CAR_Public/000920.MBX              C L A S S   A C T I O N   R E P O R T E R

            Wednesday, September 20, 2000, Vol. 2, No. 183

                              Headlines

3DFX INTERACTIVE: Agreement Reached to Settle Securities Suits in Texas
ASHWORTH INC: CA Court Dismisses Consolidated Securities Suit
BANK OF BERMUDA: Investors Charge Caymen Islands Brance of Bilking
BANKERS TRUST: Ex-Exec Pleads Guilty for Diverting Customer Funds
BIOFARMA, SERVIER: Canucks Bring French Diet Pills Maker to Court

CHEMETCO INC: IL Joins Fed Govt in Charging Smelting Plant of Pollution
COLORADO: Defends Care for Mentally Ill in Contempt of Court Hearing
CROSSROADS SYSTEMS: Plans Defense of 10 Securities Suits in Texas
FRANCO PRODUCTIONS: Web Hosts Immune from Illicit Sales Charges
HEART PACEMAKERS: Sixth Circuit Decertifies Class In Re Telectronics

INMATES LITIGATION: Plankinton Training School May Show Pattern of Abuse
LOCKHEED MARTIN: Employees Rally for Support for Racism Lawsuit
MARCOS: Philippine Court Rules Swiss Deposits Should Go to Government
MCKESSON HBO: Portions of Securities Suit Preliminarily Dismissed in CA
MICROSOFT: CA Judge Regards Some Victories As Giveaways; Fd Case Goes on

MP3.COM: Two Shareholders File Derivative Suits in San Diego
PLACER NIUGINI: Papua New Guinea Investigates Deadly Gold Mine Illnesses
SAFARI MEDIA: Cotchett and Haralson Files Securities Suit in Arizona
SOTHEBY'S HOLDINGS: Has Duty to Tell Investors Alleged Illegal Conduct
WORLDCOM, DIGEX: Shareholders Sue over Worldcom Purchase of Intermedia

                             *********

3DFX INTERACTIVE: Agreement Reached to Settle Securities Suits in Texas
-----------------------------------------------------------------------
A securities class action lawsuit was filed October 9, 1998 in Dallas
County, Texas against STB, which 3dfx acquired by merger in May 1999. The
suit was brought against STB and some of its officers and directors and the
underwriters who participated in the STB secondary offering on March 20,
1998.

The petition alleges that the registration statement for the secondary
public offering contained false and misleading statements of material facts
and omitted to state material facts. The petition asserts claims under
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and
Sections 581-33A of the Texas Securities Act on behalf of a purported class
of persons who purchased or otherwise acquired STB common stock in the
public offering. The petition seeks recission and/or unspecified damages.
That action was removed to federal court in April 2000.

On December 17, 1999, a similar securities class action lawsuit was also
filed in the United States District Court for the Northern District of
Texas, Dallas Division, against STB and three of its officers and
directors. The action asserts claims under Sections 10 and 20 of the
Securities Exchange Act of 1934.

On February 8, 2000, another similar class action lawsuit, asserting claims
under Sections 10 and 20 of the Securities Exchange Act of 1934, was filed
against STB and three of its officers and directors in the United States
District Court for the Northern District of Texas. All of these actions
have subsequently been consolidated, and the parties have now reached an
agreement in principle to settle them. The company claims that the
settlement, which is subject to final documentation and Court approval,
does not reflect any admission of liability by any of the defendants. The
principal terms of the settlement call for the establishment of a
settlement fund consisting of $4.7 million to be paid by insurance.


ASHWORTH INC: CA Court Dismisses Consolidated Securities Suit
-------------------------------------------------------------
As previously reported in the CAR, on January 22, 1999, Milberg Weiss
Bershad Hynes & Lerach LLP filed a class action in the United States
District Court for the Southern District of California ("U.S. District
Court") on behalf of purchasers of the Company's common stock during the
period between September 4, 1997 and July 15, 1998 alleging violations of
the Securities Exchange Act of 1934 by the Company and certain of its
officers and directors.

The complaint alleged that, during the class period, Company executives
made positive statements about the Company's business including statements
concerning product demand, offshore production and inventories. The
complaint further alleged that the defendants knew these statements to be
false and concealed adverse conditions and trends in the Company's business
during the class period.

                                Update

Subsequently, two other suits were served upon the Company making similar
allegations. The three actions have been consolidated by order of the
United States District Court and lead counsel for the plaintiffs has been
appointed. Per order of the Court, Plaintiffs filed their Amended and
Consolidated Complaint on December 17, 1999. On February 18, 2000, the
Company filed a motion to dismiss. On May 22, 2000 the Court heard the
motion to dismiss and took it under submission. On July 18, 2000 the U.S.
District Court granted the motion to dismiss the Amended and Consolidated
Complaint as to all defendants. The Court granted plaintiffs sixty days to
amend the complaint if they chose to do so. No discovery has occurred to
date. The Company has not received an amended complaint to date.


BANK OF BERMUDA: Investors Charge Caymen Islands Brance of Bilking
------------------------------------------------------------------
Investors have filed a class action lawsuit accusing the Bank of Bermuda's
Cayman Islands branch of aiding an alleged pyramid scheme to bilk them of
more than US$ 300 million, reports CANA-Reuters (September 6, 2000). The
lawsuit, filed in U.S. District Court in Miami, seeks triple damages that
could put a potential award in the US$ 900 million range. It alleges that
the Bank of Bermuda held an account used by Americans Michael Gause and
Richard Homa, accused by the U.S. Securities and Exchange Commission of
operating a pyramid scheme that bilked about 1,000 investors out of more
than $ 314 million. Gause and Homa allegedly promised investors in their
Atlanta-based Cash4Titles company high rates of return on a plan to make
high-interest loans secured by car titles. (Caribbean Update, October 1,
2000)


BANKERS TRUST: Ex-Exec Pleads Guilty for Diverting Customer Funds
-----------------------------------------------------------------
Ex-Bankers Trust exec pleads guilty in scheme New York --- A former Bankers
Trust Corp. executive pleaded guilty Monday to his role in a scheme to
divert millions of dollars in unclaimed customer funds into the bank's own
accounts to pump up its profits. Bruce Kingdon, who headed the bank's
client processing services unit, pleaded guilty to six counts of conspiracy
and falsifying books and records at a hearing in Manhattan federal court.
Kingdon, the most senior former official charged in the case, faces up to
six months in prison when he is sentenced in December. (The Atlanta Journal
and Constitution, September 19, 2000)


BIOFARMA, SERVIER: Canucks Bring French Diet Pills Maker to Court
-----------------------------------------------------------------
More than 155,000 Canadians who took once-popular diet pills that are now
linked to serious illnesses can join a class-action lawsuit against a
French pharmaceutical company, an Ontario judge has ruled.

Justice Peter Cumming ruled that a class-action suit launched in November
1998 by Torontonian Sheila Wilson, who claimed she became grievously ill
after taking the weight-loss drug Ponderal, can go to trial in Canada.

In a ruling issued last week in Ontario Superior Court, Cumming said that
Biofarma S.A. and its Canadian distributor, Servier Canada Inc., may have
to reimburse private and public health plans for potentially millions of
dollars in medical costs to cover the screening, diagnosis and treatment of
Canadians who took the drugs Ponderal and Redux, whether they have symptoms
or not. As well, he ruled that the firms may have to repay millions of
dollars Canadians paid to purchase the drugs.

More than 155,000 Canadians, mostly women, received 1.4 million
prescriptions for the drugs - also known by their generic names,
flenfluramine and dexfenfluramine - before they were pulled off the market
on Sept. 15, 1997, after quetions were raised in the United States about
the drugs' safety. In September 1999, a British Columbia woman, who claims
her health deteriorated to the point that she had to undergo open-heart
surgery after taking the diet pill, filed her own class-action suit against
Ponderal.

Cumming's ruling makes any patient in Canada who took the drug eligible to
join Wilson's class-action lawsuit in Ontario.

The judge noted that the drugs have been linked to a range of heart and
lung diseases. "The published medical literature raises real and legitimate
public health and safety concerns about the use of the drugs," he wrote.

Since the diet drugs were pulled off the market, several thousand lawsuits
were filed in U.S. courts by women. In November, an American firm agreed to
pay as much as $ 4.5 billion in injury claims over the diet drug. (The
Edmonton Sun, September 19, 2000)


CHEMETCO INC: IL Joins Fed Govt in Charging Smelting Plant of Pollution
-----------------------------------------------------------------------
The federal Clean Air and Clean Water acts were enacted in the early 1970s,
but Chemetco Inc. operated for years as if those laws never existed, says a
lawyer for the state of Illinois who has pursued the company for more than
a decade.

James R. Morgan, an assistant attorney general who has been lead attorney
for Illinois in the Chemetco case since 1988, says the company has tried to
change its ways in the last few years. But the copper smelting plant near
Hartford nevertheless is the state's No. 1 concern among active industrial
sites, Morgan said.

The leading indicator of the company's mind-set, investigators say, was a
pipe installed in 1986 to surreptitiously carry waste metals from the plant
into Long Lake, a wide, stagnant creek that eventually drains into the
Mississippi River. The company faces a criminal fine for that action.

Last month, Chemetco became the target of federal and state suits over
other alleged violations that the government says may be less malicious but
are no less deliberate.

Chemetco extracts copper from scrap metal by burning it in a furnace. Left
over are several types of pollutants: air emissions from the burning, waste
water (which was sent through the illegal pipe until it was shut down after
10 years of dumping) and solid waste.

Morgan said that not since the 1970s has a company deliberately ignored the
law the way Chemetco has. "If you look at how facilities were operated
prior to the Clean Air Act and the Clean Water Act, they dumped what they
wanted," he said. "That seems to be how Chemetco was operated for the
longest time. Nothing was a problem until someone told them it was a
problem."

Five former employees, including former plant manager Bruce W. Hendrickson,
were sentenced earlier this year in U.S. District Court in East St. Louis
for installing or maintaining the secret pipe. They have received in-house
detention or probation.

The company's former president, Denis Feron, also faces criminal charges
over the pipe. Authorities allege that Feron ordered the pipe installed.
But he has apparently left the country, possibly to his native Belguim. The
company and the federal government are now negotiating over the fine the
company should pay.

Telephone calls to Chemetco's chairman, John Suarez, and other officers of
the privately owned company were not returned. Attorneys for the company
could not be reached for comment. Founded in 1970, Chemetco is estimated to
employ about 150 workers and to generate about $ 50 million in annual
sales.

In addition to the government action, two property owners claim in suits
filed in January that they were exposed to serious health risks and are
seeking $ 11 million each. In addition, a class-action suit filed last year
also alleges damages.

In 1998, Robert and Ann Boettcher, who had property near the plant, settled
a suit against Chemetco for undisclosed terms. Part of the settlement may
have been Chemetco's purchase that year of the Boettchers' property for $
290,000.

                         30,000-Ton Waste Pile

The federal and state suits target a pile of gray slag that looms just
north of the plant. It threatens to overrun a chain-link fence that
surrounds the industrial site.

The slag, made of leftover metal and other ingredients when scrap metal is
melted, was classified as hazardous waste in 1991. An estimated 30,000 tons
have piled up.

Also alleged in the suits are improper construction of a bunker of zinc
oxide, careless handling of old furnace bricks contaminated with heavy
metals and the presence of contaminated dust from the smelting process.

Morgan began pursuing air pollution problems at the site in 1988. That
investigation disclosed water and hazardous waste problems. Even the
initial air pollution concerns are not resolved.

"Everything is still pending," he said. Chemetco agreed in 1988 to pay an $
80,000 fine and up to $ 10 million to develop technology to reduce air
pollution.

But Morgan said the company recently admitted that its solution, called a
"rotofilter," doesn't work properly and the company must go back to the
drawing board.

Lead in the plant's air emissions have been found to be two to six times
the government's acceptable levels. Lead in the ground water surrounding
the plant is significant, Morgan said.

Madison County residents shouldn't be overly concerned, however, because
any contamination isn't threatening private wells or municipal water
systems. But ground water contamination could eventually migrate to wells
if not stopped, Morgan said.

Otherwise, the plant is largely isolated, surrounded by agricultural fields
and just a few homes.

"When we hear they are discharging hazardous waste into our drainage
ditches, we are obviously concerned," said Joseph Parente, administrator
for the Madison County's building, zoning and environmental department.
"But it's the state's jurisdiction, so we're acting as bystanders."

Testing shows that contaminants in Long Lake are below dangerous levels
when the creek reaches Pontoon Beach.

But property owners there aren't taking any chances. They have a civil suit
pending in Madison County Circuit Court.

                        Chemetco Chronology

1986: Chemetco Inc. near Hartford secretly installs a pipe to carry waste
metals from the copper smelting plant into Long Lake. The company faces a
criminal fine for that action.

1991: Leftover metals at the site are classified as hazardous waste.

1998: Robert and Ann Boettcher settle a suit against Chemetco for
undisclosed terms.

January 2000: Haskell Pyatt and Robert and Pamela Jellen, who each own real
estate adjacent to Long Lake, sue the company for $ 11 million each,
claiming land was damaged by toxins released from a secret Chemetco Inc.
pipe.

March 2000: The Chouteau, Nameoki and Venice Drainage District sues
Chemetco and several of its officers and employees in Madison County
Circuit Court alleging that the plant's installation of a secret pipe that
drained lead, cadmium and zinc into Long Lake permanently damaged the
drainage district's property. District officials are seeking $ 50,000 plus
punitive damages.

April 2000: Two workers at Chemetco each received one year of probation and
a $ 2,500 fine in U.S. District Court in East St. Louis for their roles in
the dumping of contaminated soil into Long Lake. Two other former workers
at the plant are sentenced to home confinement for their part in the
dumping.

August 2000: The state of Illinois joins the federal government in suing
Chemetco over pollution. (St. Louis Post-Dispatch, September 19, 2000)


COLORADO: Defends Care for Mentally Ill in Contempt of Court Hearing
--------------------------------------------------------------------
A lawyer said the state should be fined $1.7 million and its top human
services official should have to live in homeless shelters until Colorado
takes better care of the chronically mentally ill. Kathleen Mullen also
said during a contempt-of-court hearing Monday that the state has ignored a
1999 court order to improve care for mentally ill Coloradans. Therefore,
Marva Hammons, executive director of Colorado's Department of Human
Services, should "go to a shelter every night until there is compliance,"
Mullen said.

But Wade Livingston, the assistant attorney general representing Hammons,
said the state has poured millions of dollars into helping Denver's
mentally ill and has complied with an order by Denver District Judge Morris
Hoffman. "We have dramatically increased services," Livingston said.

Hoffman's ruling last year that the state must fully staff housing for the
chronically mentally ill stemmed from an agreement settling a 1981
class-action lawsuit.

But Mullen contended many of the 1,600 mentally ill clients she represents
are homeless or living in unsuitable boarding homes. She said the city of
Denver complied with the settlement by December 1998, but the state has
not.

Hoffman has dealt with ongoing allegations that Denver and the state
haven't carried out a plan in the 1994 agreement that settled the lawsuit.
Earlier this year, Hoffman ordered a contempt-of-court hearing after Mullen
argued state officials were ignoring the judge's orders. Specifically, the
state hasn't designed a "comprehensive plan to identify, track" and place
on a priority housing list members of the 1,600 member class, the judge
said. Hoffman said during this week's hearing, the state must show why it
shouldn't be held in contempt. (The Associated Press State & Local Wire,
September 19, 2000)


CROSSROADS SYSTEMS: Plans Defense of 10 Securities Suits in Texas
-----------------------------------------------------------------
As previously reported in the CAR, class action lawsuits were filed against
Crossroads Systems Inc. and certain of the company’s officers and directors
in the United States District Court for the Western District of Texas,
Austin Division. The company discloses in its report filed with the SEC
that ten suits were filed between July 28, 2000 and September 8, 2000. The
plaintiffs in the actions purport to represent purchasers of our common
stock during various periods ranging from January 25, 2000 through August
24, 2000.

The complaints allege that the Company and certain of its executives made
misrepresentations and omissions in violation of sections 10(b) and 20(a)
of the Securities Exchange Act of 1934. The complaints seek compensatory
damages, costs and attorney's fees for the purported class members in an
unspecified amount. Crossroads denies any wrongdoing and intend to defend
against the claims vigorously. In particular, the company intends to file a
motion to dismiss after the Court consolidates the actions and appoints a
lead plaintiff under the Private Securities Litigation Reform Act of 1995.
The complaints are at an early stage. Consequently, at this time it is not
possible to predict whether the company will incur any liability or to
estimate its amount, if any.


FRANCO PRODUCTIONS: Web Hosts Immune from Illicit Sales Charges
---------------------------------------------------------------
Two defendants that hosted Web sites that sold videotapes of college
student-athletes taken without their knowledge or consent are immune from
suit under Section 230 of the Communications Decency Act, a federal judge
in Illinois has ruled. Doe et al. v. Franco Productions et al., No.
99-C-7885 (N.D. Ill., June 22, 2000).

Immunity under Section 230 -- traditionally applied to online service
providers -- extends to Web hosting activities as well, the U.S. District
Court for the Northern District of Illinois concluded.

Plaintiffs are numerous Illinois State University student-athletes who were
videotaped in various states of undress in restrooms, showers or locker
rooms. The tapes -- made without their knowledge or consent -- were then
displayed and sold on Web sites hosted by Genuity.net and TIAC.net. GTE
Corp. and PSINet Inc. are named as defendants in the instant case because
they are the successors, respectively, of Genuity.net and TIAC.net.

The district court dismissed the plaintiffs' previous complaint for
"intrusion upon seclusion," finding that GTE and PSINet were immune from
suit under Section 230, which states that online service providers are not
to be treated as publishers of information provided by third-party
"information content providers."

The plaintiffs amended their complaint to name the defendants in their
capacity as hosts of the offending Web sites rather than as online service
providers. The plaintiffs also added several claims, including a
"third-party benefit" claim based on the contracts between the defendants
and the owners of the Web sites, and a claim for eavesdropping under the
Electronic Communications Privacy Act, 18 U.S.C. @ 2511(a), which is not
preempted by the Communications Decency Act. GTE and PSINet again moved to
dismiss under Sec. 230.

The district court rejected the plaintiffs' contention that the defendants'
roles as Web hosts should alter the previous ruling.

"The Communications Decency Act creates federal immunity against any state
law cause of action that would hold computer service providers liable for
information originating from a third party<>," the court wrote.
"Plaintiffs' new characterization of GTE's and PSINet's activities as Web
hosts do not alter this finding. The deficiency in Plaintiffs' allegations
is the notion that involvement in Web hosting activities transforms an
entity into an information content provider."

The court next rejected the third-party beneficiary claim, which was based
on the contracts between the defendants and their customers, in which the
customers promise, among other things, not to "infringe the rights of
others." The plaintiffs are not intended beneficiaries under the contract
simply because they are "others," the court held.

Finally, the court held the plaintiffs failed to establish a claim under
the Electronic Communications Privacy Act. GTE and PSINet did not post any
of the offending communications themselves, but merely served as conduits,
the court said. (E-Business Law Bulletin, August 2000)


HEART PACEMAKERS: Sixth Circuit Decertifies Class In Re
Telectronics--------------------------------------------------------------------

The Sixth Circuit has decertified a class of plaintiffs who claim that
heart pacemakers manufactured by Telectronics Pacing Systems malfunctioned,
causing injury to a patient's heart and blood vessels. In re Telectronics
Pacing Systems Inc., Nos. 99-3476 -- 99-3480 (6th Cir., July 19, 2000).

This products liability class-action litigation was brought on behalf of
individuals implanted with the Telectronics Accufix Atrial "J" pacemaker
lead. The lead is implanted in the atrium of the heart as part of a
pacemaker device used to restore normal heartbeat. It was determined in
1994 that some of the lead wires had a tendency to break, coming through
the polyurethane coating and potentially causing injury to the heart and
blood vessels.

TPLC, listed among the defendants and owned by Telectronics, manufactured
the defective leads that were implanted in about 25,000 people in the
United States. TPLC manufactured and distributed these leads in the United
States between 1988 and 1994. Telectronics Pacing Systems is responsible to
hold industrial property rights, real estate and the equity interest in
TPLC.

Numerous state and federal court actions were filed against the defendants.
Many of the suits became part of a multidistrict litigation proceeding in
the Southern District of Ohio, In re Telectronics Pacing Systems Inc., 953
F. Supp. 909 (S.D. Ohio, 1997). The district court addressed the issue of
class certification of the MDL several times before entering the final
decision that ultimately certified the class as a mandatory, non-opt-out
class under Federal Rule of Civil Procedure 23(b)(1)(B).

The issue brought before the U.S. Court of Appeals for the Sixth Circuit
sought review of the district court's decision to certify the multidistrict
litigation. The appellate panel applied the recent Supreme Court class
action case of Ortiz v. Firbreboard Corp., 527 U.S. 815, 119 S. Ct. 2295,
144 L. Ed. 2d 715 (1999). The Ortiz decision holds that a "mandatory" class
-- a class that does not give individual notice to members or allow them to
opt out -- may not be certified, or a settlement approved, under Rule
23(b)(1)(B). Other reasons the circuit court decertified the class were
because the panel found no merit in arguments concerning issues of
settlement, limited funds and arms-length negotiation among parties.

The panel concluded that the Supreme Court's opinion in Ortiz requires that
the mandatory Rule 23(b)(1)(B) class certified by the district court here
must be decertified, and that the settlement approved by the district court
must be disapproved. (Breast Implant Litigation Reporter, August 21, 2000)


INMATES LITIGATION: Plankinton Training School May Show Pattern of Abuse
------------------------------------------------------------------------
AP news from Dioux, South Dakota says that U.S. District Judge Lawrence
Piersol has been asked to force the state to turn over documents that a
national group says will show a pattern of abuse at the State Training
School in Plankinton. The request was filed Monday in the Youth Law
Center's case against the state. The Washington, D.C.-based organization
says it will prove that staff members at the State Training School used
four-point restraints, leg shackles, isolation and excessive force.

Mark Soler, president of the Youth Law Center, asked Piersol to make state
officials release all state Division of Criminal Investigation reports
after the July 21, 1999, death of Gina Score, 14. The Canton girl died
during a forced run at the boot camp. In court paperwork, Soler said
Score's death prompted an extensive DCI investigation.

The Youth Law Center also asked for access to reports about inmate abuse,
policies and practices within the State Training School and the overall
juvenile corrections system.

"The state investigation included the use of restraints and other practices
within the institution," Soler said. "The state said that changes were
made. It's relevant for us to discover what their policy and practices
were."

Counsel for State Corrections Secretary Jeff Bloomberg and Plankinton
Superintendent Owen Spurrell, defendants in the lawsuit, have refused
earlier requests, stating they either don't have the documents or the
papers are the subject of ongoing criminal investigations and are
confidential, Soler wrote.

The trial is scheduled to start Nov. 28 in Sioux Falls federal court. The
case was certified as a class action lawsuit, affecting all present and
future inmates. The lawsuit is one of four court actions following Score's
death.


LOCKHEED MARTIN: Employees Rally for Support for Racism Lawsuit
---------------------------------------------------------------
Lockheed Martin employees seeking class-action status for a racial
discrimination lawsuit against the company rallied in Washington on Monday
seeking support from lawmakers. An employee from the Marietta plant
described a meeting last week in which a supervisor allegedly held a knife
to his stomach. Johnnie Cochran, lawyer for the employees, called on
Congress to take action against the company. Sam Grizzle, a Lockheed Martin
spokesman in Marietta, said an investigation is under way. "There was an
incident last Thursday, and a member of management has been suspended
without pay," he said. "Disciplinary action will be taken, including
termination if appropriate." (The Atlanta Journal and Constitution,
September 19, 2000)


MARCOS: Philippine Court Rules Swiss Deposits Should Go to Government
---------------------------------------------------------------------
A Philippine court ruled Tuesday that more than $ 600 million in Swiss bank
deposits belonging to the late dictator Ferdinand Marcos should go to the
government, saying he and his family could not have amassed that much money
legally.

If the government obtains the money, it would be the largest amount ever
recovered from the billions of dollars Marcos and his wife Imelda are
alleged to have acquired during his 20 years in power.

''The basis of this decision is that the amount was grossly
disproportionate to the salaries of the Marcos couple during the period of
their incumbencies,'' said Justice Catalino Castaneda Jr. of the anti-graft
Sandiganbayan court.

The Marcos family did not present evidence that the funds were legally
acquired and even said the money did not belong to Marcos, Castaneda said.

Magdangal Elma, chairman of the Presidential Commission on Good Government,
the agency in charge of recovering the Marcos wealth, called the decision a
milestone in the commission's efforts.

Marcos served as president from 1966 until he was ousted in a popular
revolt in February 1986. He and his family were driven into exile in
Hawaii, where he died three years later. He denied any wrongdoing.

The court determined the combined salaries of Marcos and his wife, who
served as governor of metropolitan Manila and as minister of human
settlements, were equivalent to only about dlrs 304,300 over the 20-year
period.

The Swiss bank deposits amounted to about dlrs 356 million when they were
discovered shortly after Marcos was toppled. Interest payments have
increased that to about dlrs 627 million.

Since 1998 the funds have been held in an escrow account in the Philippine
National Bank in Manila, where they were transferred on orders of the Swiss
Federal Supreme Court.

The Swiss court has ruled that the money can be released to the Philippine
government if Mrs. Marcos is convicted of criminal wrongdoing in the
deposits and if victims of human rights violations during Marcos'
administration are compensated. An out-of-court settlement with the
Marcoses could also free the funds.

Government lawyers say winning a case showing that the money could not have
been legally acquired by the Marcoses will meet the Swiss court's
conditions.

The Marcos family can appeal the ruling to the Supreme Court within 15
days. Otherwise, the court's ruling becomes final.

It is uncertain whether the money could be used to compensate the victims
of human rights abuses, who have won a class action lawsuit against his
estate. A law says all recovered Marcos assets must be used for the
government's land reform program. (AP Worldstream, September 19, 2000)


MCKESSON HBO: Portions of Securities Suit Preliminarily Dismissed in CA
-----------------------------------------------------------------------
Shareholders suffer court setback San Jose, Calif. A federal judge said
he's likely to dismiss portions of a securities class action stemming from
accounting irregularities at the former Atlanta-based HBO & Co., the health
care software maker acquired by McKesson Inc. in 1999. U.S. District Judge
Ronald Whyte issued a nonbinding, preliminary decision rejecting claims by
former HBO & Co. shareholders seeking damages for the financial problems
that led to the ouster of several executives last year. Shares of McKesson
HBOC, the largest U.S. drug wholesaler, have lost more than half their
value since the April 28, 1999, disclosure that HBO had prematurely booked
more than $ 40 million in sales. (The Atlanta Journal and Constitution,
September 19, 2000)


MICROSOFT: CA Judge Regards Some Victories As Giveaways; Fd Case Goes on
------------------------------------------------------------------------
The Microsoft Corp. may be on a losing streak in its epic antitrust battle
with the federal government, but the software giant is winning most of the
early skirmishes in a war with legions of consumers who have filed private
actions against the company.

Microsoft is facing no fewer than 137 antitrust class actions filed in
federal and state courts across the country by consumers who claim they
were overcharged for the company's software. The stakes are high. If the
company loses at trial or is forced to settle even a small number of these
cases, it would probably have to shell out billions of dollars in damages.

Thus far, Microsoft has enjoyed a string of victories, quietly winning
dismissals in seven states since July. But in late August, the plaintiffs
won an early round in one case when a California state judge permitted the
litigation to go forward as a class action.

Digging in against a small battalion of 80 plaintiffs lawyers working on
the private cases, Microsoft has deployed at least two dozen law firms
around the nation on its defense team. They are led by David Tulchin, a
partner at New York's Sullivan & Cromwell, and by in-house lawyer Richard
Wallis.

Leading the anti-Microsoft charge are two of the best-known plaintiffs
lawyers in the nation-coordinating counsel Michael Hausfeld of D.C.'s
Cohen, Milstein, Hausfeld & Toll and Stanley Chesley of Cincinnati's Waite,
Schneider, Bayless & Chesley.

More than 60 of the cases have been consolidated in U.S. District Court in
Baltimore before Judge J. Frederick Motz. Microsoft filed a motion in July
to dismiss this mammoth case.

At this early stage of litigation that could last well into the decade,
both sides are expressing confidence. "We feel very secure that consumers
were not harmed by any of Microsoft's activities," says the Redmond,
Wash.-based Wallis. "At the end of the day, the question is, 'Did Microsoft
overcharge consumers?' Microsoft has not overcharged consumers." Hausfeld
replies, "I think Microsoft has serious exposure."

Because so much of the litigation is now in Baltimore, Microsoft brought in
litigator Michael Brockmeyer of Piper Marbury Rudnick & Wolfe's home office
as a prominent member of its defense team. Brockmeyer declines comment.

Another key Microsoft litigator is former Federal Trade Commission member
Mary Azcuenaga, now a partner at the D.C. office of San Francisco's Heller
Ehrman White & McAuliffe. Heller Ehrman represents Microsoft in many
antitrust matters in California.

Azcuenaga says her task is not to appear in court so much as "to look at
the government's case (before U.S. District Judge Thomas Penfield Jackson)
and to see how it relates to the class actions. They are all based on Judge
Jackson's decision, so we need to understand that first."

But before Microsoft argues the substance of the antitrust laws in the
private cases and tries to show that Jackson was wrong, it is making
several procedural arguments early and often.

(Jackson's ruling has been suspended while the U.S. Supreme Court decides
whether it will accept an immediate appeal, as the Department of Justice
has urged, or lets the U.S. Court of Appeals for the D.C. Circuit rule on
the matter first, as Microsoft prefers.)

                         Illinois Brick Is Back

Thus far, Microsoft's chief weapon in the consumer cases has been an
obscure but powerful antitrust concept known as the indirect purchaser
doctrine. The doctrine was established in the 1977 Supreme Court decision
in Illinois Brick v. Illinois. It provides that customers can win money
damages for antitrust violations only if they bought the product in
question directly from the alleged antitrust violator, in this case
Microsoft.

People or companies that purchased products from a wholesaler, a retailer,
or another go-between are out of luck.

Microsoft's software is not sold directly to computer users, but is loaded
onto machines that are made by such companies as IBM, Dell, or Hewlett-
Packard. The computers are then sold in stores or by mail. So the Illinois
Brick decision, which interprets the federal Sherman Act, goes a long way
toward knocking out consumers' claims, as long as a court finds that it
applies.

But all 50 states have their own antitrust laws as well, and many of the
private cases against Microsoft were filed under these state laws. Most,
but not all, of the state statutes provide that courts should be guided by
federal antitrust law. On July 21, in a strongly worded decision, a
Kentucky state judge ruled that "this court adopts the holding of Illinois
Brick and rules that indirect purchasers have no standing." Judge Judith
McDonald-Burkman of Jefferson Circuit Court in Louisville also ruled that
whatever antitrust laws Microsoft might conceivably have violated, it had
not caused harm to people who bought computers that ran its software.
"Microsoft may have done wrong, but not to these plaintiffs," she wrote in
dismissing the case.

However, 17 states, including California, have passed laws that eliminate
the indirect purchaser defense in their state courts. That gives consumers
a better shot at preventing their cases from being dismissed and increases
the chances that they can eventually go to trial.

"We have other arguments to make in these 17 states," says Wallis. "We will
contend that it is very rare for a court to permit a class action in an
antitrust case. Most courts have said you have to look at the damages on a
purchaser-by-purchaser basis."

                       A Loss in San Francisco

Microsoft's arguments along these lines were rejected on Aug. 29 by Judge
Stuart Pollak of the California Superior Court in San Francisco.

"Most consumers have little incentive to litigate independently since the
costs of litigation undoubtedly would overwhelm their potential recovery. .
. . Under the circumstances, the superiority of a class action is
apparent," Pollak wrote.

Plaintiffs lawyer Hausfeld says there will be more rulings like Pollak's.
"If Microsoft is looking at the result of a class certification motion as
either a victory or a setback, they will have a lot of setbacks," he says.
The seven recent victories, Hausfeld adds, "were almost giveaways. They
were in states where cases probably shouldn't have been filed in the first
place, given the state of the law."

No one expects a trial in any of these cases until late 2001 at the
earliest, and a good deal will depend on whether Judge Jackson's ruling
eventually holds up on appeal. (By Jonathan Groner, editor at large of
Legal Times, pubblished September 18, 2000)


MP3.COM: Two Shareholders File Derivative Suits in San Diego
------------------------------------------------------------
Two shareholders have filed lawsuits against the MP3.com digital music
company, which already is fighting a legal battle against the recording
industry's Universal Music Group. Both lawsuits were filed late last week
in San Diego Superior Court by attorney William Lerach, a member of a San
Diego law firm that pioneered the shareholder lawsuit.

A federal judge in New York ruled earlier this month that MP3.com violated
copyright laws when it posted CDs on its MyMP3.com service without first
obtaining licenses. The court awarded Universal Music Group $25,000 per CD,
a penalty that could reach $250 million.

MP3.com plans to appeal the case. Chief operating officer Robin Richards,
said, "We feel that both complaints are without merit and we intend to
contest them vigorously." The company has insurance for shareholder
lawsuits, officials said.

The online music company has seen its stock price tumble with its mounting
legal troubles. Shares that had reached a yearly high of $64.63 were
trading at $5.06 at the start of trading Tuesday. Financial analysts warned
of potential shareholder lawsuits after the judge's ruling.

At the beginning of the year, MP3.Com was sued by recording companies, as
previously reported in the CAR.

Shareholder lawsuits normally are served under class-action status, but a
different legal tactic, called "shareholder derivative complaints," are
being used in the MP3.com lawsuits. Such suits are filed on behalf of a
shareholder and the company against top corporate officials. For these
cases, MP3.com and the two shareholders are the plaintiffs against the
company's executives and some directors. (The Associated Press State &
Local Wire, September 19, 2000)


PLACER NIUGINI: Papua New Guinea Investigates Deadly Gold Mine Illnesses
------------------------------------------------------------------------
Poisonous waste from the giant Porgera gold mine is to blame for a mystery
illness that has killed 120 people over the last decade, a Papua New Guinea
politician charged Tuesday.

Opis Papo, from the highlands constituency where the mine is located, told
parliament that local landowners were considering launching a class action
against the mine which is operated by Placer Niugini Ltd. Papo said studies
conducted by a number of medical and scientific experts had confirmed the
deaths of the villagers, at the headlands of the Strickland River, were
caused by water poisoning.

Health authorities are also investigating another strange affliction that
has broken out in low-lying Gulf Province over the past two months, leaving
63 people dead and 500 extremely ill.

Officials in Kikori district have said the 63 died as a result of drinking
water that contained minerals well above safe levels. The source of the
contamination remains unclear, particularly as Kikori lies hundreds of
kilometres from any mining activity and its waterways are not linked with
rivers that take mine tailings.

Prime Minister Mekere Morauta told parliament that while he was aware of
the potential for some environmental damage in any mining activity, the
seriousness of the damage claimed by Papo was extremely worrying. "If they
are true it is not acceptable to the government that this level of
contamination has been allowed to take place, and resulting in direct
deaths of Papua New Guineans, if that's true. "I will take the questions on
board and ask the minister for environment to make a detailed statement
later this week," he said.

Placer Niugini managing director Evert vanden Brand dismissed the claims as
"politically motivated" and said they had been made in the past and
disproved each time. "We have reason to say this (mine waste) is not the
reason the people are dying," he said, adding that he believed the deaths
were related to outbreaks of infectious disease.

Porgera wastes were well treated and analysed before being dumped and the
mine's disposal system had been studied and approved by international
experts, he said.

A medical symposium here last week was told that the 120 people who died at
the headwaters of the Strickland over the decade suffered symptoms which
included bleeding, abdominal pains and swelling. Dr Gerard Saleu, who
prepared the paper on the deaths, said two anthropology students had first
reported the disease in 1998 but no attention was given to the outbreak
until recently.

Dr Saleu said the symptoms developed within 24 hours of villagers consuming
protein foods like pork, fish, the cassowary bird and bamboo shoots. Their
lips and other body parts swelled, their skin blistered and peeled and they
passed blood in their vomit and urine. They also suffered from jaundice,
conjunctivitis and fever.

In Kikori, the site of the other mystery disease, provincial governor
Riddler Kimave said the deaths occurred at seven villages over the past two
months. Kikori district hospital was packed with sick people seeking
treatment for symptoms including headaches, diarrhoea and chills, he said.
A medical team has set off for the isolated region to verify the claims and
is expected to report back by the end of this week. "We have yet to confirm
if this is a viral disease or is caused by poisoning of the water system,"
Kimave said. "The team will gather water samples and blood slides to bring
back for further tests."

Ian Walsh of the National Analysis Laboratory, who conducted the tests,
said the sample he received contained a heavy concentration of iron and was
undrinkable. The contamination could be caused by any number of reasons,
including "natural phenomenon", he said. (Agence France Presse, September
19, 2000)


SAFARI MEDIA: Cotchett and Haralson Files Securities Suit in Arizona
--------------------------------------------------------------------
A class action lawsuit was filed on Aug. 30, 2000 in the Superior Court of
the State of Arizona in and for Pima County, Cause No. C20004513. The name
of the case is Jonathan Hodson, individually and on behalf of all others
similarly situated, Plaintiff vs. Safari Media Inc., a Delaware
Corporation, Thuc Nguyen, Maryanne Chisholm, Mark Fillmore Chisholm, et al.

The action is filed on behalf of a class of plaintiffs which includes all
persons, other than officers, directors or affiliates of the defendants,
who purchased stock or invested in Safari Media Inc. between Aug. 30, 1997
and the date of the filing of the complaint.

The action asserts claims of violation of the Arizona state securities
laws, breach of fiduciary duty, fraud and misrepresentation. The claims are
based on an alleged pattern of false statements and omissions by the
defendants about the business and value of Safari Media Inc., including
false claims that the securities were properly offered under Regulation D;
false representations that arrangements were being made to list the
securities on a national exchange; false representations that Safari Media
was being acquired by or merging with a Japanese technology company; false
representations of the existence of valuable government contracts, and
false financial statements.

Contact: Cotchett, Pitre & Simon Mark C. Molumphy, 650/697-6000 or
Haralson, Miller, Pitt & McAnally Lindsay Brew, 520/792-3836


SOTHEBY'S HOLDINGS: Has Duty to Tell Investors Alleged Illegal Conduct
----------------------------------------------------------------------
A securities fraud class action was brought by plaintiffs, who had
purchased common stock from Sotheby's Holdings Inc. Plaintiffs alleged that
the public statements made by Sotheby's were false and misleading in that
they failed to disclose that Sotheby's commission revenues were derived
from an illegal antitrust conspiracy with its primary auction competitor.
Sotheby's moved to dismiss, contending that there was no general duty under
the Securities and Exchange Commission's regulations for a corporation to
disclose uncharged illegal conduct. The court, citing the Roeder and In re
Par Pharm cases, stated that when a corporation makes a disclosure, there
is a duty to make it complete and accurate, and this duty to disclose
exists even when the omitted information relates to alleged illegal
conduct. Thus, it denied the motion to dismiss.

Judge Cote

[Footnotes Deleted for Publication]

MATTER OF SOTHEBY'S HOLDINGS, INC. QDS:02762937 - In this securities fraud
class action, plaintiffs all persons and entities who purchased Sotheby's
Class A common stock ("common stock") from February 11, 1997 to February
21, 2000 ("the Class Period") allege that defendants, Sotheby's Holdings,
Inc., its subsidiary, Sotheby's Inc. (individually and collectively
"Sotheby's"), and certain of Sotheby's present and former executive
officers and directors ("the Individual Defendants"), misrepresented
material facts in their public statements, reports to shareholders and SEC
filings relating to the existence of competition in the industry and the
source and growth of Sotheby's commission rates, auction sales, revenue and
earnings. Specifically, plaintiffs allege that the public statements made
by the defendants were false and misleading in that they failed to disclose
that Sotheby's commission revenues and, therefore, a material portion of
its profit margins and net income, were derived from an illegal antitrust
conspiracy. Plaintiffs assert that the defendants' actions violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), 15 U.S.C. @@ 78j(b) and 78t(a), and Rule 10b-5 promulgated
thereunder. All defendants have submitted motions to dismiss the complaint
in its entirety. For the reasons discussed below, the motions of defendants
Williams S. Sheridan ("Sheridan"), Joseph A. Domonkos ("Domonkos"),
Patricia A. Carberry ("Carberry"), and Cyndee L. Grillo ("Grillo")
(collectively, the "Financial Officer Defendants") and of defendant
Sotheby's, Inc. are granted; the motions of defendant Sotheby's Holdings,
Inc. and of defendants A. Alfred Taubman ("Taubman") and Diana D. Brooks
("Brooks") are denied.

                                 The Parties

The Consolidated Amended Class Action Complaint ("Complaint") alleges the
following facts. Defendant Sotheby's Holdings, Inc. primarily serves as a
holding company and parent company of defendant Sotheby's, Inc. During the
Class Period, Sotheby's, Inc. conducted auctions in the United States
through its auction house located in New York, New York. Sotheby's is one
of the world's largest auctioneers of fine arts, antiques and collectibles.
Its aggregate auction sales in 1998 and 1999, were approximately $ 1.940
billion and $ 2.259 billion, respectively.

Defendant Taubman was Chairman of the Board of Directors of Sotheby's
Holdings, Inc. between 1983 and approximately February 21, 2000. Between
1983 and the present, Taubman controlled more than 60 percent of the voting
stock of Sotheby's Holdings, Inc. and owned and still owns in excess of 22
percent of its equity. Taubman signed Sotheby's annual reports filed with
the SEC for fiscal years 1996 and 1997. Taubman resigned his position as
Chairman on February 20, 2000, soon after government investigations into
Sotheby's business practices became public.

Defendant Brooks was the President and Chief Executive Officer of Sotheby's
Holdings, Inc. and Sotheby's, Inc. between April 1994 and approximately
February 21, 2000. Brooks signed Sotheby's annual reports filed with the
SEC for fiscal years 1997 and 1998. Brooks also resigned soon after the
government investigations were made public.

Defendants Sheridan, Domonkos, Carberry and Grillo served in various
capacities as financial officers at Sotheby's at relevant times during the
Class Period. They signed Sotheby's quarterly and/or annual reports during
their employment.

                    The Price-Fixing Agreement

Christie's International PLC ("Christie's") is one of the world's largest
auction houses. Together with Sotheby's, the two auction houses control an
estimated 95 percent of the $ 4 billion worldwide auction market. Sotheby's
and Christie's generally function as agents accepting property on
consignment from their clients ("Auction Items"), selling the Items at
auction in return for a "seller's commission," based on the auction sale's
price, and a "buyer's premium," a predetermined percentage fee.

Prior to the early 1980s, Sotheby's and Christie's only charged a
commission to the seller of Auction Items. In the early 1980s, Christie's
began requiring that all buyers pay a premium of 10 percent on Auction
Items. Approximately two years later, Sotheby's instituted a premium fee of
10 percent for all buyers. Prior to entering into the commission-fixing
scheme alleged in the complaint, Sotheby's and Christie's competed with
each other in aggressive price-cutting.

In the early 1990s, as the art market went into recession and revenues at
Sotheby's and Christie's dropped, the two auction houses competed for major
consignments by reducing the official 10 percent seller commissions to
zero, effectively wiping out profits. Thereafter, Sotheby's and Christie's
agreed to fix the prices of their auction services in the United States.
They agreed to increase the buyer's premium, and in March and April, 1995,
the two houses instituted identical changes to their seller's commission
policy, changing from a flat commission to a variable one based on the
value or selling price of Auction Items. The complaint describes further
evidence of collusion in the form of shared preferred customer lists that
identified clients that were spared from paying the new fees.

                      The Government Investigation

In the Spring of 1997, the United States Department of Justice ("DOJ")
launched an antitrust investigation into collusive and price-fixing
practices between Sotheby's and Christie's and empaneled a grand jury.
Subpoenas were issued in the Spring of 1997 to Sotheby's, Christie's and
others that called for documents going back to January 1, 1992. According
to an article in the New York Times dated February 1, 2000, the Government
required Sotheby's to provide the names of officials or employees who had
"direct or indirect responsibility, including management-oversight
responsibility, for setting, recommending or negotiating consignors'
commissions and/or buyers' premiums." In late January and during February
2000, Christie's disclosed that the Antitrust Division of the DOJ had
granted Christie's "conditional amnesty" under the Antitrust Division's
Corporate Leniency Policy. Under this policy, the corporation or individual
is admitted into the program only if it reports "illegal activity" and
"reports the wrongdoing with candor and completeness."

                         The Misleading Statements

The Complaint alleges that Sotheby's publicly touted the positive impact of
the new commission structure and increased auction sales as the sources of
improved revenues, when the real cause of the increased profits was the
illegal collusion. The Complaint also alleges that Sotheby's issued
statements misrepresenting the level of competition in the auction market.
To support these allegations, plaintiffs point to specific statements,
including language in Sotheby's 1996, 1997 and 1998 Annual Reports.
Sotheby's stock rose from $ 14 a share in 1995, to a high of $ 47 in 1999.
Never during that time did Sotheby's disclose any arrangement or agreement
with Christie's to fix premium and commission charges.

                                 Discussion

The Court may grant a motion to dismiss pursuant to Rule 12(b)(6), Fed. R.
Civ. P., only if " 'it appears beyond reasonable doubt that the plaintiff
can prove no set of facts in support of his claim which will entitle him to
relief.' " Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994) (quoting
Conley v. Koenig, 355 U.S. 41, 45-46 (1957)). In considering the motion,
the court must take "as true the facts alleged in the complaint and draw[]
all reasonable inferences in the plaintiff's favor." Jackson Nat'l Life
Ins. v. Merrill Lynch & Co. 32 F.3d 697, 699-700 (2d Cir. 1994). The court
can dismiss the claim only if, assuming all the facts alleged to be true,
plaintiffs still fail to plead the basic elements of a cause of action.

Primary Violations of Section 10(b)

Section 10(b) of the Exchange Act provides that:

(a) It shall be unlawful for any person, directly or indirectly, by the use
of any means or instrumentality of interstate commerce or of the mails, or
of any facility of any national securities exchange-

(b) To use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange or any security not
so registered, any manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the Commission may prescribe
as necessary or appropriate in the public interest or for the protection of
investors.

15 U.S.C. @ 78j(b). SEC Rule 10b-5 "more specifically delineates what
constitutes a manipulative or deceptive device or contrivance." Press v.
Chemical Inv. Servs. Corp., 166 F.3d 529, 534 (2d Cir. 1999). Rule 10b-5
requires the following for a plaintiff to maintain a misrepresentation
claim: "in connection with the purchase or sale of securities, the
defendant, acting with scienter, made a false material representation or
omitted to disclose material information and that plaintiff's reliance on
defendant's action caused [plaintiff] injury." Id. (quoting In re Time
Warner Inc. Sec. Litig., 9 F.3d 259, 264 (2d Cir. 1993)) (brackets in
original). Securities fraud claims are subject to the requirements of Rule
9(b), Fed. R. Civ. P., which provides that "[in] all averments of fraud or
mistake the circumstances constituting fraud or mistake shall be stated
with particularity." See Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000).

                         Duty to Disclose

All of the defendants contend that the complaint is defective because the
plaintiffs allege no circumstances giving rise to a duty under the
securities laws to disclose the alleged collusive conduct with Christie's.
Plaintiffs respond that Sotheby's made a number of false or misleading
affirmative statements in public filings and in press releases as to the
level of competition in the industry and the reasons for Sotheby's growth
in revenues and earnings that triggered the requirement to disclose the
illegal conduct.

The Complaint alleges misrepresentations with sufficient particularity to
withstand a motion to dismiss. Specifically, the Complaint alleges that
defendants' statements in Sotheby's Annual Reports on Form 10-K that there
was "intense" competition with its "primary auction competitor,"
Christie's, and that the amount of commission proposed by auction houses
was a factor in the decision made by a seller of Auction Items, were false
and misleading because the price-fixing agreement between Sotheby's and
Christie's had eliminated price competition between the two houses. A jury
could conclude that these statements could have led reasonable investors to
believe that Sotheby's and Christie's were competing with each other in the
usual manner, that is, through price.

Defendants rely on a series of cases holding that there is no general duty
under SEC regulations for a corporation to disclose uncharged illegal
conduct. See, e.g., Roeder v. Alpha Indus., Inc., 814 F.2d 22, 27 (1st Cir.
1987); United States v. Matthews, 787 F.2d 38, 49 (2d Cir. 1986); United
States v. Crop Growers Corp., 954 F. Supp. 335, 347 (D.D.C. 1997). These
cases reflect the principle that " 'so long as uncharged criminal conduct
is not required to be disclosed by any rule lawfully promulgated by the
SEC, nondisclosure of such conduct cannot be the basis of a criminal
prosecution.' " Crop Growers, 954 F. Supp. at 346 (quoting Matthews, 787
F.2d at 49).

Generally, "an omission is actionable under the securities laws only when
the [defendant] is subject to a duty to disclose the omitted facts." Time
Warner, 9 F.3d at 267; see also Basic Inc. v. Levinson, 485 U.S. 224, 239
n.17 (1988). "A duty to disclose arises whenever secret information renders
prior public statements materially misleading." Time Warner, 9 F.3d at 268.
A statement is materially misleading if "there is 'a substantial likelihood
that the disclosure of the omitted fact would have been viewed by the
reasonable investor as having significantly altered the 'total mix' of
information available.' " Id. at 267-68 (quoting TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 499 (1976)). Thus, "[when] a corporation does
make a disclosure-whether it be voluntary or required-there is a duty to
make it complete and accurate." Roeder, 814 F.2d at 26. This duty to
disclose exists even where the omitted information relates to allegedly
illegal conduct. See In re Par Pharm., Inc. Sec. Litig., 733 F. Supp. 668,
675 (S.D.N.Y. 1990) ("The illegality of corporate behavior is not a
justification for withholding information that the corporation is otherwise
obligated to disclose."); Ballan v. Wilfred Am. Ed. Corp., 720 F. Supp.
241, 249 (E.D.N.Y. 1989) ("The fact that a defendant's act may be a crime
does not justify its concealment.").

                            Sotheby's, Inc.

Sotheby's, Inc., argues that because the plaintiffs do not allege that any
of the misleading statements were made by Sotheby's, Inc. and because no
aiding and abetting liability exists under Section 10(b), see Central Bank
v. First Interstate Bank, 511 U.S. 164, 177-78 (1994), the claim against
Sotheby's, Inc. must be dismissed. For primary liability to attach to a
defendant, the misrepresentation must "be attributed to that specific
actor." Wright v. Ernst & Young LLP, 152 F.3d 169, 175 (2d Cir. 1998). A
misrepresentation may be attributed to a corporate defendant if it was made
by or on behalf of the corporation. See Time Warner, 9 F.3d at 265 (Rule
9(b) requires plaintiff to identify the corporate insider in its pleadings
to allege corporate liability based on press reports attributed to
anonymous corporate insiders); United States v. Jacques Dessange, Inc., 103
F. Supp. 2d 701, 705-06 (S.D.N.Y. 2000) (DLC) (holding that corporation may
be criminally liable for actions of a supervisory employee where the
employee's actions "were for the benefit of and authorized by the company")
(quoting United States v. Paccione, 949 F.2d 1183, 1200 (2d Cir. 1991)).

A primary violator of Section 10(b) is " 'any actor who participated in the
fraudulent scheme.' " SEC v. U.S. Environmental, Inc., 155 F.3d 107, 112
(2d Cir. 1998) (quoting SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1471
(2d Cir. 1996)). A finding that the defendant communicated the
misrepresentation directly to the plaintiff is not necessary. See Wright,
152 F.3d at 175; In re Kidder Peabody Sec. Litig., 10 F. Supp. 2d 398, 407
(S.D.N.Y. 1998). If a plaintiff "can show that defendants were the original
and knowing source of a misrepresentation and that defendants knew or
should have known that [that] misrepresentation would be communicated to
investors, primary liability should attach." 10 F. Supp. 2d at 407
(emphasis added); see also U.S. Environmental, 155 F.3d at 112
(distinguishing cases where liability did not attach because defendant who
was the source of the misrepresentation had no legal duty to disclose or
prevent a fraudulent act).

The Complaint does not specifically allege that Sotheby's, Inc. made any
false or misleading statements. Instead, the statements alleged to be
actionable are identified as having been made by "Sotheby's" - which is
defined to include both the parent and subsidiary - or by an individual who
was an officer of both companies. An examination of the Annual Reports,
which are incorporated through the references made to them in the
Complaint, see supra n.1, indicate that they were filed by and on behalf of
Sotheby's Holdings, Inc. The press reports quoted in the Complaint do not
identify the corporate speaker as someone from Sotheby's, Inc. When there
is an identification, it is to Sotheby's Holdings, Inc. Regarding
Sotheby's, Inc., the Complaint alleges only that it is a subsidiary of
Sotheby's Holdings, Inc., which is its parent and holding company, and that
Sotheby's, Inc. conducts auctions. There are no allegations that Sotheby's,
Inc. was the original and knowing source of any misleading statements.

Plaintiffs argue that from the Complaint's allegations, it is reasonable to
infer that "the financial information and statements on competition in the
auction business... were endorsed by, the subsidiary." Such an inference is
inappropriate, especially in light of the heightened pleading requirements
for securities fraud claims. Furthermore, even were the Court to make this
inference, absent additional allegations that any information transmitted
to Sotheby's Holdings, Inc. by Sotheby's, Inc. was itself false and
misleading and that its source knew it to be such, plaintiffs would still
fail to state a claim against Sotheby's, Inc. See Kidder, 10 F. Supp. 2d at
407. Because plaintiffs fail to allege any act or omission on the part of
Sotheby's, Inc. sufficient to subject it to liability under Section 10(b),
the complaint as to Sotheby's, Inc. is dismissed.

                         The Individual Defendants

The Individual Defendants contend that plaintiffs have not sufficiently
pled the elements of a Section 10(b) claim to link the Individual
Defendants to the alleged fraud. To satisfy the requirements of Rule 9(b),
Fed. R. Civ. P., in pleading a fraud claim, a complaint must " '(1) specify
the statements that the plaintiff contends were fraudulent, (2) identify
the speaker, (3) state where and when the statements were made, and (4)
explain why the statements were fraudulent.' " Acito v. IMCERA Group, Inc.,
47 F. 3d 47, 51 (2d Cir. 1995) (quoting Mills v. Polar Molecular Corp., 12
F. 3d 1170, 1175 (2d Cir. 1993)); see also Novak, 216 F.3d at 306. In
pleading a securities fraud violation, a complaint must allege that a
defendant acted with scienter. See Novak, 216 F.3d at 306 (collecting
cases). When pleading scienter, "with respect to each act or omission"
alleged to violate the securities laws, the complaint must "state with
particularity facts giving rise to a strong inference that the defendant
acted with the required state of mind." 15 U.S.C. @ 78u-4(b)(2). The Second
Circuit has held that to satisfy this scienter requirement, "a complaint
may (1) allege facts that constitute strong circumstantial evidence of
conscious misbehavior or recklessness, or (2) allege facts to show that
defendants had both motive and opportunity to commit fraud." Rothman v.
Gregor, No. 00-7005, 2000 WL 959484, at *7 (2d Cir. July 11, 2000); see
also In re Carter-Wallace Sec. Litig., 220 F.3d 36, - (2d Cir. 2000).

A plaintiff may sufficiently plead conscious misbehavior through
allegations of deliberate illegal conduct. See Novak, 216 F.3d at 308. To
plead recklessness, a plaintiff must allege facts showing conduct that was
"highly unreasonable, representing an extreme departure from the standards
of ordinary care to the extent that the danger was either known to the
defendant or so obvious that the defendant must have been aware of it."
Rothman, 2000 WL 959484, at *8 (quotation omitted). Recklessness has been
sufficiently pled where there are specific allegations that a defendant
knew of facts or had access to information contradicting his public
statements, or where he failed to review information that he had a duty to
monitor, or where he ignored obvious signs of fraud. See Novak, 216 F.3d at
308. "Where plaintiffs contend [a] defendant[] had access to contrary
facts, they must specifically identify the reports or statements containing
this information." Id. at 309.

To plead facts supporting a strong inference of the requisite scienter by
showing motive and opportunity, a plaintiff must allege facts showing
"concrete benefits that could be realized by one or more of the false
statements and wrongful nondisclosures alleged," and "the means and likely
prospect of achieving the concrete benefits by the means alleged." Press,
988 F. Supp. at 390 (quoting Shields, 25 F.3d at 1129). General allegations
of motive "possessed by virtually all corporate insiders" are insufficient
to raise a strong inference of fraudulent intent. Novak, 216 F.3d at 307.

In its recent decision in Novak v. Kasaks, 216 F.3d 300, after summarizing
prior case law, the Second Circuit explained that a complaint pleads facts
sufficient to raise a "strong inference" of fraudulent intent where it
sufficiently alleges that a defendant:

benefitted in a concrete and personal way from the purported fraud...;
engaged in deliberately illegal behavior...; (3) knew facts or had access
to information suggesting that [her] public statements were not
accurate...; or (4) failed to check information [she] had a duty to
monitor.

Id. at 311.

                      The Financial Officer Defendants

The plaintiffs argue that they have alleged facts sufficient to raise a
strong inference of recklessness on the part of the Financial Officer
Defendants. There are no allegations of the scienter of the Financial
Officer Defendants apart from conclusory allegations regarding the
Individual Defendants as a group. For example, the Complaint alleges that
the Individual Defendants were "aware that the statements being made by
Sotheby's" were misleading, that they "knew or were grossly reckless in not
recognizing that the disclosures in public filings with the SEC... were
blatantly false," and that "their executive and/or directorial positions
provided them with access to internal corporate documents and
information... and allowed them to have conversations and meetings with
other corporate officers and employees." The Complaint does not allege that
any of the Financial Officer Defendants possessed any specific knowledge of
the alleged illegal conduct, does not allege the existence of any specific
documents or other information contradicting their public statements that
were available to the Financial Officer Defendants, and does not allege
facts demonstrating that the Financial Officer Defendants failed to review
or check information that they had a duty to monitor or that they ignored
obvious signs of fraud, see Novak, 216 F.3d at 308.

Apparently conceding these failings, the plaintiffs argue that those such
as the Financial Officer Defendants who are in senior positions of a
corporation are presumed to be "knowledgeable about significant practices
at their company." It is well established that boilerplate allegations that
defendants knew or should have known of fraudulent conduct based solely on
their board membership or executive positions are insufficient to plead
scienter. See Novak, 216 F.3d at 309; In re Health Management Sys. Inc.
Sec. Litig., No. 97 Civ. 1865 (HB), 1998 WL 283286, at *6 (S.D.N.Y. June 1,
1998); In re WRT Energy Sec. Litig., No. 96 Civ. 3210 (JFK), NO. 96 Civ.
3611 (JFK), 1997 WL 576023, at *14 (S.D.N.Y. Sept. 15, 1997); Duncan v.
Pencer, No. 94 Civ. 0321 (LHP), 1996 WL 19043, at *14 (S.D.N.Y. Jan. 18,
1996). The facts demonstrating the requisite scienter must be pleaded with
particularity, thus, in attempting to establish scienter by showing
recklessness or conscious misbehavior, conclusory allegations - that
Defendants "knew but concealed" some things, or "knew or were reckless in
not knowing" other things - do not satisfy the requirements of Rule
9(b).... [Such] allegations are "so broad and conclusory as to be
meaningless."

Shields, 25 F.3d at 1129 (quoting Decker v. Massey-Ferguson, Ltd., 681 F.2d
111, 119-20 (2d Cir. 1982)). Because the allegations of the Complaint do
not raise a strong inference of fraudulent intent on the part of the
Financial Officer Defendants, Count I of the Complaint must be dismissed as
to them.

                            Taubman and Brooks

The Complaint does, however, allege facts sufficient to raise a strong
inference that Taubman and Brooks acted with fraudulent intent. The
Complaint alleges that both Taubman and Brooks were directly involved in
arranging the illegal price-fixing agreement, and that each of them signed
10-Ks that, in light of the illegal agreement, they knew were false or
misleading. Allegations that defendants had actual knowledge that their
statements were false or misleading are sufficient to plead scienter. See
Novak, 216 F.3d at 308.

                  Section 20(a) of the Exchange Act

In Count II of the Complaint plaintiffs assert a claim of secondary
liability against the Individual Defendants under Section 20(a) of the
Exchange Act. The Individual Defendants contend that they are not control
persons within the meaning of Section 20(a). To establish a prima facie
case of liability under Section 20(a), a plaintiff must show:
a primary violation by a controlled person; (2) control of the primary
violator by the defendant; and (3) "that the controlling person was in some
meaningful sense a culpable participant" in the primary violation.

Boguslavsky v. Kaplan, 159 F.3d 715, 720 (2d Cir. 1998) (quoting SEC v.
First Jersey Securities, Inc., 101 F.3d 1450, 1472 (2d Cir. 1996)). Control
over a primary violator may be established by showing that "the defendant
possessed 'the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities,
by contract, or otherwise.' " First Jersey, 101 F.3d at 1473 (quoting 17
C.F.R. @ 240.12b-2). Actual control over the wrongdoer and the transactions
in question is necessary for control person liability. See In re Blech Sec.
Litig., 961 F. Supp. 569, 586-87 (S.D.N.Y. 1997). Thus, officer or director
status alone does not constitute control. See Livent, 78 F. Supp. 2d at 221
(collecting cases).

                     Financial Officer Defendants

As discussed above, the Complaint contains no detailed allegations
regarding the state of mind of the Financial Officer Defendants in making
the alleged misstatements. For this same reason, the Section 20(a) claim
against the Financial Officer Defendants must be dismissed for failure to
allege culpable participation in the fraud. See Livent, 78 F. Supp. 2d at
222 (dismissing Section 20(a) claims where plaintiffs did not adequately
allege scienter element of Section 10(b) claim against those defendants).

The Complaint does state a claim for control person liability against
Taubman and Brooks.

                                Conclusion

For the reasons stated, the motions of Sotheby's, Inc. and the Financial
Officer Defendants are granted and the claims against them are dismissed
without prejudice; the motions of Sotheby's Holdings, Inc. and of Taubman
and Brooks are denied. The plaintiffs having requested leave to amend to
cure any deficiencies in their pleading, any amended complaint shall be
filed by September 15, 2000. (New York Law Journal, September 8, 2000)


WORLDCOM, DIGEX: Shareholders Sue over Worldcom Purchase of Intermedia
----------------------------------------------------------------------
Eight shareholder lawsuits have been filed against Digex, Intermedia
Communications and WorldCom alleging WorldCom's purchase of Intermedia
harmed Digex shareholders and should be blocked. Suits said Digex officers
rejected $ 120-per-share bid for company from Exodus when Digex stock was
trading in mid-$ 80s, and accepted WorldCom's $6 billion bid for
Intermedia, which owns majority of Digex. WorldCom's offer did propose to
pay Intermedia shareholders 70% premium over market. "Intermedia, with the
acquiescence of the individual defendants, is engaging in self- dealing and
not acting in good faith toward plaintiff and the other members of the
staff," one lawsuit said. Suits seek class- action status, order enjoining
merger and unspecified damages. WorldCom declined to comment, and
Intermedia spokesman said company was aware of suits and expected to
prevail in court. (Communications Daily, September 19, 2000)


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