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            Thursday, September 28, 2000, Vol. 2, No. 189


ASBESTOS LITIGATION: Foundry Workers Get $17M in TX; Swan Will Appeal
BRIDGESTONE/FIRESTONE: Analysts Say Recall Could Cost over $2 Bil
BRIDGESTONE/FIRESTONE, FORD: At Least 36 States Join to Investigate
CREDIT CARDS: Lawsuit Targets American Express over Billing Practices
E.I. DUPONT: Employee Suing for Benefits Remove Suit to S.D. Iowa

FAULTY FURNACES: Have Caused Fires in CA; Agency Will Issue Warning
FHP INTERNATIONAL: Shareholders Drop Effort to Revive Securities Suit
GLIATECH IN: Anti-Scarring Gel Adcon-L Study Had Inadequate Supervision
HMOs: Aetna Agrees to Settle Securities Suit in PA for $82.5 Million
INDEPENDENT ENERGY: Rabin & Peckel Files Securities Suit in New York

INTEL CORP: FTC Ends Three-Year Probe on Business Practices
LENDERS: 3 Banks Named in Suit Filed by Consortium over Predatory Loans
MA DEPT.: Commission Will Hear Hispanic Social Workers' Complaint
NETSOLVE INC: Wolf Haldenstein Files Securities Lawsuit in Texas
OFFICEMAX INC: Milberg Weiss Files Securities Lawsuit in Ohio

ROLLINS INC: Tampa Residents Charge Improper Treatments for Termites
SILICON GRAPHICS: Discovery Goes on for '91 Alias Securities Case in CT
SILICON GRAPHICS: Discovery Proceeding for Securities Suit in CA Sp. Ct.
SOTHEBY'S HOLDINGS: Controlling Shareholder Taubman May Sell Stake
WAR VICTIMS: Japan Welcomes US Court Verdict Based on Peace Treaty

WORLDCOM INC: Promises Free Minutes Then Bill Later, CA Lawsuit Says


ASBESTOS LITIGATION: Foundry Workers Get $17M in TX; Swan Will Appeal
At the foundry, said their attorney Richard I. Nemeroff, each was exposed
to asbestos-containing products, including insulating and refractory
material, and each was ultimately diagnosed with asbestosis, a serious lung
disease connected to asbestos exposure.

The plaintiffs sued numerous makers and distributors of asbestos, which
settled before a trial, reported plaintiffs' co-counsel Troy Chandler. The
plaintiffs also sued Swan Transportation, parent of Tyler Pipe, charging
the company under a theory of negligent undertaking.

"The parent undertook the duty to provide a safe workplace," said Mr.
Nemeroff, "but Swan didn't do anything." In particular, he charged, Swan
failed to comply with Occupational Safety and Health Act rules on
protecting workers from toxic dust in the workplace.

There were paper masks available at the foundry, he said, "but the workers
were discouraged from using them and the masks were not put in a sanitary
location. The masks were scattered on the floor" of the foundry, he said.
"The workers were completely unprotected."

The defense contended that the plaintiffs did not have asbestosis, said
defense attorney Richard E. Griffin. Any exposure to asbestos in the Tyler
Pipe foundry was minimal and was from such sources as the insulated gloves
and protective clothing used by the workers, he said: "The plant does not
manufacture asbestos." In addition, he said, the Occupational Safety and
Health Administration "inspected the foundry one time for asbestos, and we
met the standards."

But on Aug. 25, a Dallas jury awarded the plaintiffs $ 17.04 million. Swan
will be entitled to set-offs of $ 1.2 million for previous settlements,
said Mr. Chandler. Mr. Griffin called the verdict "an injustice."

The judgment has not yet been entered. Swan will appeal.

Case Type: asbestos personal injury, negligent undertaking

Case: Blackburn v. Swan Transportation Co., No. 98-03696-F (Dist. Ct.,
Dallas Co., Texas)

Plaintiffs' Attorneys: Richard I. Nemeroff, Alan Rich and Troy Chandler, of
Dallas' Baron & Budd

Defense Attorneys: James L. Walker, of the San Antonio office, John
Lancaster, of the Dallas office, and Richard E. Griffin, of the Houston
office, of Dallas' Jackson Walker

Jury Verdict: $ 17.04 million

James E. Blackburn, Herman F. Ivy, Calvin Dews, Henry Barrett, Roosevelt
Green Sr., Joseph Davis and Johnnie Johnson all were longtime workers at
the Tyler Pipe Industries Inc. foundry in Tyler, Texas. (The National Law
Journal, September 25, 2000)

BRIDGESTONE/FIRESTONE: Analysts Say Recall Could Cost over $2 Bil
The financial damage from the Firestone tyre recall in the US could run to
more than Dollars 2bn if a wider recall sought by one of the main class
action lawsuits is implemented, analysts have estimated.

Working from industry statistics and assessments of litigation risks,
analysts at UBS Warburg are suggesting that the "all-in" cost of the
situation, to be borne predominantly by tyremaker Bridgestone/Firestone,
could be between Dollars 785m and Dollars 2.7bn range.

The analysts have also carried out the same calculation based on a larger
Firestone recall in 1978. That suggests that the amounts would be slightly
lower, in the Dollars 720m-Dollars 2bn range. The analysts also pointed out
that Firestone settled about two-thirds of the 1978 cases and won almost
one-quarter. Both sets of figures would include the cost of the recall
itself, as well as litigation expenses.

Bridgestone said shortly after the recall was announced in August that it
would take an immediate Dollars 350m charge to cover the costs of replacing
the 6.5m tyres. However, some analysts think this conservative and many are
more concerned about the harder-to-quantify legal liabilities. The numbers
at the upper end of the range assume that an additional, wider recall
sought by the Center for Auto Safety as part of the consumer organisation's
pending class action lawsuit, is implemented. This could add more than
Dollars 1bn to the bill.

There is still considerable concern among safety groups that unrecalled
16-inch tyres are also dangerous. They have also noted that Ford replaced
Firestone tyres of this size on sports utility vehicles in some overseas

Firestone maintains that the incident data do not justify a recall.

In a suit filed in US district court last month, the Center for Auto Safety
is seeking the recall of all Firestone ATX, ATX II and Wilderness tyres,
regardless of their size or place of manufacture.

The current recall covers all ATX and ATX II tyres in the size P235/75R15
produced in North America and all Wilderness AT tyres in size P235/75R15
made in Decatur, Illinois. (Financial Times (London), September 27, 2000)

BRIDGESTONE/FIRESTONE, FORD: At Least 36 States Join to Investigate
Attorneys general from 38 states and Puerto Rico are jointly investigating
how Bridgestone/Firestone and Ford Motor Co. handled the recall of 6.5
million tires, the tiremaker says. The combined effort, which includes
participation by Missouri and Illinois, could accelerate each state's
investigation and allow Firestone and Ford to deal with a single group
instead of individual states.

John Lampe, executive vice president of Bridgestone/Firestone, the
Nashville-based unit of Japan's Bridgestone Corp., said Tennessee Attorney
General Paul Summers told him that a group of several attorneys general
were leading the investigation and planned to meet in Nashville this week.
The company "will be open and fully cooperative with the working group in
sharing data and other background," Lampe said in a statement Monday.

Susan Krusel, a Ford spokeswoman, said Tuesday that the automaker had not
been notified of any collective investigation.

Under pressure from federal investigators, Firestone agreed last month to
recall Wilderness AT, ATX and ATX II tires because their treads were
peeling off at high speed and causing crashes. Investigators are looking at
the tires in connection with 101 deaths and hundreds of injuries, many
involving Ford Explorers.

Joe Case, spokesman for Ohio Attorney General Betty Montgomery, said
attorneys general and their legal officers had held conference calls and
shared information for several weeks.

Lampe said the tire company and the attorneys general planned a conference
call and a face-to-face meeting within the next two weeks. (St. Louis
Post-Dispatch, September 27, 2000)

CREDIT CARDS: Lawsuit Targets American Express over Billing Practices
A class action alleging unfair and misleading billing practices has been
filed against American Express on behalf of its Optima credit card

The suit, still in the preliminary stages, alleges that when customers
return items charged on their Optima card, the company deducts the purchase
from the balance charged at a lower interest rate rather than the balance
at the higher rate, thereby charging customers more because of the
difference in the interest rates.

Card members pay two interest rates for their debt balances -- 3.9% for
balance transfers from other credit cards and 14.99% for regular purchases.

The suit alleges that when Roger M. Lindmark, a Los Angeles attorney who is
the name plaintiff for the class, returned an $ 866 business office machine
charged on his card, the company credited it to the lower-interest balance
transfer category, not the regular purchase category. Thus Mr. Lindmark,
and presumably other Optima card members, paid additional interest of about
11%, despite being fully credited for the purchase.

The complaint also asserts that American Express improperly inflates the
cardholders' average daily balance by accruing interest each day on
outstanding debt balances. The papers say that the monthly interest charges
are increased by these allegedly inflated daily balances, and that both
figures increase the finance charges.

Andrew Hutton, a partner at Milberg Weiss Bershad Hynes & Lerach, in Los
Angeles, represents Mr. Lindmark and the class. He declined to put a figure
on the amount of relief being sought, but he estimates that as of 1998
there were 7 million Optima cardholders, who had average balances of about
$ 1,300. Mr. Hutton, a certified public accountant, said that he is looking
into other cases but declined to name which credit card companies they

American Express' answer is due in October. Attorney Julia Strickland, a
partner at Stroock & Stroock & Lavan in Los Angeles, referred questions
about the suit to an American Express public relations representative, who
declined comment. (The National Law Journal, September 25, 2000)

E.I. DUPONT: Employee Suing for Benefits Remove Suit to S.D. Iowa
A group of employees has filed a class-action suit against Pioneer Hi-Bred
International Inc. and its parent company, E.I. duPont de Nemours and
Company, seeking benefits alleged to be owed under a change-in-control plan
that was in place prior to the defendants' merger. Bublitz et al. v. E.I.
duPont de Nemours and Company et al., No. 4:00cv90247, notice of removal
filed (S.D. Iowa, May 16, 2000).

The suit was filed in Iowa District Court for Polk County on April 21,
2000, and removed by the defendants to U.S. District Court for the Southern
District of Iowa on May 16.

Named plaintiffs Ann E. Bublitz and Dorothy Pierce, who are upper-level
managers, assert that prior to the merger with DuPont, Pioneer adopted the
change-in-control plan in order to attract and retain highly qualified
employees who were essential to its success as a producer of agricultural
seed products. The CICP gives employees a contractual right to certain
benefits, according to the complaint, and is operative upon a change in the
control of the company and the involuntary termination of a plan
participant's employment. An involuntary termination of employment is
defined to include resignation or retirement for a stated good reason,
which is a written determination by an employee that he or she cannot in
good faith continue with job responsibilities, the suit states.

The plaintiffs characterize this individual, subjective determination as an
"easy trigger" for benefits. The suit alleges that the CICP also discusses
objective benefits triggers as constituting the stated good reason. These
triggers include a reduction in compensation and the failure to continue
bonus, benefit or compensation plans.

According to the suit, upon a plan participant's involuntary termination of
employment within three years of a change in control, the CICP provides for
a substantial lump-sum cash payment, as well as health and life insurance
coverage for 12 months. These benefits are payable regardless of whether
the change in control is hostile or friendly, the plaintiffs state.

The complaint further contends that prior to the execution of the merger
between the two defendant companies, DuPont insisted that the CICP be
altered to remove a "rabbi trust" requirement that called for the funding
of a trust upon a change in control. The subjective and objective benefits
triggers were not changed, the suit says. DuPont also had Pioneer reduce
the stock-option bonuses that were planned to go to class members and CICP
participants. This event was a good reason under the CICP, the plaintiffs
state. The merger then closed on Oct. 1, 1999, although control was
transferred to DuPont long before, the plaintiffs claim.

In May 1999, DuPont allegedly gave some Pioneer executives long-term
employment contracts instead of the CICP benefits, but the plaintiffs and
other class members did not receive employment contracts. Their CICP
benefits were materially reduced instead, the suit asserts, because DuPont
decided to eliminate the plan's "easy trigger." Following the merger,
DuPont allegedly instituted a policy requiring class members and plan
participants to quit their jobs before making a claim for benefits under
the CICP. This requirement is contrary to the plan provisions and is a
departure from prior practice, the plaintiffs state, adding that the
requirement is intended to intimidate employees into foregoing benefits.

Pioneer, at DuPont's direction, has changed the bonus, benefit and
compensation plans that were in effect before the merger, the complaint
claims, and the defendants' actions are stated good reasons under the CICP
and are a breach of the plan.

The plaintiffs raise causes of action for declaratory relief against
Pioneer and tortious interference with contract against DuPont. They also
request equitable relief in the form of an order tolling, during
litigation, the three-year period during which benefits can be requested
under the CICP. In addition to seeking class certification, the suit
demands that Pioneer pay the class members' legal fees and litigation costs
pursuant to a provision in the plan.

The plaintiffs are represented by Frank B. Harty, Gerald J. Newbrough and
Michael W. Thrall of Nyemaster, Goode, Voigts, West, Hansell & O'Brien in
Des Moines, Iowa, and by Daniel M. Reilly, Larry S. Pozner and Julie M.
Williamson of Hoffman Reilly Pozner & Williamson in Denver.

DuPont and Pioneer are represented by Michael A. Giudicessi and William J.
Hunnicutt of Fargre & Benson in Des Moines.  (Mergers & Acquisitions
Litigation Reporter, August 2000)

FAULTY FURNACES: Have Caused Fires in CA; Agency Will Issue Warning
attic furnaces manufactured by a now-bankrupt firm have caused scores of
residential fires in California in the last decade, fire inspectors and
federal investigators said.

Hundreds of thousands of unsuspecting homeowners may be at risk from these
furnaces, made by Indiana-based Consolidated Industries and sold under
various brand names in California from 1984 to 1992, these sources said.

The Consumer Product Safety Commission, the independent federal agency
responsible for warning citizens about defective products, has known about
the problem since the mid-1990s. It said Tuesday it will issue a warning
about the furnaces.

The commission's staff said it didn't issue a warning earlier because
federal law prohibits it from doing so while it is in negotiations seeking
a product recall. The agency said it had hoped to issue a recall, but was
unable to do so when Consolidated--which would have been required to
finance this action--went out of business.

The lack of a recall or warning to date had created a sense of foreboding
among many fire-prevention officials. "Every time we have a cold snap we
have a furnace fire," said Michael Freige, a senior fire inspector for the
Torrance Fire Department, who said Consolidated furnaces have caused seven
residential fires there since 1994.

The issuance of a warning without a recall means that homeowners probably
will have to foot the bill -- averaging about $ 2,000 -- for inspecting and
replacing the furnaces. Some homeowners' insurance policies may absorb the

The case highlights problems the CPSC runs into when it must deal with
financially insolvent companies. It also raises the question of whether
laws that limit the agency's ability to issue product warnings during an
investigation put consumers at unnecessary risk.

"The preference is for a recall," said Paul H. Rubin, a professor of
economics and law at Emory University and a former economist for the CPSC.
"Warnings are generally more generic, for example, 'Do not put things in
front of electric heaters.'"

Consumer advocates say the commission's tight budget prevents it in many
cases from pursuing companies like Consolidated that are unable to finance
a recall. "The commission is always bound by its limited budget," said
Rachel Weintraub, a staff attorney for the California Public Interest
Research Group. "It's always needing to balance what it can do to protect
consumers and what it can afford to do."

To date, no deaths or injuries have been caused by the furnace fires. But
residential damages range from a 1990 blaze in North Tustin that destroyed
a Ferrari and evening gowns, to a $ 750,000 fire in Rancho Palos Verdes in
1995 that consumed a home's roof and contents, to a $ 300,000 blaze in
Porter Ranch last year that led to months of counseling for a six-member

All three incidents sparked litigation. Two cases were settled and the
Porter Ranch case is pending against the builder and Consolidated.

               Manufacturer Denies Furnaces Hazardous

Consolidated said during discovery proceedings that it sold about 140,000
attic furnaces in California, said Rob MacDonald, an attorney at Richard G.
White Inc. who represents California homeowners. But the CPSC said the
company and its distributors sold at least 250,000. The units were sold
under 30 brand names, including Amana, Coleman, Kenmore, Premier, Sears and

Trane Co. said it set out to investigate some of the 7,000 Consolidated
furnaces it distributed in California as soon as it was informed of fires
caused by the units.

"As soon as Trane learned about the problem with the furnaces it conducted
an immediate investigation and virtually all the units it was called in to
inspect had no problems," said Jeff Bleich, an attorney with Munger, Tolles
& Olson, a law firm representing Trane.

Reports by federal safety engineers who tested the furnaces show that they
cause fires because of alterations Consolidated made to comply with
California's regional smog control rules. Metal rods installed on top of
the burner to absorb greater amounts of nitrogen oxide increase the
temperature inside the furnace, warp the burner and surrounding parts and
eventually allow the flame to escape.

Attorneys for the company dismiss the furnace fires as statistically
insignificant. "Furnaces only last 15 to 20 years," said Daniel Freeland,
Consolidated's bankruptcy trustee. "If they were so defective, I think you
would have thousands and thousands of fires."

The commission staff said it made the determination that the Consolidated
attic furnaces cause fires. The CPSC said its findings supported California
homeowners who filed a class-action lawsuit in 1994 against Consolidated
and four of its distributors: Addison Products, Bard Manufacturing,
American Standard/Trane Co. and Amana Appliances.

A Santa Clara Superior Court is scheduled to hear a plaintiffs' motion to
set a trial date next month. "We agree with the plaintiffs in the
class-action suit," said Mike Gidding, a CPSC attorney. "From the safety
side of things, there's not much of a dispute."

But even with this determination, the CPSC didn't warn consumers. The
agency's staff said attorneys who filed the class-action lawsuit against
Consolidated warned furnace owners through a notice that they were required
to issue when the case was certified as a class action in 1997. But this
notice wasn't sent to each individual member of the class, MacDonald said.
Instead, it was printed several times in regional newspapers, he said. "We
don't know where those households are," MacDonald said. "Consolidated's
records show the furnaces going to distributors, who sent them to other
distributors. They went through 10 hands before they got to consumers."

The CPSC wanted to ultimately issue a recall that would reimburse owners
for the furnaces, said Alan Schoem, director of the agency's Office of

But a recall became much more difficult when Consolidated filed for Chapter
11 bankruptcy reorganization two years ago because of financial liabilities
stemming from lawsuits filed by fire victims and their insurers.

Attorneys representing California homeowners dispute the CPSC's use of the
firm's bankruptcy filing as an excuse for its inaction. "There's always an
exception in bankruptcy law for government enforcement activity," said Dan
Mogin, a San Diego attorney who this summer filed a class-action lawsuit
against Sears.

The CPSC said it had hoped the company would emerge from bankruptcy. Schoem
likened the case to one involving Cadet Manufacturing, an Oregon furnace
maker that filed for bankruptcy as soon as the CPSC filed a claim against
it alleging its in-wall electric heaters can overheat and catch fire. The
agency was able to work with the firm and its creditors to tailor a recall
for about 2 million heaters that allowed the company to stay in business
and provide heater owners with a 50% discount on new units, Schoem said.
But in the Consolidated case, the company switched this summer to Chapter 7
bankruptcy, liquidating its assets and wiping out CPSC's hopes of a similar

The agency has been conducting recall negotiations with Consolidated
distributors but has yet to reach an agreement with any of them, Schoem
said. He said these companies sold only about 20% of the furnaces installed
in California.

                Agency Criticized on Warning Delays

Product safety experts say this isn't the first time that the CPSC has been
criticized for taking too long to release information about a faulty

Mary Ellen Fise, general counsel for the Consumer Federation of America, a
Washington-based consumer advocacy group, likened the case to one in the
late 1980s in which the CPSC was negotiating a recall of infant pillows
made by several manufacturers that were linked to the suffocation deaths of
19 babies. The agency reached a recall agreement with some of the
manufacturers, but not others, so it waited to go public, Fise said.

Several builders have responded to the safety questions involving
Consolidated attic furnaces on their own. Southern California's
fourth-largest builder, Shea Homes, started investigating this spring and
said the furnaces could be in more than 100 of its communities.

Homeowners who have had fires caused by faulty furnaces faced not only
extensive smoke and fire damage, but also the trauma of dislocation and
rebuilding. "Little did I know the nightmare was about to begin," said Joy
Sweeney, whose Porter Ranch family needed counseling after their home was
damaged last year.

Experts agree that it's only a matter of time--typically after eight to 10
years of steady use--before the units become a hazard. The majority of the
Consolidated units have reached, or are about to reach, this critical
phase. "Based on testing in the field, these furnaces are guaranteed to
fail," said Gerald Zamiski, an engineer at Long Beach-based Vollmer-Gray
Engineering Laboratories who has tested hundreds of Consolidated's furnaces
for a report commissioned by the CPSC. Zamiski also acted as an expert
witness in cases filed by insurance companies against Consolidated.

Attorneys and fire investigators say fire isn't the only danger presented
by Consolidated furnaces. The class-action lawsuit filed this summer by San
Diego attorney Mogin against Sears, a Consolidated distributor, was
initiated by a Bird Rock, Calif., family who contractors said could have
died when carbon monoxide leaked from a malfunctioning furnace. "The issue
here is not whether Consolidated manufactured a defective furnace," Sears
attorneys wrote in response to the plaintiffs' motion for class
certification. "It is whether Sears engaged in false advertising and/or
breached supposed express warranties." The attorneys wrote that documents
provided with 212 Consolidated furnaces that Sears distributed in
California specify that they are Consolidated furnaces with a one-year
installation warranty.

The furnace fiasco began in the mid-1980s. Consolidated wanted to cash in
on California's record-breaking building boom. But the furnaces did not
meet regional air quality district standards. So Consolidated altered the
furnace, engineer Zamiski said, and never fully tested the change.

Consolidated provided emissions-test results to air-quality officials in
the Bay Area Air Quality Management District and the South Coast Air
Quality Management District. The South Coast district said it does not test
furnaces or specify how manufacturers should meet emissions standards.
"Manufacturers have to certify that their equipment meets the emissions
limits by having it tested by an independent lab," district spokesman Bill
Kelly said. "We examine those lab reports for conformance with our
regulations and then we certify them if they comply."

Many of the attic furnaces were purchased by home builders and some were
sold as replacement units. In 1984, contractors started installing them in

                Investigators Cited Furnaces in Fires

The first fires caused by attic furnaces occurred in 1990. No one has
documented the number of fires caused by the units, but many fire
departments contacted for this story cited at least one incident.
Throughout the 1990s, fire investigators reported Consolidated furnaces
caused blazes in many communities, including Redondo, Manhattan and Newport
beaches, North Tustin, Rancho Palos Verdes, Irvine, Victorville, Yorba
Linda, Porter Ranch, Torrance, San Pedro, Venice, Murrietta, San Diego,
Compton and Ventura.

Because attics aren't equipped with smoke detectors, many people who had
fires were unaware of the fire until it was well underway. Joy Sweeney
smelled smoke in her Porter Ranch home early one morning in February 1999.
Then she saw smoke seeping out of a light fixture in the upstairs hall and
raced to evacuate her four children. "As I picked my 4-year-old up out of
her bed and was walking out of the room, I glanced up and flames were
shooting out of her heating duct," Sweeney said. The furnace was mounted in
the attic above the little girl's bed.

                  How to Check Your Furnace

   -- Check the unit's make and model number.

   -- Call a licensed heating and air conditioning contractor to inspect
       the  furnace. (A contractor must take the furnace apart and look
       closely at the burner and heat exchanger for damage. Experts warn
       that most Consolidated units are not repairable.)

   -- If you check the unit yourself, turn off the gas and power first.

   -- Whether your homeowners insurance will cover a new furnace depends
       on your coverage. Check with your insurance carrier.

                       Consolidated Furnaces

Homeowners with attic furnaces that have one of the following brand names
and model designations should call a licensed contractor:

                   BRAND NAME                MODEL NUMBER
                   ----------                ------------

                   Addison                        GHC
                   Amana                          GSE
                   American Best                 HCC
                   American Standard            THN
                   Bard                            ESG
                   Century                         GSH
                   Comfort Aire                   GSH
                   Coleman                     2505-2509B
                   Consolidated                 HAC/HCC
                   Franklin Electric           HAC/HCC
                   Goettl                           HCC
                   Goodman                       HAC/HCC
                   GMC                            HAC/HCC
                   Hamilton Electric           HAC/HCC
                   Heat Controller                GSH
                   Janitrol                      HAC/HCC
                   Johnstone                     HAC/HCC
                   Keeprite                      HAC/HCC
                   Kenmore                          735
                   Liberty                        HAC/HCC
                   Magic Chef                       ENG
                   P.F.C.                         HAC/HCC
                   Premier                        HAC/HCC
                   Sears                             735
                   Sunbelt                        HAC/HCC
                   Sunburst                       HAC/HCC
                   Sundial                           GH
                   Sun Glow                       HAC/HCC
                   Trane                             THN
                   Weatherking                      GHC

* Source: Richard G. White Inc.

Experts advise homeowners to inspect their heating units every fall and
call a licensed contractor if anything looks awry. For things you can do
yourself to see whether your furnace is operating properly, see this
Sunday's Real Estate section. (Los Angeles Times, September 27, 2000)

FHP INTERNATIONAL: Shareholders Drop Effort to Revive Securities Suit
Disgruntled shareholders of FHP International Corp. first told a federal
appeals court in San Francisco that the company's officers and directors
side-stepped the arguments in the plaintiffs' petition to revive their
securities fraud suit; then, after briefing was complete, the plaintiffs
dropped the appeal. Brady et al. v. Anderson et al., No. 98-56217,
voluntary dismissal (9th Cir., June 6, 2000).

The defendant officers and directors had asked the appellate panel to find
that a federal judge was correct in dismissing charges that they
undervalued a spin-off, so they could personally reap $35 million in
profits from a subsequent sale of the HMO. However, the plaintiffs
responded that that the opposition to their petition mischaracterized every
argument they made and did a revisionist history treatment on the case.

The central question was whether the investors met the heightened pleading
standards under the Private Securities Litigation Reform Act of 1995 by
alleging facts giving rise to a strong inference of scienter.

In 1995, the defendants restructured FHP, and its physicians' practice
management operation became a wholly owned subsidiary known as Talbert.
They later sold FHP to HMO giant PacifiCare but did not include Talbert in
the sale. Under the terms of the joint merger proxy statement, FHP
shareholders received cash and PacifiCare stock worth $35 per share plus
the right (in a post-merger offering) to acquire shares in Talbert for
$21.50 each.

According to the investors, the FHP defendants portrayed Talbert as a
loss-riddled company worth only about $60 million and dissuaded
shareholders from exercising their rights to purchase its stock. Due to
FHP's warnings about the value of Talbert, many shareholders let their
rights expire or sold them at a depressed price, the investors assert,
while the defendants snapped up the unsubscribed shares for themselves.

Three months after the Talbert offering, the FHP defendants announced they
were selling Talbert to MedPartners Inc. for approximately $200 million.
The plaintiffs assert the FHP defendants, along with investment banking
firm Merrill Lynch Pierce, Fenner & Smith, knew Talbert was worth more than
they had portrayed and intentionally misled investors.

The FHP defendants counter that, even if the allegations are true, the
shareholders benefited from the sale to PacifiCare. If the joint proxy
describing the proposed acquisition understated Talbert's value and
overstated FHP's, argue the defendants, then the price PacifiCare paid to
acquire FHP was more advantageous to the shareholders. PacifiCare has also
been named as a defendant in the suit.

The defendants also contended that the complaint failed to allege any facts
showing how any particular officer or director knew Talbert was
undervalued. The allegations are conclusory, say the FHP defendants, and
the district court was correct in dismissing the action with prejudice.

In response, plaintiffs charged that in three long, overlapping briefs, the
defendants never confronted their arguments and instead presented a warped,
out-of-sequence version of the history of the case -- and the caselaw on
this issue -- that supported their position. For instance, they said:

   -- Defendants claimed the U.S. Supreme Court has ruled that the
       requited mental state under Section 14 of the Securities Exchange
       Act of 1933 is "actual knowledge" when in fact, the high court has
       explicitly reserved that issue;

   -- The disclosure that defendants claim made the transaction's value
       clear was not made until after the original complaint was filed;

   -- The proxy statement that is the core of the fraud complaint
       occurred before the complaint was filed, not after the amended

However, on June 6 the plaintiffs voluntarily dismissed the appeal with the
agreement of each of the defendants. The U.S. Court of Appeals for the
Ninth Circuit panel approved the dismissal the next day.

The plaintiff-appellants are represented by Leonard B. Simon, Blake M.
Harper, Eric A. Isaacson, Laura M. Andracchio and Joseph D. Daley of
Milberg Weiss Bershad Hynes & Lerach in San Diego, and by Clifford W.
Roberts Jr. of Roberts & Associates in Tustin, Calif.

The FHP defendants-appellees are represented by John W. Spiegel, Kristin
Linsley Myles and Robert L. Dell Angelo of Munger, Tolles & Olson in Los

Merrill Lynch is represented by Phillip L. Bosl and William E. Thomson of
Gibson, Dunn & Crutcher in Los Angeles. (Mergers & Acquisitions Litigation
Reporter, August 2000)

GLIATECH IN: Anti-Scarring Gel Adcon-L Study Had Inadequate Supervision
The board of directors of GLIATECH INC. (Cleveland, OH) has concluded that
certain aspects of its U.S. clinical study evaluating its FDA-approved
anti-scarring gel Adcon-L were not conducted in accordance with good
clinical practices.

However, while there was insufficient supervisory oversight of the clinical
study process, the board does not believe there was intentional misconduct
involved, Gliatech said in a statement issued late Monday.

The company's clinical study of Adcon-L, Gliatech's only FDA-approved
product, is now under review by the FDA, which found that data had been
changed, erased and written over. The FDA questioning of the study led to
the unraveling of Gliatech's $203 million proposed merger with a
pharmaceutical company last month, as reported by Medical Industry Today.

In releasing preliminary information about the investigation Monday,
Gliatech also announced that three top executives are leaving the company.

President and CEO Thomas O. Oesterling has retired, effective immediately.
Oesterling, who had been Gliatech's top executive since 1989, also had been
chairman of the company but was removed from that position in the days
after the merger termination and FDA scrutiny were announced.

In addition, Michael A. Zupon, executive vice president of research and
development, and Raymond P. Silkaitis, vice president of regulatory
affairs, have resigned, effective immediately, the company said.

Further, the board has approved a series of measures to ensure the quality
of Gliatech's research, hired additional personnel in quality control and
assurance, and strengthened its internal operating procedures concerning
collection and review of clinical data, the company said. The management
and board pledged to continue to work closely with the FDA to resolve
questions about the Adcon-L clinical study.

As previously reported by Medical Industry Today, the FDA has determined
that Gliatech submitted altered data in the U.S. study of Adcon-L, which is
used to inhibit scar tissue and adhesions from forming after spinal
surgery. The FDA had granted Gliatech's Premarket Approval application in
May 1998, with conditions, which involved filing data from the U.S.
clinical trial later in the year.

On Aug. 23, 2000, the FDA sent Gliatech a "Form 483"-a list of observations
issued after an inspection or audit-which centered on the process the
company used in recording and presenting that data. As reported, that data
included numbers that had been changed, erased and written over, producing
more favorable scores.

To determine the effectiveness of Adcon-L in the study, Gliatech had
performed magnetic resonance imaging (MRI) to measure scar tissue around
patients' spines. Later, 115 of the 324 MRIs were examined and scored a
second time in what was called an Intraobserver Reliability Study, in order
to validate the initial conclusions.

The questionable changes to the data occurred during the Intraobserver
Reliability Study. As reported, 32 of the 115 MRIs had readings that
differed from the original, and 29 of those resulted in more favorable
outcomes. Six of the second scorings had erasures or "write-overs,"
producing more favorable scores. Other FDA observations centered on whether
all patients had met the criteria for the study.

On Aug. 29, GUILFORD PHARMACEUTICALS (Baltimore, MD) announced it was
terminating its merger agreement with Gliatech, citing the FDA inquiry.
Gliatech's stock fell by 60 percent that day.

In the wake of the failed merger and the disclosure of the FDA scrutiny, at
least two class action lawsuits have been filed against Gliatech by
shareholders alleging they were defrauded.

On Tuesday, Gliatech's stock continued to fall, dwindling in value by 2
percent over the previous day to close at $6.84. At their height during the
past year, Gliatech shares were worth $27.68. Gliatech trades on the Nasdaq
National Market.

In its statement Monday, Gliatech said it has hired a search firm to find a
new CEO and to hire additional personnel in the area of quality control and
other regulatory matters. In the interim, board chairman Robert Pinkas will
work as acting president and CEO. Clark Tedford, previously vice president
of product development, has been promoted to vice president of research and
development and has assumed additional responsibilities for regulatory

Adcon-L remains on the U.S. market during the FDA review. Made of a
carbohydrate polymer gel, Adcon-L is applied directly to the surgical site
as the surgeon prepares to close the opening. It is designed to inhibit
scar tissue from forming by creating a physical barrier to adhesions
between the spinal cord and nerve roots and the surrounding muscle and
bone. It is absorbed by the body within 28 days.

Adcon-L is the first member of the Adcon family of products, available in
30 countries outside of the United States. All Adcon products are designed
to inhibit postsurgical scarring in adhesions in a number of applications.
In addition, Gliatech is evaluating the Adcon technology for use in
breast-augmentation surgery, to reduce adhesions that lead to capsular
contracture, the most frequently reported complication of breast-implant
surgery, as previously reported.

Gliatech discovers and develops biosurgery and therapeutic products.
(Medical Industry Today, September 27, 2000)

HMOs: Aetna Agrees to Settle Securities suit in PA for $82.5 Million
Aetna has agreed to pay $82.5 million to settle a class-action shareholder
lawsuit accusing the insurer of misleading investors about its financial
status, a report on the New York Times says. Aetna, the nation's largest
insurer, did not admit any wrongdoing in the settlement, which was
announced on Tuesday. The agreement is subject to court approval and
includes all investors who bought Aetna stock from March 6, 1997, through
Sept. 29, 1997. The court will decide how the money will be distributed.

The lawsuit accused Aetna of failing to disclose problems that the company,
based in Hartford, was having in mid-1997 relating to its purchase of U.S.

On Sept. 29, 1997, Aetna announced that it would take a $108 million charge
because of problems with integrating U.S. Healthcare. Shareholders said
they were caught off guard by the decision because Aetna officials had
earlier made rosy statements about the company's financial position.

The suit was initially filed in 1997 in United States District Court in
Philadelphia. The case had yet to go to trial.

Aetna's stock fell from $106 on Sept. 18, 1997 to $81 on Sept. 29. It ended
the year at about $70 a share. (The New York Times, September 27, 2000)

According to the Legal Intelligencer, the settlement is the second largest
in a securities case in the Eastern District of Pennsylvania, topped only
by the $ 111 million settlement by IKON Office Solutions Inc. in November
1999. If the Aetna settlement is approved by U.S. District Judge John R.
Padova, the plaintiffs' lawyers could be awarded more than $ 27.2 million
in attorney fees.

The proposed settlement was filed just weeks before the case was set to go
to trial on Nov. 10. Lead plaintiffs' attorney Stuart H. Savett of Savett
Frutkin Podell & Ryan said on September 26 that the parties exchanged
"hundreds of thousands" of pages of documents and took 35 depositions.

Aetna, in the settlement papers, said it believes it is not liable and has
good defenses but chose to settle "solely to avoid further expense,
inconvenience and burden of this protracted litigation, and the distraction
and diversion of personnel and resources ... and to avoid the risks
inherent in uncertain, complex litigation."

In the suit, investors alleged that Aetna falsely represented that it was
successfully integrating its operations with the operations of USHC
following their merger and that Aetna issued false and misleading financial
statements for the first and second quarters of 1997. Specifically, they
alleged that after the merger of Aetna and USHC, there were numerous
technical and logistical problems with the integration. Because the
computer systems used by Aetna and USHC were incompatible, the suit said,
the conversion of Aetna's contracts and claims adjudication and
reimbursement payment systems from its computer systems to USHC's more
advanced system was plagued with difficulties. In early 1997, the suit
alleged, tens of thousand of electronically filed claims were lost in what
Aetna employees called "a computerized black hole." The integration of the
Aetna and USHC computer systems was also severely complicated by the fact
that in the spring of 1997, Aetna changed patient identification numbers
and reimbursement codes without alerting or giving new numbers and codes to
provider-billing personnel, the suit said. Consolidation of claims service
centers and reduction of workforce also compounded the computer systems'
problems because Aetna had insufficient employees to handle the unpaid
claims, the suit alleged. Aetna also experienced serious difficulties in
negotiating pre-existing and new provider contracts on more favorable
terms, the suit said.

The suit alleged that after concealing its integration and financial
problems, Aetna announced on Sept. 29, 1997, that its third-quarter
earnings would be 25 percent below analysts' estimates and that it would
increase its medical claims reserves by $ 75 million to $ 105 million
because of problems associated with the merger. According to the suit, the
price of Aetna's common stock fell that day as a result of Aetna's
announcement and closed down $ 9.50 per share at $ 81 per share.

In discovery, the plaintiffs' lawyers said, they learned that Aetna had
engaged in accounting manipulation to hide the fact that its medical claims
payable reserves were understated.

Savett was joined on the plaintiffs' team by his partners, Robert P.
Frutkin and Katharine M. Ryan; attorneys Bernard M. Gross, Deborah R. Gross
and Christopher Reyna of the Law Offices of Bernard M. Gross; and Melvyn I.
Weiss, Keith Fleischman, Salvatore J. Graziano and U. Seth Ottensoser of
the New York firm Milberg Weiss Bershad Hynes & Lerach. Aetna was
represented by Michael M. Baylson of Duane Morris & Heckscher along with
Lewis B. Kaden and Michael P. Carroll of Davis Polk & Wardwell. (The Legal
Intelligencer, September 27, 2000)

INDEPENDENT ENERGY: Rabin & Peckel Files Securities Suit in New York
A class action complaint has been filed in the United States District Court
for the Southern District of New York on behalf of all persons or entities
who purchased or otherwise acquired American Depository Shares ("ADSs") or
ordinary shares of Independent Energy Holdings PLC (Nasdaq: INDYY) (LSE:
IEH) between February 14, 2000 and September 8, 2000, inclusive (the "Class

[Note: A report on the KPMG forensic accountants’ study on the plunge of
Independent Energy is available in the September 22, 2000 issue of the

The Complaint alleges that Independent Energy and certain of its officers
and directors violated the Securities Exchange Act of 1934 by making a
series of materially false and misleading statements concerning the
financial condition of the Company and the nature and scope of its billing,
accounting, and collection problems. The Complaint alleges that as a result
of these false and misleading statements the price of Independent Energy
ADSs and ordinary shares were artificially inflated throughout the Class
Period causing plaintiff and the other members of the Class to suffer

Contact: Rabin & Peckel LLP, New York Elana M. Bourkoff or Joseph V.
McBride 800/497-8076 or 212/682-1818 Fax: 212/682-1892

INTEL CORP: FTC Ends Three-Year Probe on Business Practices
Computer chip maker Intel Corp. closed the books on a three-year government
probe into its business practices. The Federal Trade Commission notified
Intel on Tuesday that the agency had decided to end a broad investigation
into the Santa Clara, Calif.-based company without taking any further legal
action "at this time." In August, Intel settled an FTC complaint alleging
that it had illegally threatened to withhold critical product information
from three companies that refused to license their technology to the chip
maker. (The Orlando Sentinel, September 27, 2000)

LENDERS: 3 Banks Named in Suit Filed by Consortium over Predatory Loans
A consortium of fair housing, legal and civil rights organizations on
September 26 filed suit (Case Nos. 97CH12802; 99CH7566; and 98CH8721;
Circuit Court of Cook County, September 26, 2000) against three banking
institutions for predatory lending practices, demanding a halt to current
foreclosures, a change in loan terms and appropriate damages (damages vary
based upon the size of the loan). The groups are charging sub-prime lenders
and servicers Bank of New York, Bankers Trust Company and IMC Mortgage
Company with violations of the Illinois Interest Act, a law that protects
consumers against lending fraud and deception.

The consortium includes the law firm of Meites, Mulder, Burger & Mollica,
the Chicago Lawyers Committee for Civil Rights Under Law, Leadership
Council for Metropolitan Open Communities, and the National Center on
Poverty Law.

"Predatory lending is on the rise in the Chicago area, and consumers must
have some form of protection," said Thomas Meites, Meites, Mulder, Burger &
Mollica. "When you look at the terms of some of these loans and see that
the monthly loan payments are 70 percent or even 100 percent of the
borrower's monthly income, it's obvious the lender is interested in
foreclosing on the property and selling it."

The Illinois Interest Act limits the amount of charges, including points,
service charges and commissions, a lender can levy when a residential real
estate loan is originated. The Act provides consumers some protection from
lenders who hide additional fees within the complexities of a loan
contract. It is a particularly important protection for people receiving
loans from sub-prime lenders because these companies already charge higher
interest rates and fees.

The group filed three class-wide counter claims asking the court to declare
sub-prime loans owned or serviced by the three lenders in violation of the
Illinois Interest Act. The claims also ask the court to halt the
foreclosure process for the plaintiff class, change the terms of the loans
in accordance with the Act, and to order the lenders to pay the members of
the class the appropriate penalty under the Illinois Interest Act -- an
amount greater than the balance of most of these loans.

Bank of New York, Bankers Trust Company, and IMC knowingly receive payments
under thousands of sub-prime loans in violation of the Illinois Interest
Act, apparently believing that a piece of federal legislation prohibits
enforcement of the Illinois Interest Act. Each of the counter-claims
rejects this notion, claiming that the Illinois Interest Act is still

"Most recent data indicates that the number of sub-prime loans is
increasing at an alarming rate and account for a disproportionately large
number of residential property foreclosures in the Chicago region," said
Aurie A. Pennick, President of the Leadership Council. "There is also a
rather disturbing racial component -- many of these lenders are exclusively
targeting African American Communities."

A recent study by the National Training and Information Center found that
in 1993, 1.3 percent of all foreclosures resulted from sub-prime loans.
However, in 1998, 35.7 percent of all foreclosures could be attributed to
sub-prime loans. Relative to market share, in 1998, sub-prime loans
accounted for four times the number of foreclosures as prime lenders.
Another study by the Woodstock Institute found that sub-prime lending
increased by almost 3000 percent in African-American neighborhoods from
1993 to 1998, while in white neighborhoods it increased by only 250

Predatory lending occurs when sub-prime lenders target particular groups of
people and aggressively sell their loan products. Generally, predatory
lenders target low- and moderate-income individuals who have equity in
their properties but lack significant income or have large debts. When this
practice is combined with deceptive lending techniques, unsuspecting
consumers are lured into signing contracts that are purposely designed to
get them to default on their loans. Once the victim has defaulted, the
owner of the loan moves to foreclose on the property. The value of the
property is always greater then outstanding balance, assuring the loan
holder will make a profit.

One victim of this practice is Pamela Cushman, one of the
counterplaintiffs, who received a solicitation for a loan after her husband
passed away. The Heartland Mortgage Center promised her a low-interest loan
that would provide her with extra cash and lower her mortgage payment. What
she ended up with was monthly loan payments that exceeded her income. The
mortgage company was well aware that she could not pay off the loan, but
failed to inform Ms. Cushman of this fact. "The loan company said one thing
and then did another," Ms. Cushman said, "I was never told that my payments
would amount to so much." Ms. Cushman was also charged at least $5,330 in
points and fees.

"The consortium filing the counter-claims believes that each member of the
plaintiff class, which includes anyone who is obliged to make payments to
Bank of New York, Bankers Trust Company, and IMC in violation of the
Illinois Interest Act, has been victimized by aggressive sub-prime lenders,
intentionally deceptive lending contracts, and a lack of full disclosure,"
Aurie Pennick stated. "Many people in the plaintiff class are in danger of
losing the American dream -- their homes. We have to stop to predatory
lending before it claims another victim."

Meites, Mulder, Burger & Mollica is a Chicago-based law firm specializing
in complex litigation. The partners are Thomas R. Meites, Michael M.
Mulder, Joan H. Burger, and Paul W. Mollica. The associates are Shona B.
Glink, Josie R. Raimond, and Jamie S. Franklin.

The Chicago Lawyers' Committee for Civil Rights Under Law, Inc. is the
public interest law consortium of Chicago's leading law firms. The Chicago
Lawyers' Committee enforces fair housing laws and works to preserve
affordable housing, advocates for the rights and interests of poor
children, works to improve the ability of Chicago's Public School system to
meet the needs of its 89 percent minority student population, and
represents victims of hate crimes. It is particularly focused on the
reduction of barriers to opportunity and the promotion of efforts which
increase the capacity of individuals to access and sustain employment.

The Leadership Council for Metropolitan Open Communities was founded as the
result of a campaign for open housing led by Dr. Martin Luther King, Jr. in
The nation's largest and most comprehensive fair housing organization, the
Council's mission is to eliminate discrimination and segregation in
metropolitan Chicago housing markets. To achieve this purpose, the
Leadership Council operates a number of programs, including legal action,
housing counseling, education, and advocacy.

The National Center on Poverty Law identifies, develops, and supports
creative and collaborative approaches to achieving social and economic
justice for low-income people with the law. The Center fulfills its legal
advocacy and policy development mission by: representing low-income people
on welfare, work force, housing, and community development issues through
legislative and administrative advocacy, collaborations with public and
private entities, and where necessary, impact litigation; and collecting,
organizing, analyzing, and disseminating poverty law- and policy-related
information through the Clearinghouse Review and its other publications,
the Center's Web site, training sessions, and its poverty law library.

Source: Leadership Council for Metropolitan Open Communities

Contact: Thomas Meites of Meites, Mulder, Burger & Mollica, 312-263-0272;
or Nina Vinik of Chicago Lawyers Committee for Civil Rights, 312-630-9744;
or Steven Stern or David Hudson of Leadership Council for Metropolitan Open
Communities, 312-341-5678; or Dory Rand of National Center of Poverty Law,

MA DEPT.: Commission Will Hear Hispanic Social Workers' Complaint
Hearings are scheduled for November into discrimination complaints by
Hispanic social workers against the state Department of Transitional
Assistance. Dorca Gomez, who chairs the Massachusetts Commission Against
Discrimination, ordered the hearings, scheduled to open Nov. 27, after
attempts to resolve the dispute failed. Earlier, Gomez consolidated more
than 100 individual complaints filed by the workers since 1995 into a
single class-action case.

The social workers claim they were given larger caseloads and required to
translate for workers who do not speak Spanish, but were paid less than
bilingual workers who were fluent in languages other than Spanish.

The state has denied discriminating against the workers. (The Associated
Press State & Local Wire, September 27, 2000)

NETSOLVE INC: Wolf Haldenstein Files Securities Lawsuit in Texas
Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit
in the United States District Court for the Western District of Texas,
Austin Division on behalf of all persons who purchased the securities of
NetSolve Inc.  (NASDAQ: NTSL) between April 18, 2000 and August 18, 2000,
inclusive (the "Class Period'). A copy of the Complaint may be viewed
directly on the Wolf Haldenstein website, located at www.whafh.com.

The complaint alleges that NetSolve and certain of its officers and
directors 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 during the Class Period. For
example, the complaint alleges that on May 18, 2000, NetSolve Vice
President Harry S. Budow provided an interview to Bloomberg Forum
concerning the Company and its operations. During that interview, Mr. Budow
represented that the Company would beat the $0.41 earnings estimate of two
analysts that follow the Company and stated: "We've exceeded the estimates
since we went public by 2 cents or more a quarter . . . There's no reason
not to expect (it won't keep happening). . . " The complaint alleges that
these statements were materially false and misleading because, among other
things, they failed to disclose that the Company was not performing
according to its internal projections and was experiencing declining demand
for its products and services. Then, on August 18, 2000, defendants
revealed that the Company's growth rate was slowing dramatically and that
analysts should lower their earnings estimates. In response to this
information, the price of NetSolve common stock plunged from $12.625 per
share to $7.625 per share -- a decline of 38%. During the Class Period,
certain NetSolve insiders sold their personally-held NetSolve common stock
to the unsuspecting public generating aggregate proceeds of more than $3

Contact: Wolf Haldenstein Adler Freeman & Herz LLP Michael Miske, George
Peters, Fred Taylor Isquith, Esq. or Gregory M. Nespole, Esq. 800/575-0735
www.whafh.com, classmember@whafh.com

OFFICEMAX INC: Milberg Weiss Files Securities Lawsuit in Ohio
Milberg Weiss (http://www.milberg.com/officemax/)announced on September 27
that a class action has been commenced in the United States District Court
for the Northern District of Ohio on behalf of purchasers of OfficeMax Inc.
(NYSE:OMX) stock and publicly traded options during the period between
March 2, 1999 and Sept. 30, 1999 (the "Class Period").

The complaint charges OfficeMax and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. OfficeMax operates
a chain of several hundred discount office supply superstores or warehouses
selling a broad range of office supply products, including computers. The
complaint alleges that beginning on March 2, 1999, when OfficeMax reported
its 4thQ fiscal 1998 ("F98") results, OfficeMax, Michael Feuer (chairman
and chief executive officer) and Jeffrey L. Rutherford (executive vice
president and chief financial officer) made false and misleading statements
about the successful realignment of OfficeMax's business model, the strong
performance and positive momentum of OfficeMax's Core Business Segment
(which sold office supplies, furniture and business machines excluding
computers) and the Core Business Segment's improving profitability due to
its enlarged merchaneise assortment and effective inventory management.
These bullish representations and forecasts artificially inflated
OfficeMax's stock to a Class Period high of $12-1/8 on May 18, 1999, from
$7-5/8 just before the Class Period began. But then, on Sept. 30, 1999,
OfficeMax revealed that its 2ndH F99 and F00 financial results were going
to be much worse than earlier forecast. OfficeMax's stock fell by over 32%
in two days to $5, the largest two-day percentage price decline in
OfficeMax's history as a public company, on trading volume of over 10
million shares, and then continued to fall to as low as $4-1/2 per share,
its lowest price ever, a drop from which it has not recovered.

Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach,
800/449-4900 wsl@mwbhl.com

ROLLINS INC: Tampa Residents Charge Improper Treatments for Termites
The Butlands, whose home has been stirred with activity, that of termites,
have joined other Tampa residents in a lawsuit against Orkin Exterminating
Co. and its parent company, Atlanta-based Rollins Inc. The lawsuit, which
seeks class-action status, alleges that Orkin workers performed improper
chemical treatments, skipped annual inspections, forged customer names on
inspection slips and misled customers on warranties. The homeowners --- at
least 50 currently --- suffered major termite damage as a result, the
lawsuit says.

Orkin faces a similar lawsuit in Alabama that has reached class-action
status. The company denies the charges in each case.

Also in Alabama, the company was socked in August with an $ 80.8 million
award for breach of contract and fraud. Artie Mae Jeter of Tuskegee and her
lawyers contended that Orkin hid the fact that termites were destroying her
home for at least 15 years.

Orkin will appeal and has told the Securities and Exchange Commission that
the Jeter award will have a "material adverse impact" on Rollins if the
amount isn't reduced. The company, though, says it's likely the amount will
be reduced.

Legal problems haven't stopped the Orkin Man from building revenue and
customer base. About 1.7 million residential and commercial customers in
the United States, Canada and Mexico receive Orkin pest control and termite
services. But while profits remain steady, Rollins' stock price lags.
Terminix surpassed Orkin in the 1990s as the pest control industry leader
in revenue.

And as Rollins has bought back stock, acquired pest control companies and
divested other businesses, the company's business strategy remains a
mystery to outsiders. A leading investor wonders about Rollins Inc.'s
future and whether its leaders should take the company private. The company
says there are no plans to go private. Through a spokeswoman, both Randall
Rollins, the company's chairman and chief executive, and Gary Rollins, its
president, declined to be interviewed.

Orkin's spokeswoman acknowledges past problems with reinspections and
forgeries in Georgia and Florida, though the company says it was not an
extensive practice. Internal memos written by Orkin executives in Florida,
Georgia and Texas in 1996 indicated that company employees falsified
reinspections of homes for termite damage. Orkin has cleaned up the
reinspection problems, says company spokeswoman Martha May. "Orkin does not
condone forged inspection tickets. We believe that the technicians were
acting on their own." Those technicians have been fired, she says. Orkin
performs 11 million treatments a year, and the number of consumer
complaints is minuscule, she says.

The class action in Alabama also alleges forgeries of customers'
signatures, though Orkin denies those charges. Failure to reinspect houses
is a widespread industry practice, but "forging the customer's signature is
a piece of evidence we don't usually find in other companies," says
attorney Steve Etheredge, who's guiding the Alabama suit.

Separately, the Florida attorney general's office is investigating Orkin
termite-related practices. Bob Buchner, a Florida assistant attorney
general, says five other states are also investigating Orkin. Georgia
currently is not among them.

Terminix, which has run into trouble with regulators as well, recognizes
that Orkin is "a formidable competitor," says Steve Good, a Terminix vice
president. "We're constantly looking over our shoulder.'' But Good admits
that "we, too, scratch our heads" about Orkin's direction.

                         Big Name in Business

Orkin's brand-name recognition remains perhaps the best in the business.
Orkin's TV commercials --- especially the one where a fake roach wanders
across a fake TV screen --- are memorable. Orkin pest control technicians
are instantly recognizable in their trademark white shirts with red

Christine Butland says the family chose Orkin in 1993 "because of their
name. You see the advertisements on TV, and they're a national icon." The
acquisition of Orkin itself in 1964 may have been precedent-setting. That
year, Wayne Rollins engineered what is considered the first leveraged
buyout in history when Rollins Inc. acquired Atlanta-based Orkin for $ 62
million. Rollins had founded Rollins Inc. with his brother, John, in the

The company in the 1980s spun off RPC, which focused on oil and gas
services, and Rollins Communications. Rollins Inc. retained pest control,
lawn care and home security system businesses. Wayne Rollins died in 1991,
leaving sons Randall and Gary in charge. Three years ago, Rollins sold the
lawn care and security businesses, focusing on the core pest control
business. Last year, Rollins bought leading pest control operators Prism
and Redd Pest Control, and expanded internationally with the acquisition of
Canadian company PCO Services.

In Georgia, Orkin remains a powerful presence. It operates more pest
control branch offices in Georgia than any other company.

A mini-scoreboard in the lobby of Rollins Inc.'s unassuming headquarters on
Piedmont Road shows the closing price of Rollins Inc. stock, which peaked
at about $ 30 in 1994, and has hovered, lightly traded, in the midteens
recently. In 1999, Rollins reported net income of $ 7.2 million on revenue
of $ 586.6 million.

Over the past several years, the company has pursued a stock buyback
program that has helped reduce the number of shares outstanding from about
35. 9 million in February 1996 to about 29.9 million in February 2000. Amid
this buyback, according to company proxies, the percentage of shares
controlled by officers and directors --- principally those of the Rollins
family --- rose to 54.4 percent of the shares outstanding in 2000 from 43
percent in 1996. The Rollins family is estimated to own more than 14
million shares.

Mario Gabelli, whom the proxy says controls directly or indirectly, through
separate entities, more than 6 million shares, asserts that the Rollins
family "has either got to sell (the company) or buy it. They've got to do
something." The solution, Gabelli says, is for the Rollins family to take
Rollins Inc. private. "Inherently, it's a good business," he says. The
Rollins brothers, though, haven't explained their strategy to him, Gabelli
said recently.

                       Lawsuits, investigations

Meanwhile, the company wrestles with litigation and investigations. But
such activity isn't new.

In 1995, the state of Missouri reached a settlement with Orkin, requiring
the company to provide consumers with retreatments and repairs worth an
estimated $ 7 million, and pay $ 700,000 to the state. The investigation
found that Orkin wasn't using enough chemicals to treat houses, according
to the Missouri attorney general's office.

Last year, New Mexico settled with Orkin over complaints that the company
under-applied chemicals in initial termite treatments and failed to respond
to service calls, according to the state attorney general's office. Orkin
retreated the properties and agreed to pay a $ 25,000 penalty.

Orkin, at any one time, faces dozens of lawsuits, says Bob Shields, an
Atlanta attorney who has fought pest control companies in past litigation.

One lawsuit, involving an apartment complex in Orlando, alleges Orkin
failed to make proper initial termite treatments, even drilling fake holes
for pesticide application. Orkin denies the charges.

Memos from Orkin executives in 1996 warn employees against "instances of
fraud, theft and forgery" within the company. A strongly worded 1998 memo
from Orkin executive Paul Hardy to branch and regional officers said, "Both
claims and retreats have become a major concern. . . . Treat each structure
completely and correctly the first time or do not treat at all.''

The Hardy memo sought to warn Orkin technicians to apply chemicals
properly, and not dilute them, May says. "We want the customer to be

The Tampa and Alabama lawsuits charge that Orkin's employee compensation
structures led to a system where forgeries occurred. In an affidavit, a
former Orkin employee in Florida, Fred Beman, said in 1998 that Orkin
managers directed the forgery of reinspection forms so that employee
bonuses could be paid. Bonuses are tied to performance, but as part of
that, reinspections should be done properly, May says. Some forgeries were
done at the request of customers who weren't home at the time of
inspection, she says.

In Tampa, across town from the Butlands, Mike Hildebrand and his wife,
P.K., have joined the lawsuit against Orkin. During an initial termite
treatment in 1991, Mike says, Orkin failed to drill holes in the home's
foundation. Now the Hildebrands point to crevices and cracks in their
hardwood floors where termites have eaten. They estimate damage at more
than $ 10,000. "We have copies of inspection forms where they forged our
signatures," Mike Hildebrand claims. (The Atlanta Journal and Constitution,
September 27, 2000)

SILICON GRAPHICS: Discovery Goes on for '91 Alias Securities Case in CT
Silicon Graphics tells investors that the company is defending a securities
class action lawsuit involving Alias Research Inc., which Silicon Graphics
acquired in June 1995. The Alias case, which was filed in 1991 in the U.S.
District Court for the District of Connecticut, alleges that Alias and a
former officer and director made material misrepresentations and omissions
during the period from May 1991 to April 1992. The case has been remanded
to the U.S. District Court and is proceeding through discovery.

SILICON GRAPHICS: Discovery Proceeding for Securities Suit in CA Sp. Ct.
The company is defending putative securities class action lawsuits filed in
the U.S. District Court for the Northern District of California and in
California Superior Court for the County of Santa Clara in December 1997
and January 1998 alleging that SGI and certain of its officers made
material misrepresentations and omissions during the period from July to
October 1997. The U.S. District Court is considering plaintiffs' motion for
a voluntary dismissal of the case without prejudice and defendants' motion
for partial summary judgment. Discovery is proceeding in the California
Superior Court case.

SOTHEBY'S HOLDINGS: Controlling Shareholder Taubman May Sell Stake
Sotheby's controlling shareholder, Alfred Taubman, may consider selling his
22.5pc stake in the auction house, it emerged on Tuesday, a day after the
company announced the biggest legal settlement in art market history.

Mr Taubman, 75, a Michigan art collector and property tycoon who bought
Sotheby's in 1983 and took it public six years later, resigned as chairman
earlier this year when it emerged that the US Justice Department was
investigating allegations that Sotheby's and the rival house Christie's
colluded over commission rates.

The two auction houses are to each pay $256m to settle the case with
wealthy art investors who had threatened to take them to court.

Mr Taubman is understood to be footing the bill for some $156m of the
amount, and providing an additional $30m to shareholders who filed a
separate securities fraud lawsuit against the company.

A spokesman for Sotheby's said Mr Taubman could fund the settlement by
selling some of his 13.2m shares, valued at $309m, but he has yet to make a
decision on the issue. The spokesman told the Wall Street Journal: "He has
lots of options but he hasn't decided what he is going to do."

Sotheby's still faces criminal allegations by the Justice Department over
the issue. It said that it is "optimistic" a settlement can be reached.

Christie's, which has so far declined to comment, confirmed that it would
pay the $256m to settle the lawsuit, $50m of which would be in the form of
discounts to members of the class action on commissions on future sales.
Christie's chief executive, Edward J Dolman, said in a statement that the
settlement would have no impact on the company's operations. He said: "The
settlement . . . will compensate our clients with the shortest possible
delay and permit us to continue to focus on providing the highest quality
service in the industry." (The Daily Telegraph(London), September 27, 2000)

WAR VICTIMS: Japan Welcomes US Court Verdict Based on Peace Treaty
Japan's government on Wednesday welcomed a US court verdict throwing out a
lawsuit filed by former Allied prisoners of war who alleged they were
forced into slave labour for Japanese companies.

The Federal District Court in San Francisco ruled last Thursday that such
World War II restitution claims were invalid, as the Allies settled all
reparation issues in their 1951 peace treaty with Japan.

"I welcomed the court's order, for it is in line with this view," said
Japan's foreign ministry press secretary Ryuichiro Yamazaki in a statement.
"The government of Japan will continue to make utmost efforts to maintain
and further develop the Japan-US relationship, which has developed on the
basis of the San Francisco Peace Treaty and has matured into the most
important bilateral relationship in the world," he said.

Eleven US soldiers who were Japanese POWs had filed lawsuits in Los Angeles
and San Francisco last December 7, the anniversary of the Japanese attack
on Pearl Harbor, seeking unspecified restitution.

The lawsuits alleged the soldiers were "enslaved and forced to work for
years under inhumane conditions" for Japanese firms, including Nippon Steel

POWs and other victims of Japanese aggression, thwarted in their appeals
for compensation in Japanese courts, have turned to the Californian justice
system instead. California is the only US state to have extended the
statute of limitations for filing World War II-era forced labour cases to
December 2010.

Four Chinese-Americans and five Chinese nationals filed suit in Los Angeles
last month against Mitsubishi and Mitsui, alleging the Japanese
conglomerates forced thousands of Chinese citizens into slave labour during
World War II.

Japan and China formally wrapped up hostilities in a peace treaty signed in
1978, six years after Japan formally recognised Beijing instead of Taiwan.

The treaty, however, left open the possibility of individuals suing
Japanese companies.

The nine California plaintiffs, advised by lawyers who have extracted
compensation over the use of slave labour by Nazi Germany, are seeking to
turn the case into a wider class-action lawsuit. (Agence France Presse,
September 27, 2000)

WORLDCOM INC: Promises Free Minutes Then Bill Later, CA Lawsuit Says
WorldCom Inc., the nation's second-largest long-distance company, promised
customers 10 free minutes with a new calling card -- then billed them for
the calls anyway, according to a lawsuit filed on September 26.

The class-action suit, filed in U.S. District Court in Los Angeles,
contends that "many thousands" of current and former customers were

George Cuza of Los Angeles, for instance, received an "MCI WorldCom"
calling card late last year with a bright gold sticker labeled: "Your 10
Minutes Free." The card included a written promotion promising that he
would "automatically get up to 10 FREE minutes" on his first bill whether
he called someone in the United States or overseas. But after making eight
one-minute calls in October, WorldCom billed him $ 6.06 for the calls.
WorldCom never gave him a credit for the free minutes, the suit contends.

Similarly, Ky Du, who also lives in Los Angeles, also received a calling
card with the promise of 10 free minutes. But Du was billed $1.58 for her
first one-minute call in October, and was billed $9.46 for three more short

Harry Rebhuhn, one of the lawyers who filed the case, said he signed up
with WorldCom himself to find out if the problem was more widespread. After
receiving a calling card with the gold sticker, he said he made a
9.5-minute call to Germany. He was billed $23.06. Like Cuza and Du, he
never received a credit for 10 minutes. "I don't know one person who got
the credit without demanding it," Rebhuhn said. But Rebhuhn said he isn't
sure yet how many people were affected and how much money they lost. "It
could be a significantly large sum of money. It could be relatively low."

WorldCom spokesman Leland Prince declined to comment.

A similar case was filed in federal court last year, Rebhuhn said. But that
case was dropped because WorldCom hadn't filed any documents with the
Federal Communications Commission at the time, outlining the promotion.
(Under an arcane legal doctrine governing telecommunications companies,
firms are required to charge the rates listed with federal regulators --
even if they promise customers a better deal.)

Rebhuhn said he believes this case can now go forward because WorldCom has
since notified regulators about the "10 free minutes" offer.

This is just the latest in a string of consumer lawsuits to hit the
company. California and five other states sued WorldCom in July for a
litany of charges, ranging from deceptive advertising to switching
customers' service without permission.

And last month, Girard & Green in San Francisco and the Utility Consumers'
Action Network in San Diego accused WorldCom of billing people for local
phone service -- even after they switched to another company, like Pacific

"Once again, we have a telephone company billing for more than advertised,"
said Chris Witteman, a lawyer with the Greenlining Institute, a San
Francisco consumer group, which has been critical of the industry in
general. "Neither the courts nor the (state) Public Utilities Commission
have been effective in stopping this rampant abuse of the consumer," he
said. (The San Francisco Chronicle, September 27, 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
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