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/raid1/www/Hosts/bankrupt/CAR_Public/000829.MBX C L A S S A C T I O N R E P O R T E R Tuesday, August 29, 2000, Vol. 2, No. 168 Headlines 2CONNECT: Settlement Pact for Securities Suit Re IPO to Be Heard in AL ALLEGHENY HEALTH: Judge Dismisses Donors’ RICO Suit Vs Bankrupt Hospital BOSTON: Lawsuit Says Leaders Conspire against Minority Neighborhoods BRIDGESTONE/FIRESTONE: Kenneth B. Moll Files Nationwide Suit in Illinois CHINA MOBILE: China's Largest Cell Phone Operator May Face Suit over Fee COASTAL CORP: Arguments over Gas Measurement and Valuation Heard COCA-COLA: Ex-employee Says Some May Pull out of Racism Suit Settlement EASTMAN CHEMICAL: To Pay $22M for Food Additive Price-Fixing Lawsuit EDEN: Court Ordered review criticizes AZ over children's Mental services GREAT WHITE: Krage & Janvey Announces TX Suit Re Unregistered Securities HAWAII: Fails to Fix Special Ed Programs; Court Holds State in contempt MICROSOFT CORP: RI Superior Ct Judge Throws out Local Antitrust Suit NORWEGIAN CRUISE: TX Law Firm Claims Accessibility Violations under ADA OLYMPICS ORGANISERS: Blind Man to Sue over Web Site Accessibility RAINFOREST CAFE: Emerges from MN Securities Suit Re Proposed Merger VISUAL NETWORKS: Barrack Rodos Files Securities Suit in Maryland VISUAL NETWORKS: Milberg Weiss Files Securities Lawsuit in Maryland WARNACO GROUP: Cauley & Geller Files Securities Suit in New York WASTE MANAGEMENT: Eastern Environment Shareholders Sue over Merger WATER CONTAMINATION: Lawyers Advocate Ct Overseeing Ontario Compensation WATER CONTAMINATION: Walkerton Utility Boss Wants to Be Heard YBM MAGNEX: Canadian Law Firm Named in Shareholders’ Suit in U.S. YORK AND DABICH: Demand Excuse Rule Inapplicable to Two Person Board ********* 2CONNECT: Settlement Pact for Securities Suit Re IPO to Be Heard in AL ---------------------------------------------------------------------- The following statement is being issued pursuant to an order of the Circuit Court of Jefferson County, Alabama: Bartz-Michalski Trust, Robert E. Thorn R/O Ira and Robert E. Thorn, on behalf of themselves and all others similarly situated, Plaintiffs, v. Mark D. Fishman, Steve Stedman, Ira Neimark, David Colby, Lynn Tilton, Arnold Jaffee, and Sterne, Agee & Leach, Inc., Defendants. CASE NO. CV9802407 Summary Notice of Pendency of Class Action, Proposed Settlement and Settlement Hearing TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED THE SECURITIES OF 2CONNECT EXPRESS, INC. IN THE INITIAL PUBLIC OFFERING OF 2CONNECT SECURITIES PURSUANT TO THE REGISTRATION STATEMENT AND PROSPECTUS, WHICH REGISTRATION STATEMENT AND PROSPECTUS WENT EFFECTIVE ON OR ABOUT MAY 9, 1997, OR IN THE SECONDARY MARKET AT ANY TIME BETWEEN MAY 9, 1997 AND JANUARY 12, 1998, AND WERE DAMAGED THEREBY. You are hereby notified, pursuant to Rule 23 of the Alabama Rules of Civil Procedure and an Order of the Court dated July 21, 2000, that the above-captioned action has been certified as a class action, and that a settlement for 100,000 shares of common stock of Bobby Allison Wireless Corporation ("Shares"), plus $100,000 has been proposed. A hearing will be held before the Honorable Allwin E. Horn, III, at the Criminal Justice Center, 801 North 21st Street, Birmingham, Alabama 35263,at 9:45 a.m., on December 1, 2000 to determine whether the proposed settlement should be approved by the Court as fair, reasonable and adequate, and to consider the application of Plaintiffs' Counsel for attorneys' fees and reimbursement of expenses. If you are a member of the Class described above, your rights will be affected and you may be entitled to share in the settlement fund. If you have not yet received the full printed Notice of Pendency of Class Action, Proposed Partial Settlement and Settlement Hearing and a Proof of Claim form, you may obtain copies of these documents by identifying yourself as a member of the Class and by calling or writing to: In re 2Connect Securities Litigation C/O Gilardi & Co. LLC Claims Administrator Post Office Box 5100 Larkspur, CA 94977-5100 415/461-0410 Inquiries, other than requests for the forms of Notice and Proof of Claim, may be made to Plaintiffs' Counsel: David R. Donaldson, Esq., Donaldson, Guin & Slate, LLC, The Morgan Keegan Center, Suite 230, 2900 Highway 280, Birmingham, Alabama 35223, Telephone: 205/879-9994; Janine L. Pollack, Esq., Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York, New York 10119, Telephone: 212/594-5300; and/or David Mazie, Esq., Nagel Rice & Dreifuss, 301 S. Livingston Avenue, Suite 201, Livingston, New Jersey 07039-3991, Telephone: 973/535-3100. The deadline for submitting Proofs of Claim, if required, is December 10, 2000. To exclude yourself from the Class you must submit a request for exclusion no later than October 24, 2000. If you are a Class Member and do not exclude yourself you will be bound by the final order and judgment of the court. Further information may be obtained by directing your inquiry in writing to the Claims Administrator. By Order of The Court Contact: Gilardi & Co., LLC Cheryl Washington, 415/461-0410 ALLEGHENY HEALTH: Judge Dismisses Donors’ RICO Suit Vs Bankrupt Hospital ------------------------------------------------------------------------ A federal judge has dismissed a proposed class-action civil RICO suit against former officers and directors of the Allegheny Health Education and Research Foundation (AHERF) brought by charitable donors and recipients who said their money was squandered before the hospital chain ended up in bankruptcy. In his 46-page opinion in Browne v. Abdelhak, Senior U.S. District Judge Clarence C. Newcomer found that neither group the donors or the recipients has a legally protectable "property interest" in the money. Attorneys Sherrie R. Savett & Michael J. Fantini of Berger & Montague filed the suit on behalf of a proposed class of people and organizations who provided funds to AHERF in contribution to grants or endowments "to be used for specific purposes relating to research, medicine, patient care, education, lectureships, etc.," and a second proposed class "who were the beneficiaries or recipients of grants or endowments held by AHERF." The defendants in the suit are "the inner circle of officers of AHERF," as well as members of the executive committee of its Board of trustees and Mellon Bank Corp. The suit essentially alleged that the defendants wrongfully seized and misappropriated the class members' restricted endowment funds and grants held in AHERF's custody. In the late 1980s, the suit said, AHERF expanded with the acquisition of two medical schools the Medical College of Pennsylvania and Hahnemann University and their related hospitals and later acquired several community hospitals and St. Christopher Hospital for Children. In the midst of the financial strain that resulted from AHERF's overexpansion, the suit alleged, the defendants raided and used millions of dollars from various endowments and accounts for "unauthorized purposes, including awarding themselves exorbitant pay raises, bonuses, and other compensations; repaying a [$ 89 million] loan to defendant Mellon; and for other business purposes of AHERF." The alleged misuse of funds was "part of a larger fraudulent scheme by the defendants to keep AHERF afloat for as long as possible so that the defendants could continue to loot AHERF as well as plaintiffs' funds in order to enrich themselves," the suit alleged. In July 1998, AHERF filed for bankruptcy court protection from creditors who were owed an estimated $ 1.3 billion.Several teams of defense lawyers moved to have the suit dismissed arguing that both proposed plaintiff classes lacked standing to bring suit under RICO. In order to have standing to bring a RICO claim, a plaintiff must have been injured in his business or property, and that injury must have been proximately caused by the alleged RICO pattern. The defense teams argued that none of the plaintiffs alleged a true property interest that would grant standing to bring the suit. Donors Looking first to the charitable donor class, Newcomer found that "despite the dearth of case law on the subject, it has been held that a property interest is created in a donation when a right of reverter, right to modify, or right to redirect is retained by the donor." But Pennsylvania courts, he said, "have joined in not recognizing an implied possibility of reverter." Instead, Newcomer said, Pennsylvania courts have concluded that "where there is a conveyance to a corporate grantee, the addition of the words, 'for no other use or purpose whatsoever,' is not of itself sufficient to create a base fee where the purpose expressed in the limitation and in the corporate charter are similar." The suit alleged that when the plaintiffs established or contributed to the endowments or grants held by AHERF, "the officer and trustee defendants agreed and/or caused AHERF to represent to and agree with plaintiffs and class members that the endowment and grant funds would be restricted, that is, AHERF and the officer and trustee defendants could only use the funds for the purposes designated by plaintiffs and the Class, and not for any other purposes."But Newcomer found that the suit's "general allegations" about the plaintiffs' endowment agreements' language "are not sufficient to show that the plaintiffs retained any rights of reverter, rights to modify, or rights to redirect." Beneficiaries Turning to the standing of the proposed beneficiary class, Newcomer found that the question was somewhat more complicated."Although the beneficiary plaintiffs' standing to enforce the trusts is not really contested, their standing as to whether they may recover damages is disputed," Newcomer wrote. The Restatement (Second) of Trusts, he said, states that "the remedies for the failure of the trustees of a charitable trust to perform their duties under the trust are exclusively equitable."However, Newcomer said, the Restatement also says that "if the trustee is under a duty to pay money immediately and unconditionally to the beneficiary, the beneficiary can maintain an action at law against the trustee to enforce payment."Newcomer concluded that the suit "sufficiently pleads that AHERF was holding grant money for the beneficiary plaintiffs in charitable trust for the purposes of funding their research" and that the allegations "sufficiently show that AHERF had a duty to pay the beneficiary plaintiffs from the funds." However, Newcomer said, "AHERF's duty to pay was not unconditional; rather, it was restricted to the particular uses for which the money was granted." While the beneficiary plaintiffs "clearly had an interest in the funds," he said, "their interest was limited to the conditions and restrictions set forth by the grants and was not alienable without valid restraint upon alienation." As a result, Newcomer concluded that the beneficiary plaintiffs "did not have a property interest in those restricted grants funds for which they now seek to recover unrestricted, and possibly treble, damages." Therefore, he said, neither of the proposed classes have standing to bring any RICO claims. Mellon Bank was represented by attorneys Jay H. Calvert, Joseph B.G. Fay and Bryant Lim of Morgan Lewis & Bockius, along with Richard S. Toder and Menachem O. Zelmanovitz of Morgan's New York office. Eight "outside director" defendants were represented by Kirkpatrick & Lockhart attorneys Robert L. Byer, David L. McClenahan, Wendy E. Smith, Nicholas P. Vari and John T. Waldron. Sherif S. Abdelhak, AHERF's former CEO, was represented by George E. McGrann of Sweeney Metz Fox & Schermer, along with Judith F. Olson of Schnader Harrison Segal & Lewis. AHERF's former head of human resources, Dwight L. Kasperbauer, was represented by Drinker Biddle & Reath attorneys Michael J. Holston, John F. Schultz, Kirk D. Weaver, Amy E. Pizzutillo and Mary Catherine Roper. David McConnell, AHERF's former CFO, was represented by Kevin K. Douglass and Amy L. Wetterau of Babst Callard Clements & Zomner, along with Robert A. King of Buchanan Ingersoll. And former AHERF general counsel Nancy Wynstra was represented by Sal Cognetti of Foley Cognetti & Comerford, along with Jeffrey B. Balicki, Jeffrey R. Lalama and Francis C. Rapp of Feldstein Grinberg Stein & McKee. (The Legal Intelligencer, August 28, 2000) BOSTON: Lawsuit Says Leaders Conspire against Minority Neighborhoods -------------------------------------------------------------------- South Boston's elected leaders engaged in a conspiracy to discriminate against minority neighborhoods in their effort to gain housing dollars for their district, a lawsuit filed in federal court alleges. City Council President James M. Kelly, State Senator Stephen F. Lynch, and Representative John A. Hart Jr. are individually named as defendants in the suit brought against the city by neighborhood housing and civil rights groups to challenge a 1998 agreement promising South Boston the bulk of funds raised by development of the waterfront. "The Seaport does not belong to South Boston any more than Logan Airport belongs to East Boston," said Pat Cusick of the South End/Low er Roxbury Housing and Planning Coalition, who joined some two dozen plaintiffs and activists outside the federal courthouse along the waterfront. City Councilor Chuck Turner of Roxbury criticized Mayor Thomas M. Menino for not nullifying the agreement. "He chose not to do that and created the situation where we have to go to court today to take the action necessary to see that justice is done," Turner said. The complaint asks a federal judge to declare the agreement invalid, saying that it violates city zoning ordinance, state housing law, and the federal Fair Housing Act, and would result in discrimination as city housing dollars are channeled to the predominantly white neighborhood of South Boston. Hart, who said South Boston officials still believe they have a valid contract, said he was "outraged" that the suit evoked the race issue. "It isn't today, and never has been, about race," Hart said. He maintained that the core issue is protecting a community besieged by development and trying to "preserve the fabric that we have. . . . The way we're going, the South Boston that we knew over the years is disappearing." In questioning the motivations of South Boston leaders, the complaint cites comments made by Kelly. In May, Kelly said that the South Boston Betterment Trust, the private nonprofit group that the politicians empaneled, could build housing with developers' contributions, without regard to Fair Housing guidelines that require marketing to a diverse pool of applicants. Asked whether minorities would be left out, Kelly said at the time: "My first obligation is to build affordable housing for people who were born and raised in South Boston and either have been or are threatened to be displaced. That they happen to be white is not a factor one way or the other." Hart responded that from the time the agreement with the city was negotiated, the officials knew they had to comply with fair housing laws. "We are not looking to discriminate at all, but just like somebody in a minority area of the city might look to help his constituents or hers, we're looking to help ours," Hart said. "If other people have the opportunity to apply for that housing, then good for them. But I represent a section of South Boston and Dorchester, and that's my responsibility, to do things to benefit my people, to do things fairly." The Boston Redevelopment Authority and the South Boston Betterment Trust are also named as defendants in the lawsuit, which was spearheaded by the Lawyers' Committee for Civil Rights Under the Law, the law firm of Testa Hurwitz & Thibeault, and the Legal Services Center of Harvard Law School. Steve Crawford, a spokesman for the Betterment Trust, said members could not comment until they reviewed the document. BRA director Mark Maloney said the city insists on adherence to fair housing rules, intends to comply with them, and provides linkage funds for housing to qualified applicants in any community. Asked about the allegations of a conspiracy to discriminate, he said: "That's absolutely untrue, unfounded, and frankly I think it's ridiculous. . . . To extend that argument would be to suggest that giving any money to a white community is an act of discrimination. "South Boston has a need for affordable housing," he added, though the neighborhood has offered fewer applications for linkage in the past. "The other communities have received significant linkage funds to address their housing needs because they've been willing and interested in receiving afford able housing funding." The plaintiffs include housing and community groups that will compete with South Boston for resources, including the Jamaica Plain Neighborhood Development Corp., City Life/Vi da Urbana, and the South End/Lower Roxbury Housing & Planning Coalition. (The Boston Globe, August 25, 2000) BRIDGESTONE/FIRESTONE: Kenneth B. Moll Files Nationwide Suit in Illinois ------------------------------------------------------------------------ Kenneth B. Moll & Associates, Ltd. filed the first nationwide class action lawsuit on behalf of all persons that suffered personal injuries, death and other injuries as a result of ATX, ATX II and Wilderness AT tires designed, manufactured, sold, and distributed by Defendants. According to the complaint, these tires have demonstrated that they are unreasonably dangerous due to an increased risk of tread separation, and have caused numerous injuries and fatalities. The lawsuit, known as the "BRIDGESTONE/FIRESTONE and FORD Class Action," was filed Monday, August 28, 2000, in the Circuit Court of Cook County, Illinois. Over 1,000 individuals have filed complaints with the National Highway Transportation Authority regarding tread separation and other tire failure associated with these tires. The statistics include over 62 fatalities and hundreds of reported injuries. As early as fall of 1999, Defendant, Ford Motor Company, began a recall of Bridgestone/Firestone Tires on exported sport-utility vehicles in foreign countries. Although Americans were making similar complaints about their tires to Bridgestone/Firestone, a recall of certain model and size tires was not issued in America until August 9, 2000. On August 9, 2000, BRIDGESTONE/FIRESTONE and FORD, announced a voluntary phased recall of all P235/75R15 Radial ATX and Radial ATX II tires and only certain Wilderness AT tires which were manufactured at Firestone's Decatur, Illinois manufacturing plant. Attorney Kenneth Moll said, "The primary goals of the BRIDGESTONE/FIRESTONE and FORD Class Action are to (1) encourage BRIDGESTONE/FIRESTONE and FORD to issue a fully inclusive recall of all defective tires in the United States as it did last year in foreign countries, including (a) Wilderness AT tires manufactured in all 7 North American plants, including the Decatur, Illinois plant and (b) all ATX, ATX II and Wilderness AT 16 inch tires; (2) ensure a speedy and fully reimbursed exchange of all defective Wilderness AT, ATX, and ATX II tires; and (3) compensate all persons who suffered personal injury or death as the result of the defective design and manufacture of the tires." Contact: Kenneth B. Moll & Associates, Ltd. Kenneth B. Moll, 312/558-6444 CHINA MOBILE: China's Largest Cell Phone Operator May Face Suit over Fee ------------------------------------------------------------------------ China Mobile, the country's largest cellular phone operator, may face a class action over a new fee it started charging this month, state media reported on Monday. Subscribers in the central province of Henan are furious because the local branch of the company is asking six yuan (72 cents) extra every month for allowing callers' phone numbers to be displayed, the China Youth Daily said. "If you want this function, you have to pay six yuan more," a China Mobile spokesman told AFP by phone. "If you don't want it, we can cancel it for you." He declined to comment on the prospect of a class action, which would reportedly be the first against a Chinese telecoms company. The fee, which has been charged since Monday last week, is in accordance with directions from the central government, which allows mobile phone operators to charge as much as 10 yuan (1.2 dollars) a month for the function, he said. A law firm in Zhengzhou, the capital of Henan, has set up a hotline for angry mobile phone users and may decide to launch a class action against the company, the China Youth Daily reported. The response has been overwhelming, with over 100 people calling in just one day, according to the paper. "We must use the lawyer weapon to protect our legitimate rights," one unnamed rail worker told the paper. "That way we can show monopolists that us ordinary folk aren't that easy to fool." (Agence France Presse, August 28, 2000) COASTAL CORP: Arguments over Gas Measurement and Valuation Heard ---------------------------------------------------------------- El Paso Energy Corp, which into a definitive agreement to merge with The Coastal Corporation in January 2000, reports to the SEC that two legal proceedings, one in federal court and the other in state court, have been instituted against a number of gas pipeline companies and their affiliates, including Coastal and several of its subsidiaries. The plaintiffs in each suit seek damages for the alleged undermeasurement of the heating value and the volume of natural gas. In the federal proceeding, Jack Grynberg filed 77 separate False Claim Act suits in September 1997 against natural gas transmission companies and producers, gatherers, and processors of natural gas, seeking unspecified damages which could include treble damages for the maximum period permitted by law (potentially as much as ten years) and penalties of up to $10,000 per false claim. In addition to the measurement claims, these suits also allege that the defendants undervalued the gas in paying royalties. The Coastal defendants were sued in the U.S. District Courts of Colorado and the Eastern District of Michigan. In April 1999, the U.S. Department of Justice notified the Company that the United States would not intervene in these cases at that time. The MultiDistrict Litigation Panel has consolidated the Grynberg suits with several other Grynberg cases for pre-trial proceedings in Wyoming. The defendants filed a motion to dismiss which was argued in March 2000, and the parties are awaiting the Court's decision. The United States has filed a motion to dismiss part of the Grynberg case. In the state proceedings, the Quinque Operating Company, on behalf of itself and subclasses of gas producers, royalty owners, overriding royalty owners, and state taxing authorities, in May 1999, instituted a legal proceeding in State Court in Stevens County, Kansas against over 200 gas companies, including several Coastal subsidiaries. The Quinque suit seeks unspecified actual, punitive and treble damages for the alleged undermeasurement of all natural gas measured in the United States from non-federal and non-Indian lands since 1974. The plaintiffs are seeking certification of a national class of all similarly situated gas producers, royalty owners, overriding royalty owners, and state taxing authorities. The suit was removed to the U.S. District Court for the District of Kansas. The plaintiffs filed a motion to remand the case back to the state court. The MultiDistrict Litigation Panel has transferred the Quinque suit to Wyoming and consolidated it with the Grynberg proceedings as a result of a motion filed by several of the defendants in the Quinque suit. Numerous other lawsuits and other proceedings which have arisen in the ordinary course of business are pending or threatened against the Company or its subsidiaries. COCA-COLA: Ex-employee Says Some May Pull out of Racism Suit Settlement ----------------------------------------------------------------------- A former Coca-Cola Co. employee says he and others may pull out of the proposed settlement of a class-action racial discrimination suit against the company. Larry Jones, a former Coke human relations manager who organized the Committee for Corporate Justice after being laid off, said black employees have not been given any information about the settlement. He said he and others may withdraw from the settlement and file separate suits. "We will continue to have private meetings to weigh our options and plot strategy," Jones said at a news conference. "That strategy will include seeking new legal counsel. We didn't hire these attorneys, and they will be making millions of dollars off of us." Eight former Coke employees originally filed the lawsuit in December 1998. It was expanded into a class action, with a potential class of 2,100 people. Coke spokesman Ben Deutsch said Jones and about 200 others are barred from filing separate suits because of waivers they signed when they were laid off in a corporate restructuring. Jones disagreed. "Opting out should be an option available to all members," he said. Terms of the Coke settlement, reached two months ago, are not expected to be announced until late October or early November, after a final agreement has been reached. The suit alleges that the company has discriminated against blacks in pay, promotions and performance evaluations. The company has denied the allegations. (The Associated Press State & Local Wire, August 25, 2000) EASTMAN CHEMICAL: To Pay $22M for Food Additive Price-Fixing Lawsuit -------------------------------------------------------------------- Eastman Chemical Co. has agreed to pay $22 million to settle its part of a class-action lawsuit for fixing the price of a food additive. Eastman stopped selling sorbate, which prevents mold in bread and other foods, on June 30. It agreed to pay an $11 million fine two years ago to settle criminal charges. The company admitted in 1998 to fixing sorbate prices from January 1995 to June 1997. At the time, Eastman was the only producer of the product in the United States. Eastman spokeswoman Nancy Ledford said that the sorbate price fixing was an isolated event that "violated our long-held policies and practices for antitrust compliance." The $22 million settlement was approved by the U.S. District Court for the Northern District of California in San Francisco. It's part of an $82 million settlement involving four defendants, including Hoechst AG of Germany, Daicel Chemical Industries LTD. of Japan, and Nippon Gohsei of Japan. (The Associated Press State & Local Wire, August 25, 2000) EDEN: Court Ordered review criticizes AZ over children's Mental services ------------------------------------------------------------------------ A court-ordered independent review of behavioral health services to children in Maricopa County, Ariz., has found a growing gap between the level of services the state says it provides and the observed level of performance. The report is part of the proceedings in the class-action lawsuit J.K v. Eden. The suit, filed in 1996, seeks adequate addiction and mental health services for 14,000 Medicaid-eligible children in Maricopa County, which includes Phoenix and about 80 percent of the state population. Up to 3,500 of those children have complex, chronic conditions. "The services that are out there are not the services that kids need," Anne Ronan, staff attorney at the Arizona Center for Disability Law, told ADAW. The disability center, along with the Bazelon Center for Mental Health Law and the National Youth Law Center, filed the lawsuit. The system lacks necessary services and the skilled staff that would provide them, Ronan said. Specialized services for children and adolescents, such as treatment for substance abuse and co-occurring disorders, are basically unavailable, she said. The report comes at a critical time for the state. A temporary hold on the lawsuit expires at the end of July. If state officials and advocates do not begin serious discussions that move toward a consent decree soon, the lawsuit will go to trial, Ronan said. Advocates are aiming for a mid-January court date. Because of the litigation, state officials are reluctant to comment. "The department is committed to continued efforts on improving services to Medicaid-eligible children, and working with stakeholders to address concerns in the delivery of care," Ronald J. Smith, assistant director of the Department of Health Services' Behavioral Health Division, said in a statement. Arizona's behavioral health system covers addiction and mental health services for all Medicaid-eligible and indigent residents under a Section 1915(b) Medicaid waiver first implemented in 1992. Five regional behavioral health authorities (RBHAs) manage those services under full-risk contracts. ValueOptions Inc. has managed the Maricopa County program since February 1999, when it assumed full responsibility and financial risk from the state. The Department of Health Services took control of the RBHA's operations on Sept. 5, 1997, after the system's managing agency, ComCare Inc., fell into a financial tailspin that forced it to drastically reduce services to indigent adults (see ADAW, Sept. 8, 1997). Underfunding continues to plague the program, which operates under the weight of two class-action lawsuits. The other lawsuit, Arnold v. Sarn, is under consent decree and demands that all adults with serious mental illness who reside in Maricopa County have access to appropriate community-based services. The consent decree's requirements have had a direct impact on children's services. ValueOptions diverts $ 900,000 a month, nearly one-third of the money it receives for children's s services, to pay for adult services. A solution to the chronic funding problem will not be easy. The state estimates that its mental health system lacks about $ 350 million. In a special session this year, Gov. Jane Dee Hull won legislative approval to provide an additional $ 70 million in one-time funding for the system, through tobacco settlement funding. The report concluded that each of the major players bears responsibility for the system's poor performance: the state Medicaid agency, known as the Arizona Health Care Cost Containment System (AHCCCS); the Department of Health Services; ValueOptions; and providers. Report's findings An independent evaluation team, led by Ivor Groves, M.D., conducted its evaluation in April. The 18-member team reviewed data compiled by the state and ValueOptions and interviewed numerous stakeholders, including ValueOptions management and staff, case managers, providers, juvenile court staff, child welfare staff, special education staff, families and advocates. It also conducted an indepth analysis of care received by children in 41 cases. The team concluded that: -- The substance abuse and mental health services provided by Medicaid fail to meet both professional norms and the state's own standards of practice. -- Children with complex needs receive poor services and as a result often become enmeshed in the child welfare system, the juvenile justice system or both. -- Neither the state nor ValueOptions is providing the leadership needed to improve the system. -- The system creates numerous barriers to service. ValueOptions' authorization process is especially problematic. The team found that the system performed basic functions essential to the delivery of services less than 50 percent of the time. Those functions included understanding the child's needs, developing a service plan responsive to those needs and ensuring that the plan was implemented. ValueOptions' response ValueOptions agrees that the system is underfunded and improvements can be made, but the company questions the report's methodology, Sally Ordini, a spokeswoman for the company's Arizona operations, told ADAW. The report draws some strong conclusions from a small number of cases, Ordini said. And the report tended to ignore system improvements since the first court-ordered report in 1998. More children are being served, she said, and they are showing better outcomes. Ronan says the sample size was all that the state agreed to pay for, and that after discussing the matter in court, the state agreed it would not dispute the report's findings based on the sample size. The DHS also tried to cancel the contract for the evaluation team in January, but the court ordered that the review be conducted as planned. Cases were analyzed nine months after ValueOptions took over the system, Ordini said, which doesn't accurately represent the stability and improvements the program is making, such as greater access to services, newer medications and an expanded crisis-response system. Maricopa County's population is about 3 million and growing rapidly. Officials have estimated that the population is increasing by about 8,000 a month. ValueOptions provides about 40,000 units of service a month, of which about 12,000 are for children. About 2,000 new consumers enter the program each month, Ordini said. ValueOptions' contract for Maricopa County runs for three years and is valued at $ 510 million. The state has the option of renewing the contract for an additional two years. Causes of system failure identified in the report include: * A malfunctioning service authorization process. * Front-line staff with insufficient skills and supports. * Unavailability of substance abuse treatment, respite care and wraparound services. * Lack of coordination with schools, juvenile courts and other agencies. In order to achieve effective front-line practice, the system needs more than policy tweaking and minor funding adjustments, the report states. Its recommendations include: * A fundamental reassessment of the organization, resources and approach currently being used to provide behavioral health services to children. * A reorientation toward meaningful outcomes, such as school success, a stable living situation and sober and lawful behavior. * Immediate attention to front-line staff training. * The development of adequate levels of intensive in-home services, respite care and wraparound services. * Active participation of the school, child welfare and juvenile justice systems. IAC-ACC-NO: 64394460 (Alcoholism & Drug Abuse Weekly, July 31, 2000) GREAT WHITE: Krage & Janvey Announces TX Suit Re Unregistered Securities ------------------------------------------------------------------------ The following was released on August 28 by Krage & Janvey, L.L.P.: On July 31, 2000, Dr. John Brizzolara, M.D., William H. Fox, and Dr. J. Walt Stallings, M.D. filed a Class Action lawsuit against Morgan Stanley Dean Witter, Paragon Capital Corporation, Glenn Michael Financial, Inc., Harvestons Securities, Inc., Josephthal & Co., Inc., Drake Capital Securities, Equitrade Securities, Westminster Securities, Barron Chase Securities, Taylor Stuart Securities, Bristol Asset Management, Augustine Fund, L.P., GEM Investment Advisory, Parthenon Investment Corp., Trafalgar Strategic Investment Fund, NISMIC Sales Corp., Joseph Kavanagh, Robert Cooke, Karl Birkenfeld, Andrew Left (aka Henry Lipton), Michael Manis, and Irving Ayash arising from the sale of unregistered securities of Great White Marine & Recreation, Inc. (f/k/a Tiger Shark International, Inc.) Plaintiffs allege the Defendants unlawfully distributed unregistered GWMR's common stock to the Class as part of a fraudulent scheme. Members of the Class are persons who purchased shares of GWMR common stock in the Over-the-Counter market during the period from January 4, 1998, to and including July 29, 1999. The specific allegations against the Defendants include civil conspiracy, fraud, and sales of unregistered securities, in violation of Federal Securities Laws. The Plaintiffs and members of the Class seek rescission and money damages. Any persons who purchased GWMR shares during the class period may file a motion with the United States District Court for the Western District of Texas [Waco] not later than sixty (60) days after this Notice is published, to request that the Court appoint them as lead Plaintiff of the Class. The address of the U.S. District Court Clerk is 800 Franklin Avenue, Room 303, P.O. Box 608, Waco, Texas 76703. Contact: Phillip Offill of Krage & Janvey, L.L.P., 214-969-7500 HAWAII: Fails to Fix Special Ed Programs; Court Holds State in contempt ----------------------------------------------------------------------- In a class action spanning most of the past decade, the U.S. District Court, District of Hawaii held the state of Hawaii in contempt for failing to bring its special education programs in line with the Individuals with Disabilities Education Act and Section 504. Felix by Servietti-Coleman v. Cayetano, 32 IDELR 230 (D. Hawaii 2000). The class action was initiated in 1993 by a group of students with mental health needs. In 1994 the parties entered into a consent decree in which the state agreed to "implement a seamless system of care." Following modifications to the decree and the state's subsequent noncompliance, 141 benchmarks were established to gauge the state's progress toward compliance in each of its school facilities. The class charged that the state failed to comply with the decree and asked the court to find it in contempt. The court found that the state failed to meet many of the most significant benchmarks, such as modifying its facilities and updating personnel procedures. The state also could have offered special incentives, higher salaries, or better working conditions to attract qualified special education teachers, but it did not. The state was unable to satisfactorily explain why it did not meet the benchmarks, whose deadlines the court termed "firm but manageable." While it made progress, the court scolded the state for failing to take "every reasonable step" to comply with the decree. A good faith effort to comply was also irrelevant, for all that was required to find the state in contempt was noncompliance with the decree. The court ordered further hearings to determine the appropriate relief. (School Law Bulletin, August 23, 2000) MICROSOFT CORP: RI Superior Ct Judge Throws out Local Antitrust Suit -------------------------------------------------------------------- A Superior Court judge has thrown out a local lawsuit against Microsoft Corp. that tried to piggyback on an earlier success of an antitrust suit against the software giant. The class-action suit, filed by a Providence doctor and law firm, accused Microsoft of using its "monopoly power" to overcharge for the Windows 98 operating system. Judge Michael Silverstein said state law bars the suit because the parties did not buy the software directly from Microsoft. The suit was filed by Dr. Santini Siena and Yesser, Glasson & Dineen. It was one of a dozen lawsuits filed across the country by private companies and individuals against Microsoft, The Providence Journal reported. Several state courts have already ruled on the matters, dismissing lawsuits on the same grounds that Silverstein did, according to Jeffrey Schreck, their lawyer. Silverstein ruled that federal and state law permits only "direct purchasers" to file such claims. The suit was filed on behalf of an estimated 20,000 Rhode Islanders who bought Windows 98, alleging they were charged "a monopoly price in excess of what Microsoft would have been able to charge in a competitive market." They asked Microsoft to pay the difference between the prices the company actually charged for the software and the prices it would have charged if the company did not dominate the market, according to the complaint filed March 31. "Because of its monopoly power, Microsoft charged the higher, revenue-maximizing price, not a competitive price," the lawsuit alleged. In June, U.S. District Judge Thomas Penfield Jackson ruled Microsoft had violated the nation's antitrust laws and ordered the company be split. Microsoft appealed. Now the company and prosecutors are bickering over the site of the appeal: Microsoft wants it heard in a federal appellate court, while prosecutors want it held before the U.S. Supreme Court. (The Associated Press State & Local Wire, August 28, 2000) NORWEGIAN CRUISE: TX Law Firm Claims Accessibility Violations under ADA ----------------------------------------------------------------------- Bolstered by a recent federal appeals court ruling saying that foreign flag cruise ships may be subjected to ADA accessibility requirements, a Texas law firm has filed two class action lawsuits claiming that a foreign cruise line violated the ADA and state law by failing to provide adequate access to people with mobility impairments and their traveling companions. The suit is important because it expands upon the theory of liability that has traditionally been put forth in these cases, by adding new plaintiffs, defendants and claims. Elaine B. Roberts of Houston's Bruckner Burch LLC filed the suits earlier this month. They claim that Norwegian Cruise Lines, believed to be incorporated in the Bahamas, subjects passengers with disabilities to illegal surcharges for accessible cabins and subjects such passengers to illegal architectural barriers on cruises. Both suits are filed on behalf of Douglas Spector, who uses an electric scooter due to a mobility impairment; his wife Ana Spector, who does not have a disability but travels with him; and wheelchair user Julia Hollenbeck. The defendant has a ship called the M/S Norwegian Sea, which regularly sails to and from the Port of Houston. The federal suit, which asserts a violation of Title III of the ADA, has some interesting factual allegations. Because passengers with disabilities are not permitted to participate in discount programs, it says, they are subjected to illegal surcharges. It addition, Roberts alleges that the defendant illegally requires people with mobility impairments to travel with someone who would be able to assist them in the event of an emergency. In addition, she says, Norwegian does not have an evacuation plan in place for people with mobility impairments. She adds that the plaintiffs were told before embarking on a cruise that the ships programs were accessible, only to be confronted with access barriers. "Unbelievably," she says, "when high-ranking NCL agents were confronted with passenger complaints of discriminatory treatment and proof that the ADA applied to cruise ships, NCL showed no remorse or willingness to change their policies[.]" In June, the 11th U.S. Circuit Court of Appeals ruled in Stevens v. Premier Cruises Inc., 215 F.3d 1237, 18 NDLR 126 (11th Cir. 2000) that ADA accessibility requirements may apply to foreign-flag cruise ships that operate in U.S. waters). The federal complaint seeks injunctive and declaratory relief, as well as attorney's fees and costs. (Disability Compliance Bulletin, August 25, 2000) OLYMPICS ORGANISERS: Blind Man to Sue over Web Site Accessibility ----------------------------------------------------------------- By Judy Skatssoon SYDNEY, Aug 28 AAP - A blind man will seek damages in court from Sydney Olympic organisers after they refused to comply with an order to make their website more accessible to him. The Human Rights and Equal Opportunity Commission (HREOC) found Games organiser SOCOG had unlawfully discriminated against Bruce Maguire by failing to make accessible to him key parts of its website, including its results page. "The complainant was clearly the recipient of less favourable treatment by the respondent in that he was unable to access the services offered ... by means of its website or at best he was offered imperfect or limited access only," said inquiry commissioner William Carter, QC. He ordered SOCOG to make the site accessible to Mr Maguire by the beginning of the Games on September 15. The central and most involved part of the order was a requirement to reformat the results tables so Mr Maguire could access them. But SOCOG spokesman Milton Cockburn said it was not feasible for SOCOG to do this because it would cost $2 million and take more than a year to complete. "Sydney 2000 is committed to ensuring accessibility to vision-impaired users to as much of its site as possible where this can be achieved in a time and cost effective manner," Mr Cockburn told AAP. "IBM's advice to us is that it is not feasible to meet Mr Maguire's demands that real time results tables can be reformated for his use. "This would cost in excess of $2 million and take 368 days to complete." SOCOG would therefore not comply with this order "because of the cost and huge amount of time involved", Mr Cockburn said. Mr Maguire's lawyer, Simon Moran, who estimated the cost to SOCOG at between $30,000 and $40,000, said the timeframe meant his client would have to wait until after the Olympics before pursuing the matter in the Federal Court. He blamed this on deliberate "delaying tactics" by SOCOG, which was exploiting the fact the HREOC orders are non-binding. Commenting before SOCOG's response to the decision, Mr Maguire vowed he would lead a class action for compensation if SOCOG did not make the required changes. Mr Moran said the most likely course of action was that Mr Maguire would return to HREOC after the Olympics to pursue a class action seeking an award for damages. The action would then go before the Federal Court for enforcement. It was Mr Maguire's third action against the Olympic organisers. Last year HREOC found SOCOG had discriminated against him for not making ticket order forms available in braille. SOCOG also had agreed to provide braille copies of the Olympic Souvenir Program following a complaint by Mr Maguire, but was yet to act on this, Mr Moran said. (AAP NEWSFEED, August 28, 2000) RAINFOREST CAFE: Emerges from MN Securities Suit Re Proposed Merger ------------------------------------------------------------------- The Company and certain directors are named as defendants in a purported class action lawsuit, In re: Rainforest Cafe, Inc. Shareholders' Litigation. This is a consolidation of three lawsuits, Billie Mack v. Lyle Berman, et al., Robert Fink v. Rainforest Cafe, Inc., et al., and Heartland Group, Inc. v. Rainforest Cafe, Inc., et al. filed on December 23, 1999, January 13, 2000 and March 27, 2000, respectively. The actions were filed in Hennepin County District Court of Minnesota, alleging that defendants breached their fiduciary duty and engaged in unfair dealing to the detriment of the holders of Rainforest Cafe common stock in connection with a proposed merger of the Company with Landry's. By order dated June 12, 2000, the court dismissed the case with prejudice, but reserved plaintiffs' claim for attorney fees. A hearing on the claim for attorney fees is scheduled for August 16, 2000. VISUAL NETWORKS: Barrack Rodos Files Securities Suit in Maryland ---------------------------------------------------------------- Barrack, Rodos & Bacine announces that the class action previously commenced on behalf of purchasers of the common stock of Visual Networks, Inc. (Nasdaq: VNWK) ("Visual Networks" or the "Company") has been expanded to include February 7, 2000 through August 22, 2000 inclusive, (the "Expanded Class Period"). This action is pending in the United States District Court for the District of Maryland. The complaint alleges that, during the Class Period, defendants issued to the investing public false and misleading statements concerning Visual Networks' acquisition of Avesta Technologies Inc. ("Avesta"), especially by failing to disclose problems related to integrating Avesta into the Company, and concerning the sale of the Company's core products. The complaint further alleges that, following disclosure of the true state of the Company's affairs about the Avesta integration problems and weakening revenues, its common stock plummeted more than $14.00, about 54%. Contact: Counsel for Class Plaintiffs, Barrack, Rodos & Bacine, Shareholder Relations Manager, 800-417-7305, or 215-963-0600, fax: 888-417-7306, or 215-963-0838, or msgoldman@barrack.com VISUAL NETWORKS: Milberg Weiss Files Securities Lawsuit in Maryland ------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on August 9, 2000, on behalf of purchasers of the securities of Visual Networks Inc. (NASDAQ: VNWK) between February 7, 2000 and July 5, 2000, inclusive. The action is pending in the United States District Court for the District of Maryland. The complaint charges that 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 material misrepresentations to the market between February 7, 2000, and July 5, 2000.A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/visual/ Contact: Milberg Weiss Bershad Hynes & Lerach LLP Steven G. Schulman or Samuel H. Rudman Phone number: (800) 320-5081 Email: visualcase@milbergNY.com Website: http://www.milberg.com WARNACO GROUP: Cauley & Geller Files Securities Suit in New York ---------------------------------------------------------------- The Law Firm of Cauley & Geller, LLP announced that it has filed a class action in the United States District Court for the Southern District of New York on behalf of all individuals and institutional investors that purchased the common stock of Warnaco Group, Inc. (NYSE:WAC) between December 11, 1997 and July 20, 2000, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the strong sales of Warnaco's existing Calvin Klein products, and its purported strong revenues and earnings, together with the quality and value of its inventory. The complaint further alleges that, defendants' engaged in a fraudulent scheme and course of business that (i) deceived the investing public regarding Warnaco's prospects and business; (ii) artificially inflated the prices of Warnaco's common stock; (iii) allowed defendants to sell over 1 million shares of their Warnaco stock for $14.6 million in insider trading proceeds; (iv) allowed defendants to use Warnaco stock as currency to fund its stock-for-stock acquisitions; and (v) caused plaintiff and other members of the Class to purchase Warnaco common stock at inflated prices. As a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. When the truth about the Company was revealed, the price of the stock dropped significantly. Contact: Cauley & Geller, LLP, Boca Raton Sue Null, Jackie Addison or Sharon Jackson Toll Free: 888/551-9944 E-mail: Cauleypa@aol.com WASTE MANAGEMENT: Eastern Environment Shareholders Sue over Merger ------------------------------------------------------------------ The former shareholders of Eastern Environment Services have filed a proposed class action against Waste Management Inc., the largest trash hauler in North America, and certain officers and directors, asserting it did not disclose the extent of its financial problems prior to Eastern's merger and stock swap with the company in December 1998. Miller et al. v. Waste Management Inc. et al., No. 00C-06-257RRC, complaint filed (Del. Super. Ct., June 29, 2000). In the $1.15 billion swap, the stockholders received 0.6406 shares of WMI common stock for each Eastern share, for a total of about 24.5 million WMI shares. However, it was not until seven months after the merger that the market was shocked by the news of a $1.23 billion after-tax charge attributed to problems with the original merger of the old Waste Management and USA Waste that formed WMI. The merger between the former Waste Management and USA Waste in July 1998 was touted as a blending of the two companies' synergies, and was expected to save at least $800 million in costs due to enhanced efficiencies. WMI had reported a decrease in general and administrative costs due to the company's ability to integrate its acquisitions. In addition, WMI said income increased (as a percentage of operating revenues) due to the economies of scale realized by the newly formed entity. WMI shares were trading as high as $53 per share between August and December 1998. After revenue shortfalls for the second quarter of 1999 were revealed, the stock plummeted 37 percent in one day, to a low of $32 per share. Moreover, due to the high volume of trading, the company lost about $12 billion in market value that, according to the complaint, was one of the most massive single day losses in U.S. corporate finance history. The stock continued to drop when earning expectations for the second quarter of 1999 were revised, falling an additional 17 percent to close at $25.9375. In August 1999, the company announced it would restate its first-quarter earnings due in part to mistakes in calculating reserves for environmental cleanup. The next day, WMI's stock fell to $22.25. But the largest blow to the company's reputation occurred on Nov. 9, 1999, when the staggering $1.23 billion charge was announced. WMI said it was in part due to problems with converting millions of customers from the former Waste Management's billing system to the new system. Although the charge was taken in the third quarter of 1999, it was admittedly related to prior periods. The company's stock continued its decline to close at $17.9375 and, to date, has not recovered. The Eastern shareholders are alleging violations of Sections 11 and 12(a)(2) and 15 of the Securities Act for failure to make full and complete disclosures in the registration statement and prospectus provided to them before their merger. In June of this year, WMI settled with the Securities and Exchange Commission regarding charges that it misled investors starting in the spring of 1999 with its overly optimistic projections. According to published reports, the SEC's order may be favorable to the company because it delineates a relatively short period of time during which the company actively misled investors. There are other numerous class actions already consolidated against the company for securities fraud pending in the Southern District of Texas. The Eastern shareholders filed a separate action to ensure that the class period and their concerns are covered by the litigation. The Eastern shareholders are represented by Karen L. Morris and James A. McShane of Morris & Morris in Wilmington, Del.; Merrill G. Davidoff, Peter Nordberg, Lawrence J. Lederer and Lane L. Vines of Berger & Montague in Philadelphia and R. Bruce McNew of Taylor & McNew in Greenville, Del. (Delaware Corporate Litigation Reporter, August 7, 2000) WATER CONTAMINATION: Lawyers Advocate Ct Overseeing Ontario Compensation ------------------------------------------------------------------------ The Ontario government's initiative to compensate victims of the tainted-water tragedy must be overseen by the courts, say lawyers leading a class-action suit arising from the disaster. That will be the key message the lawyers plan to deliver at a meeting tonight with residents of Walkerton, Ont., hundreds of whom have been considering the government's compensation bid. "There has been a push for the people to go ahead and accept the compensation plan," said Tom White, one of a dozen lawyers from six law firms involved in the $ 300-million class-action suit. While White would only say the push is coming "from some of the other parties involved," the lawyers say without judicial oversight, the process is flawed. What's more, they argue, turning the process over to the courts could resolve the class-action suit without a protracted legal battle, saving taxpayers a bundle. The proposed class action arose out of the E. coli outbreak in May that killed six and sickened up to 2,000. (The Calgary Sun, August 28, 2000) WATER CONTAMINATION: Walkerton Utility Boss Wants to Be Heard ------------------------------------------------------------- The man at the centre of controversy over the deadly E. coli virus that contaminated the water supply in Walkerton, Ont., is among hundreds of people who want to be heard at an independent probe into the crisis. The Walkerton Inquiry Commission released a list of 41 applications for standing, representing more than 80 groups and 200 individuals, at the inquiry, set to begin in October. Among them was the application of a group comprised of more than 200 victims and parents of children who were badly infected by the E. coli bacteria, which was discovered in the town's water supply in mid-May. Stan Koebel, the public utilities manager accused of failing to warn the people of Walkerton about their water, is also on the list, as is the Walkerton Public Utilities Commission, the area's public health board and the Ontario government. All four are named in a $ 300-million class-action lawsuit launched by a number of Walkerton residents in recent weeks. Koebel went into hiding soon after the public learned of the contamination that killed six people and sickened up to 2,000. He has since returned to his home and his job. Dr. Murray McQuigge, medical officer of health for the area, who first alerted the public to the bacterial outbreak, has also submitted a personal application, as did his employer, the Bruce Grey Owen Sound Health Unit. The groups, which range from physicians to cattle farmers, citizens to politicians, all want input on the disaster that made headlines across the country. "I think this is the kind of result you get with this type of situation," said Bruce Davidson, a founding member of Concerned Walkerton Citizens, a grassroots group that has applied for standing. Davidson's lawyers, with the Canadian Environmental Law Association, were notified that a "flurry" of applications were submitted within the last week, he said. The deadline was Friday. Walkerton residents are entering their 14th week without tap water. Davidson said he's been told it could be as late as October before their water is declared safe. (The Edmonton Sun, August 28, 2000) YBM MAGNEX: Canadian Law Firm Named in Shareholders’ Suit in U.S. ----------------------------------------------------------------- The Bay Street law firm of Cassels Brock and Blackwell and a partner in its securities practice have been added to a U.S. lawsuit brought by shareholders who lost money in the collapse of YBM Magnex International Inc. on indications it was laundering money for Russian organized crime. It is the first time a Canadian law firm has been named as a defendant in a class action for its conduct in advising a publicly traded company, securities experts said. Five Canadian brokerage houses involved in underwriting a new issue of YBM shares in 1997 have also been added to the suit: National Bank Financial Corp., formerly known as First Marathon Securities Ltd.; Griffiths McBurney & Partners; ScotiaMcLeod Inc.; Canaccord Capital Corp.; and HSBC James Capel Canada Inc., the former Gordon Capital Corp. None of the brokerage houses chose to comment. The case, which is open to Canadian shareholders, is scheduled to go to trial in U.S. District Court at the end of February. The supplemental complaint filed on Aug. 21 adds the law firm, which was YBM's Canadian general counsel, as well as Lawrence Wilder, the partner regularly assigned to handle YBM's business. 'From the earliest days these defendants knew facts showing YBM was not a law-abiding, up-and-coming corporation, but gave advice and took steps calculated to shield the truth from the investing public,' according to the document on file at the courthouse in Philadelphia. 'Thousands of investors relied on the false and incomplete public disclosures prepared for the company by Wilder and Cassels Brock; and these investors suffered immense losses when the truth about YBM -- so long concealed by Wilder and Cassels Brock -- came to light.' David Peterson, former Ontario premier and chairman of Cassels Brock, was named in the original YBM suit filed in 1998. He sat on YBM's board of directors. Mr. Peterson denies all allegations of wrongdoing and filed a defence in May saying he 'acted in good faith at all times.' He has also filed a cross-claim against YBM, alleging the company, through its management, concealed material information from him to induce him to join the board and remain there. However, the new defendants have yet to submit their legal responses. They may file motions to dismiss, arguing the case against them should be thrown out. YBM, a Canadian magnet manufacturer, was widely touted to the North American investing public as a rising star on the Toronto Stock Exchange. The lawsuit says shareholders were never told of a litany of troubling signs: from evidence Russian crime figures were its founding shareholders and had been receiving 'commissions,' to the fact YBM was under investigation by the U.S. government, and warnings by YBM's own investigators of a clear connection between Russian mobsters and members of YBM's management, including its chief operating officer. According to the new filing, the Fairfax Group, investigators hired by YBM, travelled to the company's key subsidiary in Budapest in 1997 and found records 'kept in milk cartons in a damp basement; receipts for equipment purchased from the original investors that appeared brand new, even though the transactions had occurred years earlier; invoices for large dollar figures addressed to post office boxes.' Shareholders were not informed. 'YBM, on the specific and repeated directions and advice of defendants Wilder and Cassels Brock, made no public disclosure of the results of the Fairfax work, or the adverse material facts it uncovered.' The filing also refers to a questionnaire sent to YBM's original Russian shareholders in December, 1996 -- almost 18 months before the company's collapse that warned 'events are currently unfolding in the United States and Canada that could destroy our company in a short time. 'Our Western securities lawyers [namely Wilder, and Cassels Brock] tell us that we are very close to having an obligation to disclose these allegations to the general public. If that were to happen, our stock could be worthless in a short period of time.' According to the supplemental complaint, Mr. Wilder and Cassels Brock were at the very least aware of the contents, yet 'directed the company to remain silent about the truth, allowing YBM's private and public sales of stock to continue.' YBM raised $100-million on the TSE through a new common share issue 11 months later. The underwriters, including co-leads First Marathon and Griffiths McBurney, also ignored persistent problems, according to the filing. 'Several of these same defendants had personally visited the company's Hungarian facilities, where they observed or had access to the same information as Fairfax,' it stated. 'These defendants were also privy to the findings of fictitious sales, missing customers, and unreliable sales documentation. With actual knowledge of and ready access to material non-public information that revealed gross irregularities at YBM, the unqualified certification in the 1997 prospectus by the underwriter defendants amounted to at least a reckless deception of the investing public.' (National Post (formerly The Financial Post), August 28, 2000) YORK AND DABICH: Demand Excuse Rule Inapplicable to Two Person Board -------------------------------------------------------------------- In the case of a two-person board of directors, Delaware's rule that pre-suit demand is excused only where a majority of the directors are self-interested cannot be taken literally, said Vice Chancellor Leo Strine. In an issue of first impression ruling, the judge refused to dismiss a suit against two defendants -- who once made up the full board of directors of Carnet Holdings Corp. -- because even one interested director could have blocked a move to have Carnet take up the derivative suit. Beneville v. York and Dabich. (Delaware Corporate Litigation Reporter, August 7, 2000) ********* 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. 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