inmates as well as to other inmates, staff and the community," Shoob wrote. In his order, Shoob directs the county to take 12 steps toward improving conditions. Among them: Improving methods of identifying, treating and monitoring inmates with communicable diseases; developing a quality management and needs assessment plan; improving the physical conditions in jail cells; monitoring staff vacancies; and hiring additional staff to reduce the backlog of health care work at the jail. County to Comply Fulton County Sheriff Jacquelyn H. Barrett says the county already is making improvements along the lines the judge suggested. But overcrowding, she says, is serious. She has 3,100 inmates housed in a jail meant to hold 2,200. "I think the judge has recognized a point I have been making, and that is that we have systemic problems we can't resolve without addressing the problem of overcrowding," she says. Though he set no specific timetable, the judge directs the county to comply "promptly." Lead plaintiffs' lawyer Tamara H. Serwer with the Southern Center for Human Rights says the order is far more comprehensive than she had expected. "It is massive," she says. "I think it is sort of a recognition that all parties have had that you can't change conditions for a small class of people without changing conditions throughout the whole system." County Commission Chair Michael Kenn called Shoob's order "wonderful" and says he hopes it leads to a new jail for Fulton. "I've been pushing for it all along," he says. "I knew if we didn't do it soon a federal judge would give us the impetus." Kenn says he would add a discussion of plans for a new jail as an emergency item to the agenda for the commission's meeting. Six HIV-positive inmates brought the class action suit in April 1999, charging that the jail denied them emergency care and access to the medication they need to stave off catastrophic illness. The county reached a settlement with the plaintiffs in January and Shoob appointed Greifinger, a former chief medical authority for jails in New York City and New York state, to monitor the jail's compliance. In his first report, Greifinger noted serious health problems at the jail, among them unsanitary conditions, failure to provide medicine for communicable diseases and a lack of medical attention for some gravely ill inmates. (Daily Report, March 16, 2000). According to Shoob's order, Greifinger found that at least one inmate may have died because of the lack of access to medical care. As a result of the report, Barrett decided not to renew the jail's contract with Correctional Healthcare Services. She appointed Correctional Medical Associates Inc. to handle medical care on an interim, emergency basis March 1. Settlement Violated Shoob issued a scathing order on March 13 declaring the county had violated the settlement agreement. Subsequent reports from CMA supported Greifinger's findings. According to the CMA report, 500 inmates had not received physicals to determine whether they suffered from chronic or communicable diseases. Some of them, the report said, had been in prison up to four months. The company cited a long list of conditions it called "unacceptable" and dangerous to all inmates. According to the report, jail records were chaotic, inmates with chronic diseases received only sporadic treatment and many inmates had little access to the medicine they need to survive. (Daily Report, March 28, 2000). CMA's report also found that medical conditions were extremely unsanitary. Staffers left new and used hypodermic needles lying around and infrequently washed their hands, according to the report. Serwer of the Southern Center says jail conditions show how important it was to remedy the problems quickly. "This is really a public policy issue; this is a public health issue," she says. In his March 31 report, Greifinger found that jail officials had made some progress by repairing some of the cells and providing hand-washing stations. "There has been a significant change in operations at the Fulton County Jail since my last report," he wrote. However, Greifinger also found some inmates continued to have problems receiving necessary medicine, others with diseases went untreated and still others lived in overcrowded conditions, some sleeping on mattresses on the floor. He told the judge he plans to return April 24 for another inspection. Shoob lauded CMA for changes it had made at the jail. In his order, Shoob directed Barrett to extend the company's contract for a year. However, he noted that the county must move quickly to improve conditions in order to comply with the settlement. "The court believes it should point out that. ... If remedial action is not promptly and expeditiously taken, there is a very serious question as to whether the sheriff and individual county commissioners, who have now been fully apprised of the deplorable conditions at the jail, would be entitled to qualified immunity as to injuries sustained by inmates at a future date arising from such conditions," Shoob wrote. Motive Change, Not Damages But Serwer says the plaintiffs never intended to sue individual defendants for damages. She would rather the county spend money to improve medical care for prisoners, she says. "Our motive from the beginning was what is the way we can get the most substantive change the quickest," she says. Serwer notes that the succession of reports and orders had brought the case to "a really productive stage" in which both sides recognize the problems and are trying to solve them in cooperation with each other. "I hope that this is the kind of spur all the parties need to address the scope of the problem," she says. (Fulton County Daily Report, April 13, 2000) JDN REALTY: NY Times Tells of Disarray after a Series of Disclosures -------------------------------------------------------------------- First the founder was in charge. But then came an accounting scandal, and he stepped aside -- sort of. Replacing him were two other executives: his wife and the man who oversaw accounting. But then another accounting scandal became public April 12, and they stepped aside, too -- sort of. Who's running the company this morning? A member of the board who has supposedly been overseeing the company's executives since the day it went public in 1994. This is JDN Realty, an Atlanta-based real estate investment trust that was one of the industry's most respected firms in the 1990's. It is also one of the prime developers for Wal-Mart Stores. But in the last two months, JDN disclosed that it had been making under-the-table payments to two of its own executives for years, that it improperly billed its two largest clients, that it defaulted on its main bank loan and that it would have to restate all of its earnings since 1994. Law firms across the country have filed class-action lawsuits. With the latest announcement, JDN's stock has dropped 43 percent since February. "The more you look into this, the stranger it gets," said Patrick S. McGurn, a vice president at Institutional Shareholder Services, which advises large investors on corporate governance issues. "There is so much wrong with this that it's almost the plot for a satire." More seriously, management experts say, JDN's travails offer a case study of the problems that can befall a public company that continues to operate like a private one. At a time when companies are going public at a record rate, and many are flouting widely accepted management guidelines, the lessons are particularly relevant. At the core of JDN's troubles, corporate governance specialists say, is a board that is too closely aligned with management to be an effective advocate for shareholders. The directors are a small inbred group -- mostly men who have business ties to JDN or personal ties to J. Donald Nichols, the founder, and his wife, Elizabeth. Most have been board members since the company went public in 1994. The board even lacks a nominating committee. JDN executives, through a spokesman, and board members declined to comment. A lawyer investigating the company's problems on behalf of the board said the directors had aggressively responded to the company's problems. "The interests of the shareholders have been paramount in their minds," said John Latham, a partner at Alston & Bird in Atlanta. To analysts and investors, however, JDN's problems -- jeopardizing almost every relationship the company has and undercutting its financial statements for the last six years -- are deep enough that an independent board would have discovered them sooner. Even after they become public, the company has reacted in ways that have ensured bad news will continue to dribble out, the critics say. In February, for example, Ms. Nichols was one of two JDN executives on a conference call to analysts in which she emphasized that Mr. Nichols, her husband, did not seem to have benefited personally from the off-the-books payments. And the company said it would not publish its 1999 earnings by the end of this week, violating a two-week extension it had previously received from the Securities and Exchange Commission. The company also acknowledged the billing "discrepancies" in previous deals with its two largest customers, Wal-Mart and Lowe's, a home improvement retailer. The problems, which analysts said amounted to overstating costs, leave JDN open to legal claims from the two companies, it acknowledged. After the market closed, Mr. Nichols resigned as chairman, according to Mr. Latham. Mr. Nichols had already stepped aside as chief executive in February. Now JDN faces the difficult task of regaining the trust of clients, analysts and investors who say they still have little solid understanding of the company's problems. "Those things cause you to lose a significant amount of confidence in management," said one investor who has sold JDN shares in the last two months. And Wal-Mart and Lowe's, the two companies JDN wrongly billed for the construction, leasing and sale of shopping malls, are now conducting their own inquiries, spokesmen for the companies said. "Anytime we have to pay something we shouldn't, we take that very seriously," said Les Copeland, the Wal-Mart spokesman. If anything, he added, "We're going to overreact to it and manage it very carefully." Until recently, Mr. Nichols seemed to have a golden touch. After five years playing minor league baseball in the Baltimore Orioles' system, he switched to the business world, joining J. C. Bradford & Company, a Nashville investment firm, according to a 1998 article in Forbes magazine about his art collection, He then struck out on his own, getting his first break by helping Wal-Mart build a store near his boyhood home in Franklin, Tenn. His real estate business expanded in the 1980's, thanks in part to Wal-Mart's rise as the nation's biggest retailer. JDN went public in March 1994, and its stock consistently outperformed other real estate investment trusts, giving shareholders a 79 percent return between January 1995 and January 2000. Real estate indexes returned about 50 percent during that same period. JDN "had a superior growth rate and a predictable earnings stream," said Andrew Jones, a real estate analyst at Morgan Stanley Dean Witter. "People really understood how they made money." The executives did it by establishing solid relationships with the country's strongest retailers like Wal-Mart and Home Depot. JDN won a reputation for finishing its projects on time and, seemingly, on budget. Retailers, Mr. Jones said, "will pay a little bit more for predictability." In the highly leveraged real estate business, a small amount of additional cash flow makes a big difference to profits. All the while, JDN continued to operate with largely the same board it had on the day it went public. Until Mr. Nichols resigned, it included him and Ms. Nichols, along with William B. Green, a bank and real estate executive who knew the Nicholses from Tennessee, where the couple continue to live; Craig Macnab, a Nashville financial executive who also once worked at J. C. Bradford, one of the underwriters of JDN's first stock sale; and Haywood D. Cochrane Jr., a Nashville health-care executive who says he met Mr. Nichols through mutual friends shortly before JDN's initial public offering. Of the two directors who have joined in the last six years, one is William G. Byrnes, a retired Alex. Brown executive whom Mr. Nichols recently praised for the vital role he played in shepherding JDN's public offering. The other, Philip G. Satre, is the president of Harrah's Entertainment and also has a Tennessee connection. For years, he was based in Memphis as a hotel executive. The best evidence of the coziness between the directors and executives, critics say, is the lack of a nominating committee on the board. Without one, the choice of directors often falls solely to the chief executive. "That in itself ends up leading to a lot of cronyism on boards," said Ann Yerger, the director of research at the Council of Institutional Investors. "You want to know there are at least one or two independent directors asking the hard questions." Three-quarters of public companies in the United States have nominating committees, according to a recent study by Korn/Ferry International, a recruiting firm. But executives of many public real estate investment trusts, known as REIT's, often continue to run them more like the private firms they once were, governance specialists said. As REIT's have stumbled in recent years, investors have turned more attention to their management structures. At the Council of Institutional Investors' annual meeting last summer, its members held a specific discussion about the industry, Ms. Yerger said. At JDN, management experts said, a more independent board may not have been able to prevent the off-the-books payments, but it probably would have responded more forcefully once the scandal broke. On Feb. 14, the company announced that two executives, Jeb L. Hughes and C. Sheldon Whittelsey, had received $4.9 million in payments that JDN's earnings statements did not reflect. Many of the payments, the company said, were approved by Mr. Nichols. The payments, which analysts said could have come in the form of cash or real estate, ranged from 4 percent to 20 percent of JDN's annual earnings between 1994 and 1998. Mr. Nichols may have made the payments, Mr. Jones at Morgan Stanley said, in an attempt to retain the executives at a time when private real estate firms were doing much better, and paying more, than public REIT's. The company offered no explanation, however. It did announce that Mr. Nichols was stepping aside as chief executive but that he would remain chairman, in charge of maintaining "tenant relationships." Under the circumstances, the company should have immediately dismissed Mr. Nichols, said Mr. McGurn, the shareholder adviser, rather than "talking about reassigning him to other duties in the corporation." Mr. Latham, the board's lawyer, said the directors initially chose to weigh Mr. Nichols's mistakes against the importance of his ties to big clients. "It's a business decision the board had to make," he said. Ms. Nichols and JDN's chief financial officer, William J. Kerley, then took over as co-chief executives, and the board began investigating the payments, as well as searching for a new chief executive. Yesterday, Mr. Kerley resigned, Ms. Nichols returned to her job as company president, and the board named one of its members, Mr. Macnab -- the former J. C. Bradford employee -- to the top job. Analysts and investors, meanwhile, are still trying to figure out when the next piece of news will come and what it will contain. "I've heard so many different things, I don't really know what's true and what's not," said Jessica C. Tully, an analyst at Wachovia Securities in Atlanta, who downgraded JDN's stock to "sell" on April 12. (The New York Times, April 13, 2000) JOHNSON & JOHNSON: Heartburn Drug Propulsid Target of Lawsuit in VA ------------------------------------------------------------------- A popular heartburn drug that may be the cause of deadly irregular heartbeats is the target of a class action lawsuit in West Virginia. Charles and Sandra Sprouce filed the lawsuit Wednesday April 12 in Marshall County against the manufacturers of Propulsid. The lawsuit seeks compensatory and punitive damages from Johnson & Johnson and one of its subsidiaries, Janssen Pharmaceutica. Dr. Jasbir Makar of Weirton also was named as a defendant. Charles Sprouce took the drug, which "is not reasonably safe, and thus is a defective product," the lawsuit said. His wife alleges that the drug has caused a loss of relations with her husband. The Food and Drug Administration last month announced that Propulsid was too dangerous for continued routine prescription. The FDA worked with Janssen Pharmaceutica to create an unusual program allowing Propulsid to be taken only by a limited number of patients with serious illnesses. Under the plan, Janssen will stop marketing Propulsid on July 14 and remove it from pharmacies in mid-August. Certain patients with serious medical conditions can apply to get the drug after general sales end. A consumer advocacy group urged the FDA to move faster to stop sales of Propulsid. About 6 million prescriptions for Propulsid were filled in the U.S. in 1999. About 30 million have been filled since the drug gained FDA approval in 1993. As of Dec. 31, the FDA cited 80 deaths and 341 other heartbeat abnormalities linked to Propulsid. The consumer group Public Citizen said it had counted an additional 23 Propulsid-related deaths reported to the FDA this year, bringing the toll to 103. (The Associated Press, April 13, 2000) LOCKHEED MARTIN: Class over Contaminated Groundwater in Redlands Denied ----------------------------------------------------------------------- A class action claim against Lockheed Martin Corp. sank under its own weight April 11 when the Fourth District Court of Appeal ruled that residents of Redlands could not sue as a community for exposure to contaminated groundwater. In issuing its order to decertify the class, the court of appeal held that proposed damages in the form of a court-supervised medical monitoring program relied too heavily upon factors unique to each individual in the 50,000- to 100,000-member class. "Many courts, both California and federal, have found that mass tort actions for personal injuries are not appropriate for class treatment due to the plethora of individual factual issues regarding liability, causation and damages," Acting Presiding Justice Thomas Hollenhorst wrote for the unanimous court. Justices Art McKinster and James Ward concurred that the community could not prove that enough common issues exist to support a class action. "A class action cannot be maintained if each individual's right to recovery depends on facts peculiar to that individual," the panel held. Plaintiffs in Lockheed Martin Corp. v. Superior Court, E025064, claim that beginning as early as 1954, Lockheed and other defendants conducted manufacturing operations in San Bernardino County that resulted in the discharge of dangerous chemicals that seeped into the Redlands groundwater. Plaintiffs allege that they were exposed to a laundry list of harmful solvents, including rocket fuel components and rocket fuel decomposition products. They asserted that the geographic boundaries of the class were legitimate because the evidence was based on water contamination records. Plaintiffs' sought relief in the form of the medical program as well as punitive damages. San Bernardino Superior Court Judge Ben Kayashima granted class status to the plaintiffs on the grounds that the medical monitoring program was a form of injunctive relief. But relying on the U.S. Supreme Court's ruling in _Amchem v. Windsor_ (1997) 521 U.S. 591, as well as California case law, the appellate struck that ruling down. "Common issues do not predominate to allow certification of a class in mass toxic tort exposure cases such as ours," Hollenhorst wrote. (The Recorder, April 12, 2000) MTBE LITIGATION: Petroleum Cos. Sued Over Additive -------------------------------------------------- A lawsuit filed on behalf of well owners in 16 states accuses the nation's largest petroleum companies of knowing about the potential dangers of the gasoline additive MTBE for nearly two decades. The lawsuit, filed Wednesday April 12 in Madison County Circuit Court, asks that the companies be ordered to pay for the testing of wells and either the installation of filtering systems or connection to alternative water supplies. The lawsuit also asks that the companies pay for temporary supplies of bottled water if such supplies are necessary. The attorneys who filed the lawsuit claim that once MTBE contaminates groundwater, a foul taste and odor leaves the water virtually unusable and unfit for human consumption. In Illinois, 27 of the 1,800 community water supplies regulated by the state's Environmental Protection Agency have been found to have detectable amounts of MTBE, according to the lawsuit. Named as defendants are Atlantic Richfield Co., Amoco as well as BP Amoco PLC (former by British Petroleum's acquisition of Amoco), Citgo Petroleum Corp., Conoco Inc., Chevron Corp., Exxon Mobil Corp., Equilon Enterprises LLC, Phillips Petroleum Co., Royal Dutch-Shell Group of Cos. and Texaco Inc. An industry spokesman did not dispute that MTBE has caused problems. ''If it gets near your drinking water, you have real trouble. Nobody disagrees about that,'' Michael Shanahan, a spokesman for the Washington-based American Petroleum Institute, said. But he added that the petroleum companies used MTBE as a means to improve air quality because the U.S. Environmental Protection Agency ordered them to do so in some states. ''So from the beginning, the industry's position has been that the government should not mandate which additives get used,'' Shanahan said. The use of MTBE and how much it contaminates ground water has been hotly debated nationwide. Farm-state lawmakers were split over whether Congress should repeal a clean-fuels standard that requires gasoline sold in many cities to contain oxygen-enhancing additives such as MTBE and corn-based ethanol. Last month, the Clinton administration said it planned to ban MTBE because it has been found to be contaminating underground water supplies and proposed that Congress eliminate the oxygenate standard. To ensure a continued market for ethanol, which is more expensive than MTBE, the administration suggested replacing the oxygenate standard with a requirement that gasoline refiners continue using a minimum amount of ethanol and other fuels made from renewable resources. The lawsuit names six Madison County residents as plaintiffs. Their attorneys are asking that it be certified as a class-action lawsuit that would include other well owners in Illinois, California, Wisconsin, Indiana, Connecticut, Delaware, Kentucky, Maryland, Massachusetts, Missouri, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Texas and Virginia. (AP Online, April 13, 2000) NATIONAL AUTO: Announces Settlement for Securities Suit in Ohio --------------------------------------------------------------- National Auto Credit, Inc. (OTC Bulletin Board: NAKD) ("NAC") announced on April 12 that it had reached an agreement in principle to settle the class action securities litigation filed against it and certain of its current and former officers and directors in the United States District Court for the Northern District of Ohio. Under the terms agreed upon, NAC will pay to the plaintiffs' class $6.5 million in consideration for, among other things, the release of all defendants from liability. The settlement is not an admission of liability by any party. The settlement is subject to preparation of final documentation and court approval. NAC further announced that its Board of Directors had amended the company's by-laws on April 5, 2000 to establish procedures for action by written consent without a meeting of stockholders. Generally, the amendment provides that a stockholder wishing to take action by written consent must request a record date, after which time the Board of Directors has five business days to set a record date, which may be no later than five business days after the Board acts. The amendment also requires that the request for a record date contain certain information about the proposed action by consent. If the Board does not set a record date, then the record date is the date upon which the consent is delivered to the company, absent prior action of the Board as may be required by Delaware law. To be valid, a written consent action must be signed by holders of outstanding stock representing not less than the minimum number of votes necessary to take the corporate action at a meeting at which all shares are present and voted. The Board of Directors also adopted a by-law requiring an affirmative vote of eighty percent (80%) of outstanding shares of each class of voting stock in order to alter, add, amend or repeal the company's by-laws. NAC also announced that on April 7, 2000, it filed a complaint in the Court of Chancery of the State of Delaware captioned National Auto Credit, Inc. v. Sam J. Frankino, Civil Action No. 17973, seeking injunctive and monetary relief against defendant Frankino for breaches of fiduciary duty in his capacity as a director of the company. On April 7, 2000, Sam J. Frankino delivered to NAC a written consent purportedly representing the holders of a majority of the outstanding shares of the company's common stock. The consent action purports to (a) rescind any and all amendments to the company's by-laws made on or after March 1, 2000 (including those described in the third paragraph of this release); (b) declassify the Board of Directors of the company; and (c) remove the following directors from the Board: John Gleason, David Huber, Donald Jasensky, William Marshall, James McNamara, Philip Sauder, Henry Toh, and Peter Zackaroff. Messrs. Huber, Jasensky, Sauder and Zackaroff were previously elected to serve on the Board of Directors by Mr. Frankino. NAC is reviewing the validity of the written consent. Although this review is ongoing, the company notes that (i) the consent does not appear to represent the holders of a majority of the company's outstanding stock, (ii) the consent was not preceded by a request for a record date as required by the company's by-laws, and (iii) the consent does not purport to represent an action by the holders of eighty percent (80%) of each class of the company's outstanding voting stock, as required for an amendment to the company's by- laws. PACIFIC GATEWAY: Shapiro Haber Files Securities Suit in California ------------------------------------------------------------------ A class action suit alleging securities fraud has been filed in the United States District Court for the Northern District of California against Pacific Gateway Exchange, Inc. (Nasdaq: PGEX) and certain of its officers and directors, by the Boston law firm Shapiro Haber & Urmy LLP. The case was filed on behalf of all persons who purchased Pacific common stock during the period May 13, 1999 through March 31, 2000, inclusive (the "Class Period"). The complaint charges defendants with violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and 10b-5 promulgated thereunder. The complaint alleges that defendants falsely reported that Pacific had earnings per share of $0.22, $0.13 and $0.18, respectively, in the first, second and third quarters of 1999. During the Class Period, the price of Pacific stock rose to highs of over $40 per share. Defendants sought to profit from Pacific's false record profits and supposed growth and sold more than 20,000 shares during the Class Period, resulting in proceeds of over $1 million. Pacific shocked investors after the market had closed on March 31, 2000, revealing that it would restate its earnings for the first three quarters of 1999. This announcement caused Pacific stock to plunge to as low as $9 per share in the subsequent days. Contact: Edward F. Haber, Esq. or Lisa Palin, paralegal, of Shapiro Haber & Urmy LLP, 800-287-8119, or cases@shulaw.com PACIFIC GATEWAY: Schubert & Reed Files Securities Suit in California -------------------------------------------------------------------- A class action suit alleging securities fraud has been filed in the United States District Court for the Northern District of California against Pacific Gateway Exchange, Inc. (Nasdaq: PGEX)and certain of its officers and directors, by the San Francisco law firm Schubert & Reed LLP. The case was filed on behalf of all persons who purchased Pacific common stock during the period May 13, 1999 through March 31, 2000, inclusive (the "Class Period"). As alleged in the Complaint, defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by issuing a series of materially false and misleading statements concerning the Company's financial results, as a result of which the price of Pacific common stock was artificially inflated during the Class Period. Specifically, the complaint alleges that defendants created the fiction that Pacific had earnings per share of $0.22, $0.13 and $0.18, respectively, in the first, second and third quarters of fiscal year 1999. After the market had closed on March 31, 2000, Pacific shocked investors, revealing that it would restate its first, second and third quarter earnings for fiscal year 1999, and that the Company's chief financial officer had resigned. This revelation caused Pacific stock to plummet to $10-1/4 per share on the following trading day, a decline of 75% from its Class Period high of over $40 per share. Pacific's shares continued their descent to $7-1/2 in the days that followed. Evidence that a number of corporate insiders sold a substantial number of their shares of Pacific common stock at artificially inflated prices and reaped proceeds in excess of $1 million -- in particular shortly after the announcement of the Company's revenues for the first quarter of fiscal year 1999 -- suggests that defendants were motivated by personal gain to falsely inflate the price of the Company's shares. Contact: Juden Justice Reed, Esq. of Schubert & Reed LLP, 415-788-4220, or fax, 415- 788-0161, or mail@schubert-reed.com PACIFIC GATEWAY: Wolf Popper Announces Securities Lawsuit --------------------------------------------------------- Pacific Gateway Exchange (Nasdaq: PGEX), and certain directors and senior officers have been charged with committing securities fraud in a lawsuit filed by Wolf Popper LLP. That lawsuit was filed on April 12, 2000, on behalf of all persons who purchased Pacific Gateway Exchange common stock from May 13, 1999 through March 31, 2000. The Complaint charges the defendants with manipulating Pacific Gateway Exchange's stock price by improperly accounting for certain expenses and misleading the public about the Company's ability to continue operating as a going concern, resulting in the material misstatements contained in the Company's financial and operating results from May 1999 and through March 2000. The Complaint further alleges that the individual defendants sought to profit from their accounting manipulations by selling Pacific Gateway Exchange stock at prices artificially inflated by their illegal actions. Contact: James A. Harrod, Esq. (212-451-9642) or Douglas Rotela, Investor Relations Representative (212-451-9625), Wolf Popper LLP, 845 Third Avenue, New York, NY 10022-6689, Toll Free: 877-370-7703, Facsimile: 212-486-2093 or 212-486-2238, E-Mail: jharrod@wolfpopper.com or IRRep@wolfpopper.com Website: http://www.wolfpopper.com RAVISENT TECHNOLOGIES: Berger & Montague Files Securities Suit in PA -------------------------------------------------------------------- The law firm of Berger & Montague, P.C. on behalf of its client, on March 15, 2000, filed a lawsuit in the United States District Court for the Eastern District of Pennsylvania on behalf of all persons who purchased the common stock of Ravisent Technologies, Inc. (NASDAQ: RVST) during the period of July 15, 1999 through March 14, 2000 inclusive (the "Class Period"). The Complaint alleges that Ravisent and certain of its officers and directors violated the Securities Exchange Act of 1934. According to the Complaint, defendants engaged in a scheme to artificially inflate the revenues and profits of Ravisent by improperly recording revenues on contracts in violation of generally accepted accounting principles in order to accomplish the Company's Initial Public Offering ("IPO") at the maximum price per share, and to then create the expectation in the market that Ravisent was an increasingly profitable company. Pursuant to their scheme, defendants determined to effectuate the IPO during the fiscal quarter so that there would be no current period certified financial statements of Ravisent included. On February 18, 2000, defendants announced that the release of its 1999 audited financial statements would be delayed due to final audit procedures as a result of its discussions with its independent auditors concerning Ravisent's having inappropriately recognized revenue in 1999 on certain contracts. As a result of this announcement, Ravisent's share price plunged $9 to close at $18 9/18 on traded volume in excess of 3,500,000 shares. Also, on March 14, 2000, after the close of the market, defendants finally announced that it is restating previously reported financial results for the second and third quarters ended June 30, 1999 and September 30, 1999, respectively. The restatement is due to the fact that the Company improperly recognized revenues on transactions with customers. Thus, the restated second quarter 1999 revenues and net loss are $ 7,679,000 and ($1,150,000), as compared to the previously reported revenues and net loss of $11,601,000 and ($248,000), respectively. In addition, the restated third quarter 1999 revenues and net income are $5,238,000 and$530,000, as compared to the previously reported revenues and net income of $5,988,000 and $ 1,097,000, respectively. In response to this announcement, Ravisent's share price dropped from $18 1/4 on March 14, 2000 to open at $15 15/16 on March 15th. Contact: Berger & Montague, P.C., Philadelphia Sherrie R. Savett, Esquire, 888/891-2289 or Michael T. Fantini, Esquire, 888/891-2289 or Kimberly A. Walker, Investor Relations Manager 215/875-3000 or 888/891-2289 Fax: 215/875-4604 http://home.bm.netInvestor Protect@bm.net TOBACCO LITIGATION: 3 Kansans with Medicaid Sue over Tobacco Money ------------------------------------------------------------------ Three Kansans who have received Medicaid benefits for smoking-related illnesses have filed a lawsuit seeking part of the state's $1.77 billion settlement with big tobacco companies. Attorneys representing the three Kansans filed the lawsuit in U.S. District Court in Topeka on Wednesday April 12 and are requesting that the lawsuit be made a class action. Such status could open the case to tens of thousands of plaintiffs, with a settlement worth millions, said Thomas Lemon, one of the lawyers. Another attorney, Harold Houck, said the state got a "windfall" in its settlement. "The state did a good job, too good of a job," he said. Plaintiffs are John Puleo, a disabled worker from Topeka who has a heart condition, a lung condition and pneumonia; Judith Clark, a Johnson County woman who has a lung disorder; and Tammy Thomas, a Johnson County woman with emphysema. Defendants in the case are Attorney General Carla Stovall, who prosecuted and settled the state's tobacco lawsuit; Janet Schalansky, secretary of the Department of Social and Rehabilitation Services, which oversees the state's Medicaid program; and Citibank, which receives, manages and distributes the funds paid to Kansas by the tobacco companies. Spokeswomen for Stovall and Schalansky said their agencies hadn't received copies of the lawsuit and declined to comment. Defendants in federal lawsuits have 20 days to respond or to seek an extension to file a response. The case stems from the state's successful lawsuit against R.J. Reynolds Tobacco Co. That lawsuit was filed in Shawnee County District Court in 1996. The state settled that case and others with tobacco companies in 1998. Kansas is among 46 states that expect to split $206 billion from the settlement over 25 years. In the lawsuit against the state, the plaintiffs say federal law requires Kansas to pay Medicaid recipients all money recovered from third parties in excess of money needed to reimburse state and federal Medicaid programs. "The state has taken no steps to disburse to the plaintiffs any portion of the settlement amount or to inform the plaintiffs of their rights to claim that portion of the settlement monies to which they are legally entitled," the lawsuit states. Kansas is among 12 states in which Medicaid recipients have filed lawsuits to recover part of the settlement. (The Associated Press., April 13, 2000) TOBACCO LITIGATION: Smokers Seeking Funds from B&W Denied Cert. in CA --------------------------------------------------------------------- A California state superior court in San Diego has denied class certification for Brown, et al. v. Brown & Williamson Tobacco, et al. The suit was filed on behalf of California smokers who were seeking funds for smoking cessation programs. "The decision by the Superior Court of California is yet another demonstration that smoking and health lawsuits cannot be maintained as class actions," said Mitch Neuhauser, an attorney for Brown & Williamson. "The court's decision continues the trend of federal and most state courts refusing to certify a class action in a smoking and health case." In his opinion rejecting the plaintiffs' application for class certification, Judge Ronald S. Prager said, "(T)he plaintiff seeks class certification of a mass tort action, seeking recovery under seven different common law causes of action, against eleven different defendants, concerning hundreds of different brands of cigarettes, and premised on various wrongful acts spanning more than four decades. It is almost academic from the mere face of such a synopsis of this action that class certification is inappropriate." "Judge Prager's decision lays out the numerous reasons why a case involving the claims of thousands of individual smokers cannot be treated as a class action," Neuhauser said. "Each individual smoker's claim is inherently individual and unique. The court's opinion mirrors Brown & Williamson's position on class action suits that the facts involving each individual's smoking and health experiences are unique and should be handled as such," Neuhauser said. ********* 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, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. 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