/raid1/www/Hosts/bankrupt/CAR_Public/001212.MBX        C L A S S   A C T I O N   R E P O R T E R

             Tuesday, December 12, 2000, Vol. 2, No. 240


BOEING NORTH: Rocketdyne Facility Faces New Experiments on Cancer Risk
BRIDGESTONE/FIRESTONE: Judge Sets Quick Pace; Appoints Liaison Counsel
CALIFORNIA: 9th Cir OKs Teacher Skills Test Despite Disparate Impact
CANADA: The Toronto Star Reviews on Budget and Veterans' Services Suit
ECONOMY SYNDROME: Airlines Face Huge Claims By Sufferers

ECONOMY SYNDROME: Australian Law Firm To Launch Class Action
HOLOCAUST VICTIMS: German Industry Welcomes US Court Dismissal Of Suit
JARROD GERSCHOFFER: Indiana Checkpoints Ruling Can Signal Diversion
KUTAK ROCK: To Pay $8M To Pennsylvania School Districts for Ponzi Scheme
LOCKHEED MARTIN: Deal in Toxins Suit Gets Nod; Going Solo Might Not Pay

MAGELLAN HEALTH: MO Residents Allege of Fraud By Mental Health Provider
NEW YORK: Lawyers and Groups Fight 5 Years for School Conditions
PARADYNE NETWORKS: DSL Provider Announces Management Changes
RITE AID: 11th Cir Says Failure to Tell Differential Pricing Isn't Fraud
SLAVERY REPARATION: Burgeoning Movement Asks What America Owes

SLAVERY REPARATION: Issues To Iron Out Before Making Case
SLAVERY REPARATION: New Law in CA Aims at Policy Disclosure by Insurers
STATE AUTO: Releases Pending Meridian Mutual Merger; Some Seek to Enjoin
STEWART ENTERPRISES: Announces Securities Suits in Louisiana Dismissed
TOBACCO LITIGATION: Supreme Court Declines to Hear Northwest Appeal

TOSHIBA, GATEWAY: Allegedly Defective Floppy Disk Devices Cost Millions
TWINLAB: Third Quarter Sales Down 6.7%; Revenues Down 5.6%
U.S. FOREST: Settles Lawsuit with Female Workers over Sexual Harrassment
USDA: Women Farmers, Elderly Farm Sue Over Discrimination
VITAMIN PRICE-FIXING: BASF Hopes to Get over Role in Scandal

WATER CONTAMINATION: Walkerton E. Coli Inquiry Testimony Angers Many

* IT Security Focus Moves From Coders To Lawyers
* Reports of Racism at Work Seen to Be Increasing in NC and Nationwide


BOEING NORTH: Rocketdyne Facility Faces New Experiments on Cancer Risk
Residents suing Boeing North American over its Rocketdyne facility in Santa
Susana, Calif., hope a new three-year study will confirm what they suspect:
that cancer rates are attributable to the facility. Previous studies found
no link.

In a mid-October meeting hosted by the Agency for Toxic Substances and
Disease Registry (ATSDR), several people cited a preliminary report that
found no evidence of any harm from rocket testing and nuclear research at
the Santa Susana Field Laboratory as proof the new study would gloss over

Scientists from the Eastern Research Group of Boston and University of
California-Los Angeles will conduct the Santa Susana Public Health
Initiative, looking at new cancer registry data.

Plaintiffs argue that Boeing, a Seattle company, should build a medical
treatment facility because the plant caused the high cancer rates (HWN,
March 13, p. 83). The class-action suit recently was decertified (HWN, Nov.
6, p. 345). Contact: ATSDR Region 9, (415) 744-1771. (Hazardous Waste News,
November 27, 2000)

BRIDGESTONE/FIRESTONE: Judge Sets Quick Pace; Appoints Liaison Counsel
As the bright, red monster truck emblazoned with Ford and Firestone
emblemsroared to life with all the other behemoths on Monument Circle in
preparation for a weekend race event, the first Firestone MDL conference
took off in similar fashion a block away in federal court.

Chief Judge Sarah Evans Barker set the tone of the mammoth Bridgestone/
Firestone multidistrict litigation in her inimitable style. "I was thinking
of the old Bette Davis line: 'If you want to get something done, give it to
a couple of old broads,'" she said, referring to herself and her
magistrate, Judge V. Sue Shields. "And let me tell you these old broads
aregoing to get this done."

Barker's courtroom was a sea of navy blue suits and power ties Nov. 17 as
she convened the preliminary status conference on the high-powered MDL case
that landed in her court less than a month ago. Barker paced the litigation
from the starting gun by issuing an immediate stay of depositions already
in progress, so the pretrial path would stay oncourse. She stepped back
slightly from that stance at the conference, allowing depositions to
continue in the personal injury and wrongful death suits. In her initial
move at the conference, Barker appointed Irwin Levin, of Cohen& Malad,
temporary liaison counsel for the class action plaintiffs, and William
Winingham Jr., of Wilson Kehoe & Winingham, temporary liaison counsel for
the personal injury and wrongful death plaintiffs. Given that the Judicial
Panel on Multidistrict Litigation has already transferred 63 cases to the
United States Southern District of Indiana, Indianapolis Division court for
pretrial handling, and scores more could be filed, Barker chose Levin and
Winingham as point men for the army of lawyers involved in this case.
Barker gave her two new liaisons several chores to accomplish before the
next meeting in early December, but it seems plaintiffs' counsel jumped the
gun. After working feverishly for the past 17 days, plaintiffs' counsel had
already drafted a structure plan proposal and selected their own leaders
subject to Barker's approval.

"It's like herding cats, but we did that," said Lexington, Miss., attorney
Don Barrett. "We've worked out a structure and we will move forward
expeditiously." Barrett was the pick as lead counsel for the class action
cases. Miami attorneys Victor M. Diaz, of Podhurst Orsbeck Josefsberg Eaton
Meadows Olin & Perwin, and Mike Eidson, of Colson Hicks Eidson, are co-lead
counsel for the personal injury and wrongful death plaintiffs under the
plaintiffs' proposal. At this juncture, there are lead attorneys for
Firestone and Ford, and another attorney representing Bridgestone is
supposed to surface before the next meeting. Talk of settlement also worked
its way into the initial confab of attorneys. Louisiana attorney Daniel
Bechnel sparked Barker's interest when he broached the subject of
alternative dispute resolution.

"Add the issue of immediate ADR to the agenda for the next meeting and be
prepared to talk about it," she said.

Eight years worth of state court litigated cases against Ford and Firestone
provide a good base for settlement, the plaintiffs' attorneys said. But
culling information from state cases should be the limit.

The Ford and Firestone attorneys asked if Barker would try to cooperate
with the various state courts in scheduling depositions so company
executives would not be burdened by multiple appearances. The plaintiffs
balked at the suggestion.

"I'm not sure I should make this analogy, but we do not want you to become
the mother hen to 10 different state courts," Diaz said to Barker. "The
state battles have been going on for years. The MDL is the tail, not the
dog, in this case."

Barker took the analogy gracefully, but warned Diaz he'd better not go any
further down that road.

The plaintiffs' attorneys also complained that they have not had full
access to all records in the case. Ford attorney John H. Beisner, of the
Washington, D.C., firm O'Melveny & Meyers, said they have not established a
document repository yet because trade secrets are co-mingled with other
files at the present time.

Barker told him to make the document repository a priority.

The plaintiffs also said they need some representative sample of faulty
tires as evidence. Barker acknowledged the company couldn't keep every tire
that is returned. She ordered the two sides to come to some agreement

The plaintiffs' attorneys promised to provide Barker a copy of their
structure proposal forthwith. The next status conference is scheduled for
Dec. 6, but Barker noted the agenda might be short, since the parties have
gained so much ground already. (The Indiana Lawyer, December 6, 2000)

CALIFORNIA: 9th Cir OKs Teacher Skills Test Despite Disparate Impact
The 9th U.S. Circuit Court of Appeals refused to invalidate a California
basic skills test for prospective public school teachers, although the test
concededly had a disparate impact on minority candidates, who received a
greater number of failing scores than non-minority candidates. Association
of Mexican-American Educators v. State of California, Nos. 96-17131 and
97-15422 (9th Cir. 10/30/2000).

Why wasn't the test struck down as violating Title VII of the Civil Rights
Act of 1964? Because several studies "validated" the test as actually
measuring the candidates' basic skills in reading, writing and mathematics.
California law required teachers and administrators to pass the California
Basic Education Skills Test as a prerequisite to employment in the state's
public school system. The pass-fail exam consisted of three sections
covering reading, writing and mathematics.

To pass the test, a candidate must receive a "scaled" score of 123. Since
the test's inception, minority candidates disproportionately received
failing scores. Three non-profit organizations representing the interests
of Mexican-American, Asian-American and African-American educators brought
a class action suit against the state, asserting that the test was invalid
under Title VII. A U.S. district court disagreed and dismissed the suit.

In affirming the lower court's dismissal, the 9th Circuit conceded that a
direct employment relationship between the minority educators, who were
only potential employees, and the individual school district was not a
prerequisite to Title VII liability. Title VII applied here because the
school districts "interfered" with the minority educators' employment
opportunities with local school districts by requiring and administering
the test, and because the state highly controlled the operation of local
public school districts.

The court also conceded that the minority educators established an initial
case that the test caused a disparate impact on the basis of race. However,
extensive evidence indicated that the test was properly validated through
studies showing that it actually measured skills, knowledge and ability
required for the successful performance of the job. "Professionally
acceptable" methods showed that the test questions were "predictive of or
significantly correlated with the element of work behavior" that they were
designed to measure, the appellate court reasoned.

The court also rejected the minority educators' argument disputing the
amount of the passing score necessary to pass the writing section of the
test. That score reflected the state's reasonable judgment about the
minimum level of basic skills competence that should be required of
teachers, it concluded. (Your School and the Law, December 7, 2000)

CANADA: The Toronto Star Reviews on Budget and Veterans' Services Suit
Something else in the budget will have to give way.' Canadian veterans'
services will suffer if Ottawa is forced to proceed with a hearing into how
much it owes disabled war vets for mismanaging their bank accounts for 80
years, Ontario's chief justice has been told.

Federal lawyers were in the Ontario Court of Appeal last Friday December 8
asking to have the hearing delayed until Ottawa appeals a judge's finding
that it breached its duties to mentally incapacitated veterans under its

Mr. Justice John Brockenshire of the Superior Court of Justice found the
federal government liable in October in a class-action lawsuit brought on
behalf of thousands of vets who spent much of their lives in hospitals with
shell shock or other cognitive disabilities.

Their pensions and other personal funds that were held in a government
account between 1914 and 1990 were never invested and some estates were
confiscated by Ottawa after they died, the court was told.

A financial report recently prepared on behalf of veterans estimates those
losses at $1.6 billion.

A date for a hearing to establish the amount Ottawa owes in compensation is
expected to be set this month.

But if that hearing goes ahead before the government's appeal is finished,
Ottawa will have to spend so much money in legal costs that veterans'
programs will be affected, said Dale Yurka, a justice department lawyer.

"The cost will be borne by the department, borne by the taxpayers of
Canada, " she told Ontario Chief Justice Roy McMurtry. "Something else in
the budget will have to give way."

If Ottawa wins its appeal, it would never be able to recover those costs
because they would be far more than the lead plaintiff in the lawsuit, 86-
year-old Joseph Authorson, could pay, Yurka suggested.

More time is needed because federal lawyers have to comb through "three
miles" of veterans' records in the National Archives in Ottawa to prepare
for the hearing, she said.

But Ray Colautti, a lawyer representing potential claimants in the lawsuit,
said veterans and their relatives, some of whom are also in their late 80s,
" don't have the luxury of waiting."

The information needed by the government is easily available in federal
reports, he said. "Justice delayed is justice denied."

"These people have money owing to them," added David Greenaway, another
lawyer representing the veterans. "The government breached its fiduciary
duties to some of the most vulnerable members of society."

The government is asking McMurtry to take the appeal off the fast track and
consolidate it with several other appeals from Brockenshire's rulings.

Ottawa needs extra time because the case is complex and the implications go
far beyond the Department of Veterans Affairs, so other federal departments
need to be consulted, Yurka told the court.

In an interview later, she said the federal government believes money it
has held on behalf of aboriginal groups and federal inmates could also be
affected by how the courts ultimately rule in the case. (The Toronto Star,
December 11, 2000)

ECONOMY SYNDROME: Airlines Face Huge Claims By Sufferers
Airlines face huge damages claims by possibly hundreds of passengers over
what an Australian law firm says was a failure to warn of the risks of
exposure to potentially fatal blood clots caused by cramped seating.

Every international carrier flying long-haul routes may be accused of
exposing economy-class passengers to the risk of deep-vein thrombosis
(DVT), or "economy-class syndrome", lawyers Slater and Gordon said Monday.

What started off Monday morning as a case involving 10 passengers and nine
airlines by afternoon involved up to 100 claimants and potentially hundreds
more who were victims of DVT or relatives of dead victims.

Slater and Gordon, renowned in Australia for initiating successful class
actions against major companies, said it had been deluged with inquiries
following a newspaper report of the case.

"I think over the next couple of days we'll end up with a very significant
number of potential clients," Slater and Gordon solicitor Paul Henderson
told AFP.

In each case, it is claimed the airline failed to warn passengers they were
exposed to the risk of developing potentially fatal blood clots as a result
of sitting for extended periods in cramped conditions. The travel times
varied from four or five hours to about 18 hours.

Henderson said though it may be more prevalent in Australia because of the
distances people have to travel to get to and from anywhere else, it
appeared to be a significant international problem.

One claimant in what is believed to be the first action of its kind in the
world is the widower of a young woman who died from DVT after a Qantas
flight from Australia to Britain in October.

Another is a young Melbourne woman, Rebecca Brown, who is to sue British
Airways over the severe leg cramps she suffered on a flight to London three
years ago.

Brown, 24, complained her leg cramps turned out to be blood clots that
spread to her lungs as soon as she left the flight and she had to spend
most of what should have been a European holiday in a London hospital.

"The x-rays at hospitals showed seven clots in my lungs which could have
easily gone to my brain and killed me," Brown told The Australian
newspaper. "I am totally amazed more people don't know how dangerous long
distances can be."

Alan McCarthy, 49, is suing Emirates Airlines because he had never heard of
the condition before he collapsed when a blood clot blocked his left lung
two weeks after he returned from a trip to Ireland.

Air France and Air New Zealand were also among the initial list of airlines
which will be issued with writs early in the new year, Henderson said. But
many more airlines are now expected to be implicated.

The condition, by no means unique to airlines or even to long distance
travel, is the result of sitting without adequate physical movement for
excessive periods of time, doctors say.

Henderson began processing the claims following the death of Welsh woman
Emma Christoffersen, 28, after she left a flight from Melbourne in London
in October.

Each of the claims could be worth up to 60,000 dollars (33,000 US),
depending on the extent of hospitalisation and continuing medical problems,
he said.

"Most of them ended up in hospital, usually from five to 10 days, having
their condition stabilised by the use of blood-thinning products such as
Warfarin," Henderson told reporters.

The claimants, who were usually overseas at the time they developed the
condition, then had to spend some weeks recuperating before they were
allowed to travel.

Qantas said in October it had introduced in-flight audio programs for
passengers to do exercises in their seats to ensure mobility and was
working on an in-flight video to increase awareness about the need to
maintain mobility. (Agence France Presse, December 11, 2000)

ECONOMY SYNDROME: Australian Law Firm To Launch Class Action
Law firm Slater and Gordon is launching damages claims against Qantas
Airways Ltd, British Airways PLC, Air France and Air New Zealand Ltd on
behalf of 10 Australians for allegedly failing to warn passengers of the
risk of flying economy class, ABC Online reported.

The action follows the death of a Welsh woman when she got off a flight
from Sydney to London, after suffering from the "economy-class" syndrome,
which is allegedly caused by sitting for long periods in cramped

The passengers claim they were not properly informed of the possibility
that cramped seating conditions may cause deep vein thrombosis which can
lead to paralysis or possibly death.

Lawyer Paul Henderson says he hopes to first have informal talks with the
airlines, before proceeding with action in the courts.

Henderson said his clients were hospitalised after suffering from the

He said some airlines currently advise passengers to stretch their legs on
extended flights, but he says this is an insufficient warning.

"They need to explain the risk of blood clots, and the symptoms associated
with it, because one of the difficulties is that you start off with some
minor cramping in the leg, and it may be days or weeks before it transports
to the lungs where you'll then suffer shortness of breath," he said. (AFX
European Focus, December 11, 2000)

HOLOCAUST VICTIMS: German Industry Welcomes US Court Dismissal Of Suit
The German business foundation in charge of compensating former Nazi slave
laborers Monday hailed a US federal court decision to dismiss a class
action suit brought by Holocaust victims' families against German insurers.
It said the recent ruling by a New York district court lent support to the
foundation's efforts to protect German companies from such court action in
the United States.

"This is an important step toward comprehensive legal security for German
companies in the United States," Manfred Gentz, German industry's chief US
negotiator on the Nazi slave labor issue, said in a statement.

German negotiators from government and industry reached an agreement with
American representatives this summer on the terms of compensating victims
of the Nazis' system of forced labor. One of the sticking points of those
negotiations was the German firms' insistence on some kind of protection
against future lawsuits. German negotiators are hoping for some kind of
definitive agreement from US judges early next year. Germany has agreed to
compensate former slave laborers under the Nazis' 10 billion marks (five
billion euros, 4.5 billion dollars) in reparations to former slave
laborers, half of which is to come from industry and half from the federal

While the government has already set aside its share, the "Remembrance,
Responsibility and Future" foundation representing more than 5,000 German
companies has so far only been able to raise 3.4 billion marks, leaving the
companies' share 1.6 billion marks short.

The case in New York involved families of Holocaust victims who were suing
some of German largest insurance companies for failing to honor life
insurance policies. The judge in the case, Michael Mukasey, agreed to
dismiss the case on the basis of the US-German agreement on compensation.

Gentz said the ruling confirmed the solidity of the bilateral pact,
explaining that the US government had presented to the judge in the suit a
statement to the effect that pursuit of the case was not in the US

In November, a New Jersey court had dismissed another class action suit
against German companies for using slave labor. (Agence France Presse,
December 11, 2000)

JARROD GERSCHOFFER: Indiana Checkpoints Ruling Can Signal Diversion
An Indiana Court of Appeals finding that sobriety checkpoints violate the
Indiana Constitution has prosecutors and criminal defense attorneys
scrambling in anticipation of what could be a huge diversion from a
generation of law enforcement practice.

Ruling that Article I, Section 11 of the Indiana Constitution provides a
higher standard of protection against unreasonable searches and seizures
than the U.S. Constitution, appeals judges Edward W. Najam Jr., Patrick D.
Sullivan, and Sanford M. Brook found that drunk driving roadblocks
represent an unreasonable intrusion on that protection.

The decision, State of Indiana v. Jarrod E. Gerschoffer, Ind. Court of
Appeals No. 71A05-0003 (2000), came out of St. Joseph Superior Court in
connection with the June 18, 1999, arrest of the defendant in Mishawaka.

It represents a break from the U.S. Supreme Court, which found in Brown v.
Texas, 443 U.S. (1979), and Michigan Dept. of State Police v. Sitz, 496
U.S. (1990), that the state could justify a seizure as reasonable if it
proved the public safety interest outweighed the intrusion on individual

On behalf of the three-judge panel, Judge Najam wrote that Article 1,
Section 11 provides protections "more extensive than those afforded by the
Fourth Amendment," establishing "an independent prohibition against
unreasonable searches and seizures."

Following the logic of Moran v. State, 644 N.E.2d (Ind. 1994), and Baldwin
v. Reagan, 715 N.E.2d (Ind. 1999), the panel found that "Article 1, Section
11 is not a mere copy of the Fourth Amendment but stands on its own."

"The fundamental and underlying principle in all of these cases in
indisputable: the Indiana Constitution creates an overriding preference for
a warrant and, absent a warrant, police must have probable case or
individualized suspicion of criminal activity before they may conduct a
search or seizure," Judge Najam wrote.

"While the United States Supreme Court has created a sobriety roadblock
exception to the requirement of probable cause or reasonable suspicion, we
decline to borrow from Fourth Amendment jurisprudence on this issue.
Specifically, we will not forsake the minimum requirement of individualized
suspicion to allow blanket suspicionless seizures of motorists traveling
Indiana's public roadways," Judge Najam wrote.

Judge Najam added in dicta that the three-part Brown justification test and
Sitz ruling eventually should be seen independently according to state
constitutional principles.

"A suspicionless roadblock seizure is inherently random, arbitrary and
capricious, and there is nothing in the text or original meaning of Article
1, Section 11 to suggest that the framers would have considered such a
seizure as anything other than unreasonable," Judge Najam wrote. "The
framers could not have intended for Indiana judges to abandon the
constitutional principles of probable cause and later, reasonable
suspicion, in favor of a three-part test invented by the federal courts."

                          Future Uncertain

Attorneys from both sides of the courtroom wasted little time before the
Court of Appeals had rendered the decision to weighing in on its

On Nov. 29, defense attorney Thomas E. Hastings, of the Indianapolis firm
Brown & Hastings, filed a complaint in Marion Superior Court seeking class
action status in his effort to overturn a client's roadblock-derived drunk
driving conviction. That class would include "everybody who received
tickets or criminal convictions solely from a DWI roadblock," Hastings

A veteran of more than 500 drunk driving cases, Hastings acknowledged his
case is tied to the future of the Gerschoffer case, which is expected to be
filed for transfer with the Indiana Supreme Court before Christmas absent a
motion for time extension. Depending on that eventual outcome, Hastings
believes thousands of DWI convictions could be reopened on grounds of
constitutional infringement.

"The Court of Appeals doesn't point just to this particular roadblock in
this case it's a blanket. It says all roadblocks and goes across the
board," Hastings said. "Because it's such a fundamental right to be free
from illegal search and seizure, I think there's a decent chance it will be
retroactive, but that's really a big question mark right now."

Marion County Prosecutor Scott C. Newman disagrees, noting cases that
introduce new principles overturning accepted ones typically don't apply
retroactively. But more distressing to Newman than the threat of having
thousands of closed cases reopened is the loss of what he calls "a valuable
tool" in deterring drunk driving, which he likens to the decision ruling
Indianapolis' curfew law unconstitutional.

"This has been one of our major strategies, and one that's been pretty
effective for us. In 10 years, we've had 1,000 fewer alcohol-related
crashes in Marion County. That means what we we're doing has been working,"
Newman said. "This has been widely accepted and repeatedly affirmed, and on
top of that, it has worked. It's a shame we're losing another tool. It gets

Newman believes prosecutors are unified in their support of sobriety
roadblocks and will file amicus briefs in support of Attorney General Karen
Freeman Wilson's anticipated appeal for transfer.

"The Attorney General knows prosecutors around the state would strongly
encourage transfer. Prosecutors view this as a major setback to drunk
driving enforcement," Newman said.

How the Supreme Court would rule if transfer is granted remains to be seen.
Judge Najam pointed out Chief Justice Randall Shepard's stance in dissent
to the court's ruling in the search and seizure case State v. Garcia, 500
N.E.2d (Ind. 1986), and to Justice Frank Sullivan Jr.'s reasonable
suspicion stance in his opinion in the Baldwin case.

For Hastings, those pointers still leave some uncertainty as to what will
come after the new year.

"It's been a trend in the Supreme Court since Shepard became chief justice
to develop a separate body of law for the Indiana Constitution in a number
of areas of the law," Hastings said. "It will be interesting to see what
the Supreme Court says in this case." (The Indiana Lawyer, December 6,

KUTAK ROCK: To Pay $8M To Pennsylvania School Districts for Ponzi Scheme
Kutak Rock will pay $8 million to 50 school districts and local governments
in Pennsylvania to settle allegations that the firm and its lawyers played
a key role in a Ponzi scheme orchestrated by money manager John Gardner
Black that resulted in losses of about $70 million.

None of the lawyers involved in the litigation would discuss the proposed
settlement, which sources said Kutak Rock has tried to keep confidential.

But the details of the proposed settlement agreement were outlined in
documents that were filed recently with a court in Blair County, Pa., and
disclosed by two local papers, the Altoona Mirror and the Pittsburgh
Post-Gazette. Blair County Court Judge Hiram Carpenter 3d is expected to
hold a "fairness hearing" on the agreement on Dec. 18.

The settlement is the latest action in the aftermath of the biggest
investment scandal ever to hit investors in the state of Pennsylvania,
sources said.

Black invested bond proceeds and other funds from the school districts and
local governments in interest rate-sensitive financial products. All were
in Pennsylvania except for Hartford County, Md., sources said.

Black lost millions of dollars when interest rates fluctuated in the
mid-1990s. He tried to cover up the losses, devising a collateralized
investment agreement program, under which the local government funds were
placed in pooled accounts that were not fully backed by collateral but were
controlled by Black and two companies he owned. Black allegedly engaged in
a Ponzi scheme, obtaining money from new investors to make payments to
existing ones.

Kutak Rock and its lawyers -- including former employee Bruce M. Serchuk,
who is now senior technician reviewer for the IRS' chief counsel's office
-- were sued by the school districts and local governments in 1999. A class
action suit filed in the Blair County court in September 1999 on behalf of
the Daniel Boone Area School District and 48 other districts and localities
alleged that the firm, and particularly Serchuk, helped Black establish the
companies and create the documents used in the investment scheme.

The Tyrone Area School District, which lost more than $25 million from the
scheme, filed its own suit against Kutak, charging it with malpractice for
serving as its bond counsel at the same time it was providing legal
services and advice to Black, who was investing the district's bond

The court-appointed bankruptcy trustees for the two companies owned by
Black Devon Capital Management Inc. and Financial Management Services Inc.
-- also filed a malpractice suit against Kutak and its lawyers in an
attempt to recover some of the funds and distribute them to the school
districts and other creditors.

Under the proposed settlement agreement mediated late last month, Kutak
would pay $4 million to the Tyrone Area School District, $3.5 million to
Daniel Boone and other school districts and municipalities in the class
action suit, and $250,000 each to the estates of the now defunct Devon and

Neither Kutak lawyers, Joesph Warin, a lawyer with Gibson, Dunn & Crutcher
who is representing the firm, or Serchuk, could be reached for comment.

In addition, Hefren-Tillotson Inc., a broker-dealer firm in Pennsylvania
that bought and sold securities for Black in connection with the alleged
scheme, is expected to pay about $600,000 to settle charges filed against
it. A hearing on that matter is to be held early next year. No one at that
firm would comment.

These settlements would come after Keystone Financial Inc., of Harrisburg,
agreed last year to pay about $51 million to settle charges related to the
investment scandal. Keystone agreed to the payment after acquiring
Mid-State Bank of Altoona, the custodian of the school district and local
government funds. Keystone has since been acquired by M&T Bank in Buffalo,

Black is currently in a federal prison, sources said. He has served seven
months of a 42-month prison sentence stemming from a plea agreement he made
in a criminal case. He also settled charges with the Securities and
Exchange Commission, which uncovered the investment scheme and obtained a
court order freezing the assets of Devon and FMS in 1997. (The Bond Buyer,
December 11, 2000)

LOCKHEED MARTIN: Deal in Toxins Suit Gets Nod; Going Solo Might Not Pay
A proposed $ 5 million deal to settle a toxic contamination suit between
Lockheed Martin and some 400 plaintiffs got a tentative nod last Friday
December 8 from a judge, who indicated he might reject a bid by a Burbank
woman to proceed with her own claim.

Superior Court Judge Carl J. West ruled the settlement was made in good
faith and should be accepted by the more than 400 plaintiffs, who claim
they were made sick by toxins generated during decades of defense
manufacturing in Burbank.

But he put off making a final determination on a bid by Lynell Murray-
Madrid to withdraw her claim, saying it could jeopardize the deal for the
other plaintiffs. The proposed settlement requires the approval of all

He also warned Murray-Madrid that she could end up with nothing if she
decides to pursue her own lawsuit against Lockheed. ''I doubt that even if
you are able to get a judgment in your favor that it would be anywhere near
the costs of proceeding with the trial,'' he said. ''I'm afraid that if I
let you go on as the sole plaintiff, I would be effectively saying it will
be dismissed with absolutely nothing.''

Murray-Madrid said she was disappointed with West's tentative decision and
was unsure what she'll do if the judge finalizes his tentative decision.

She said she and her sister, Erin Baker, want Lockheed to be held
accountable for their illnesses, which include Hodgkin's disease and
Crohn's disease. Baker's claim was among 140 bellwether cases dismissed in
May that would share in the settlement.

''We were told that this was not a class-action (suit), (that) our cases
would be tried as individuals,'' she told the judge. ''That's how it was
started and that's how we believe it should end.''

But West said with more than 400 plaintiffs, the attorneys were given
authority to accept a settlement made in good faith. Their clients were all
bound by that, and all but a few said they wanted the deal.

Murray-Madrid and her sister submitted forms to withdraw their case and
replace their attorney, Thomas G. Foley. But West said the paperwork was
not filed in time to release the women before the settlement was presented
to the court Oct. 20.

Lockheed spokeswoman Gail E. Rymer said she would not comment on the
judge's statements until he makes his final ruling.

''The judge did an excellent job of explaining the issues and showed
extreme compassion and understanding for Ms. Madrid,'' she said. ''But I
think this whole process has demonstrated that the justice system works,
and he's based his comments on substance and process.''

The case is expected back in court Jan. 19, when the court will clarify the
status of more than a dozen plaintiffs.

The suits - originally filed by more than 3,000 people but whittled down to
several hundred - contended that the plaintiffs' illnesses were caused by
toxins used to clean and degrease airplane parts. Those volatile organic
compounds were left behind in the soil and groundwater when Lockheed moved

This year, West ruled that the plaintiffs did not scientifically prove
their case. The settlement was reached in October.

Among the variables to determine how the money would be divided among the
remaining plaintiffs are their illnesses, and when and how long they lived
in Burbank. (The Daily News of Los Angeles, December 9, 2000)

MAGELLAN HEALTH: MO Residents Allege of Fraud By Mental Health Provider
Pennsylvania and Missouri residents filed separate but identical complaints
seeking class action certification against Magellan Health Services Inc.
and its wholly owned subsidiary, Magellan Behavioral Health Inc., in the
U.S. District Court for the Eastern District of Missouri. The complaints
allege that by failing to disclose the truth about the plan's coverage, the
plan members paid more for their mental health coverage than they would
have paid had they known the truth, in violation of the RICO Act and the
Employee Retirement and Income Security Act. (Jane and John Doe, et al. v.
Magellan Health Services Inc., et al., No. 4:00CV01715 JCH (E.D. Mo.
10/26/00) and B.S.W., et al. v. Magellan Health Services Inc., et al., No.
4:00CV01716 TIA (E.D. Mo. 10/26/00).)

Magellan Health Services is a health care organization that manages mental
health and substance abuse services for 70 million people throughout the
United States. Both complaints sought class certification for plan members.
The complaints alleged that Magellan failed to identify and explain its
participation in the provision of covered behavioral health benefits;
failed to inform members that it assumed the underlying insurance risk of
loss for their behavioral health care benefits; failed to disclose that it
applied coverage criteria that are different and more restrictive than
described in documents; and failed to inform members that it created
financial incentives for doctors to deny claims and to withhold medically
necessary care. The suits charge that by "means of material
misrepresentation and omissions ... Magellan intended and did provide
Plaintiffs and Class Members with coverage of lesser market value than the
coverage that had been described and represented." (Civil RICO Report,
December 7, 2000)

NEW YORK: Lawyers and Groups Fight 5 Years for School Conditions
Math teachers failing the tests they give their students. Schoolbuses
doubling as temporary classrooms. Those aren't just horror stories from an
article decrying the state of our schools, they're facts that Simpson
Thacher & Bartlett tried to prove during the seven-month trial in Campaign
for Fiscal Equity v. New York. For the past five years, lead partner Joseph
Wayland and a team of three partners and five associates have represented
the CFE, a consortium of school boards, parent organizations, and other
advocacy groups.

The group claims that these shameful conditions prevent New York City
schoolchildren from getting the "sound, basic education" required by the
state constitution, and that the state's disproportionate funding of
upstate and suburban schools is a primary cause ("Sutherland's Northern
Exposure," December 1999).

The judge is considering the case now, and a decision is expected by
year-end. Most of the team worked on the case full-time, making it the
longest, most expensive pro bono effort in the firm's history. Wayland
estimates that the case has cost the equivalent of $12 million in fees and
millions more in disbursements.

Everyone involved has been surprised by the length of the case. "We didn't
think the school conditions or the state of the curriculum could be
disputed," says Wayland. But the state (through its attorneys at Sutherland
Asbill & Brennan) fought every issue, arguing that the education given city
schoolchildren is constitutionally sound. The cost increased accordingly.
It's hard to imagine the entire partnership of a major firm agreeing about
anything that involves spending large amounts of money. But Wayland claims
that the firm never wavered. "I've been surprised by the unanimity of
support. It's extraordinary," he says.

The case originated with the chairman of the executive committee, Richard
Beattie, who was a member of the New York City Board of Education in the
mid-1980s, and is the current chairman of New Visions for Public Schools,
an advocacy group. When the CFE needed a lawyer, he seemed a natural
choice. "Bobby Wagner (son of former mayor Robert Wagner) and I thought
about a case like this when we were on the Board of Education together," he
recalls. "I spent a lot of time arguing with Albany that the city schools
need more money." Beattie isn't a litigator, so he handed the case off to
Wayland, who says that it "engaged me emotionally in a way that most of our
cases don't." He's not worried that years of unprofitable work will cast a
shadow on his career. "There's a high correlation here between pro bono
work and success," he says. "Many of our partners were among the most
active in pro bono work as associates."

Largely because of this case, Simpson is bucking the industry trend toward
diminished pro bono time. The firm finished thirteenth in the Am Law 100
pro bono survey, recording an increase in both total number of hours and
hours per attorney over the last year. "These haven't been lean years,"
says Wayland, who doesn't buy the excuse that firms are too busy: "We've
proven that you don't have to sacrifice pro bono hours in order to be
profitable or to service clients." Simpson Thacher has already committed to
handling the inevitable appeal, which means that the firm will continue to
balance this case and its paying work for some time to come.

Whatever the result, the team accomplished an immediate educational goal.
During the trial, the CFE developed a program for high school students, and
one or two classes would usually attend the trial. On most days, the
lawyers would give a presentation at lunch about the case and explain what
had happened that morning. "It was great," says Wayland. "Some of the days
were pretty dry, but usually we were talking about things that the kids
knew all about, like conditions in the schools."

The extent of Simpson Thacher's dedication was underscored when, during the
course of the litigation, another "major" New York firm was approached
about taking on a similar case about the funding of education. That firm
asked Simpson Thacher for information about the litigation and the
commitment it required. "They came to our office for a tour, and I gave
them some idea of our expenses," Wayland recalls. The result? "We never
heard from them again," he says. Partner Joseph Wayland says the firm has
given him unwavering support throughout his five-year city school battle.
(The American Lawyer, December 2000)

PARADYNE NETWORKS: DSL Provider Announces Management Changes
Paradyne Networks, Inc. (Nasdaq:PDYN), a worldwide provider of Digital
Subscriber Line (DSL) and Service Level Management equipment solutions,
announced on December 11 that Andrew S. May has resigned his position as
Chief Executive Officer of the Company effective December 8, 2000. Mr. May
will remain as a strategic advisor to the Company through June 2001 and a
member of the Company's board of directors. Mr. May served as chief
executive officer of the Company since December 1996 and a director since
January 1997. Also, effective December 8, 2000, the Company appointed Sean
E. Belanger, the Company's President and Chief Operating Officer, as the
Company's new President and Chief Executive Officer. Mr. Belanger has also
been elected to the Board of Directors of the Company.

Commenting on Mr. May's decision to step down as the Company's Chief
Executive Officer, the Company's Chairman of the Board Thomas E. Epley
said, "Andy played an integral role in the development and marketing of
Paradyne's successful DSL products, our subsequent initial public offering
and in the creation of a strong internal corporate organization. We
appreciate the leadership he provided during our Company's formative years
and very much appreciate Andy's willingness to stay on as a strategic
advisor to the Company for an interim period and as a director."

Mr. Epley added, "We are extremely pleased that Sean has agreed to assume
the position of President and CEO. This is a time of considerable
uncertainty in our industry but the Board is confident that Sean is
imminently qualified to lead Paradyne. Sean knows Paradyne's products, and
he knows our customers, two critical ingredients for success."

                         Belanger Background

Prior to his appointment as the Company's Chief Executive Officer, Belanger
served as the Company's President and Chief Operating Officer and prior to
that as the Company's Senior Vice President of Worldwide Sales, a position
that he held beginning in June 1997. Prior to his employment with the
Company, Mr. Belanger served as Vice President and General Manager of 3Com
Corporation's Network Service Provider division.

           Belanger Initiatives and Fiscal 2001 Guidance

"We remain confident that our DSL and Service Level Management lines of
business will continue to offer long-term growth on a worldwide basis. We
will be making some organizational changes that will emphasize Paradyne's
diversified markets and products. First, we will shift from a centralized
horizontal organizational structure to focused teams targeting specific
initiatives in the Company's DSL, Service Level Management and Technology
products. Second, we will be aligning marketing and sales resources to more
effectively focus on the emerging opportunities in international markets
while continuing to serve our strong base of North American customers. The
international changes include the expansion of Paradyne's five
international offices in Tokyo, Singapore, Nice, Beijing and Cairo. In
light of these changes, we are withdrawing our previously announced fiscal
2001 guidance and will be providing new guidance in January 2001 with our
4th quarter 2000 earnings press release," said Sean Belanger.

RITE AID: 11th Cir Says Failure to Tell Differential Pricing Isn't Fraud
In an action alleging a retail pharmacy chain implemented a scheme to
defraud its uninsured consumers of prescription drugs by charging them
higher prices for medication than it charged its insured customers, the
11th U.S. Circuit Court of Appeals concluded that a retail pharmacy chain
had no duty to disclose its differential pricing policy to consumers. The
court held that the pharmacy did not violate the RICO Act because its
failure to disclose its pricing policy was not fraudulent. (Langford, et
al. v. Rite Aid of Alabama Inc., et al., No. 10167 (11th Cir. 11/2/00).)

The uninsured consumers purchased prescription drugs from a local Rite Aid
Pharmacy. Because they lacked medical insurance that would reimburse them
for the costs of the drugs, they paid for their prescriptions themselves.
The uninsured consumers filed a class action suit against Rite Aid Inc. and
its subsidiary, alleging that Rite Aid "maintained an elaborate scheme to
defraud uninsured customers by increasing the prices of prescription drugs
for customers lacking insurance." The uninsured consumers claimed Rite
Aid's failure to disclose that it maintained a policy of charging them
higher prices for prescription drugs than it charged insured consumers
constituted mail and wire fraud in violation of the RICO Act. The
plaintiffs sought to certify a class of all uninsured consumers that
purchased drugs from Rite Aid pharmacies over the past five years.

Rite Aid moved to dismiss, arguing that the uninsured consumers failed to
allege a predicate offense as required by the RICO Act. Rite Aid argued
that their failure to disclose the pricing differential was not fraudulent
because retailers have no affirmative duty to disclose their pricing
schemes to consumers. The U.S. District Court for the Northern District of
Alabama determined that Rite Aid owed no duty of disclosure to the
uninsured consumers and dismissed the RICO claim. The uninsured consumers
appealed. (Civil RICO Report, December 7, 2000)

SLAVERY REPARATION: Burgeoning Movement Asks What America Owes
It starts with a man in chains. Then it runs, grimly purposeful, through
200-plus years of bigotry, humiliation, rejection to end up here, with Joan
Brown's children.

That's how Brown sees it, anyway: a straight line running from slavery to
the present, each woe following hard upon the last.

Her ancestors were shackled. Freed, they were kept illiterate and poor.
Couldn't get loans. Couldn't get decent medical care. Brown's mother died
of tuberculosis at age 18. Brown herself was sent to pick cotton as a girl.
She never made it past the third grade. Of her nine children, only two
graduated from high school. One is in prison. And 14 of her grandchildren
are in foster care, their parents deemed unfit.

Brutal, hopeless past leads to brutal, hopeless future.

Which brings Brown, 53, to this conclusion: The U.S. government owes her
big. In fact, it owes all African Americans for centuries of mistreatment.
Owes them reparations.

Brown, who walks door-to-door in this nearly all-black city to drum up
support for her cause, is but one voice in a resurgent national movement
that insists America owes its African American citizens a debt -- and
demands at least a down payment.

This is not necessarily a call for taxpayers to cut checks to each African
American of slave descent. That's just one approach. Many activists urge
instead a domestic Marshall Plan--a huge investment to rebuild black
communities through college scholarships, job training, interest-free
loans, even amnesty for some nonviolent criminals.

The specifics, they contend, are less important than the principle: the
government confessing its sins and moving to atone for them. Admitting that
its policies--not only during slavery but also in the century that
followed--ground many blacks down into a permanent underclass.

"So many residuals of slavery are very clearly with us," said Hilary O.
Shelton, who directs the Washington chapter of the National Assn. for the
Advancement of Colored People. "An apology is due but also much more than

The reparations movement has been simmering for 40 years, to little effect.
A poll taken in October by Harvard University and the University of Chicago
found that 53% of blacks surveyed thought the government should compensate
descendants of slaves. A 1997 poll by ABC News found just 10% of whites
backed the idea.

Yet several recent developments have energized the movement.

Last year's settlement compensating Jews who had been forced into slave
labor in Nazi Germany spurred some African Americans to ask: Why not us?
Recent disclosures about--and apologies from--companies that profited off
the slave trade, including Aetna Insurance and the Hartford Courant
newspaper, also got people thinking. As did a book by prominent lobbyist
Randall Robinson titled "The Debt: What America Owes to Blacks."

Chicago, Detroit, Cleveland, Dallas and Washington all have passed
resolutions calling for a national committee to advise Congress on
reparations. Rep. John Conyers Jr. (D-Mich.) has gained 46 co-sponsors of a
bill that would do just that. "The forward thrust is very, very
encouraging," he said of the bill, which is backed by the NAACP.

Meanwhile, a coalition of big-time attorneys, both black and white, plans
to file a class-action lawsuit within months seeking reparations for
African Americans. The group includes Johnnie L. Cochran Jr.; Richard
Scruggs, who led the recent state attorneys general fight against the
tobacco industry; and Alexander J. Pires Jr., who recently won $ 1 billion
for black farmers discriminated against by the U.S. Department of

Pires called the reparations lawsuit "far and away the most important case

It's also bound to be one of the most controversial. Already, the debate
runs acrid.

On one side, the proponents of reparations draw that line from slavery to
the sorrows of today: the 26% of blacks living in poverty, compared with 8%
of whites. The black infant mortality rate, double that of whites. The
familiar, depressing landscapes of black communities like Benton Harbor,
which boasts a sparkling Lake Michigan waterfront and a spunky downtown
revival, but which nonetheless struggles with unemployment, crime and block
after block of boarded-up, beaten-up homes.

On the other side, the critics concede, African Americans do face tough
odds, but look at all those who have made it. Look at the booming black
middle class. Those at the bottom need to stop bellyaching, they say. Need
to move on. Move up.

"If you added up all the income black Americans earn and considered us as a
separate nation, we'd be the 13th or 14th richest nation on the face of
this Earth," says Walter E. Williams, an economist at George Mason
University in Fairfax, Va. "Blacks have benefited from the fact of slavery,
because we have far greater freedom and far higher incomes than we could
ever find in Africa."

Robert Woodson Sr.--director of the National Center for Neighborhood
Enterprise in Washington, which trains black youths for skilled jobs such
as Web site design--points to the African American business districts that
thrived in the 1920s, '30s and '40s despite Jim Crow, despite lynchings,
despite overt and legal bigotry. If blacks could do it then, surely they
can do it now, he argues. But only if they stop begging and get to work.
"If you see yourself as a chronic victim, and if you look to the people you
say are your enemy for your salvation," Woodson warns, "then you always
remain a whining dependent."

Such are the philosophical objections to reparations. There are practical
questions to consider as well. If reparations are to be paid, who should
get them? Just descendants of slaves, or all African Americans? What about
black immigrants from elsewhere in the world? If the compensation is for
slavery more than a century ago, why should today's taxpayers foot the
bill? If more recent bigotry is the rationale, why do African Americans
have a special claim? What about reparations for gays? Or women? Or white
men whose grandparents were humiliated--and impoverished--by signs
decreeing, "No Irish need apply?"

And what if blacks won? Would they, in effect, be trading reparations for
all government aid?

"Asking for reparations is strategically unwise because it puts a limit on
your claim" by casting investment in black communities as a onetime payback
of old debts, rather than an open-ended moral obligation to help fellow
citizens in need, argues Glenn C. Loury, director of the Institute on Race
and Social Division at Boston University. "I don't see anything wrong with
getting money to help solve the problems," Loury said. "What I'm objecting
to is having it presented as a quid pro quo."

But a quid pro quo is exactly what some blacks want.

William Spriggs, research director of the National Urban League, offers
this analogy: "It's like playing poker with someone who's been dealing from
the bottom of the deck and gets all your chips. You finally call him on it,
and he says: 'OK, here's the deck, you deal. I won't cheat anymore.' You
say, 'But what about my chips?' And he says, 'Oh, no, you don't get your
chips back. I'm just telling you I'm going to be fair from here on out.'
You're never going to win that game."

So why not demand those chips back? You used us. You abused us. You owe us.
The pitch could hardly be more straightforward.

Reparation advocates even claim precedent on their side: After all,
President Reagan approved restitution of $ 20,000 to each Japanese American
interned during World War II. And in 1980, the Supreme Court awarded Sioux
Indians $ 191 million as compensation for land stolen from them a century
earlier. On a smaller scale, the state of Florida in 1994 paid $ 150,000 to
each survivor of a 1923 assault on the black town of Rosewood.

But those cases hinge on specific, quantifiable losses that reparations
could redress. Japanese Americans, for example, could testify about the
homes and businesses they lost when they were locked behind barbed wire.
The Sioux could point to the land taken from them and explain what it meant
to the tribe.

African American losses are much harder to calculate, although some have
tried: By one estimate, the wages slaves should have been paid, plus
interest, would amount to $ 1.4 trillion today. By another, blacks lost $
82 billion in equity due to mortgage discrimination in this generation
alone. A third calculation pegs the value of 40 acres and a mule--the
compensation that freed slaves were promised but never got--at about $
40,000 each in current dollars.

How, though, can one put a price tag on the gaps in Joan Brown's education?
On the blow to her self-esteem when, not yet 10, she had to abandon her
studies in Alabama and pick cotton to survive? How can one quantify the
consequences that followed, not inevitably but predictably: her inability
to get a job, her poverty, seven of her nine kids dropping out of school?

Brown is not sure how to run the figures. Still, she insists it's vital to
try. An elected commissioner in this southwest Michigan town of 12,000, she
looks at the mess that is her ward--the busted windows, the junky lots, the
homes tipsy with disrepair--and concludes her constituents need their
country to own up to how far it's pushed them down. "Reparations would
change the attitude of a lot of people," she said. "We'd have more faith
and trust in America." Adjoa Aiyetoro, a law professor at American
University, adds simply: "It's a matter of dignity."

Dignity, that is, not only for African Americans but for all citizens, of
every race. Most reparation activists passionately believe that airing
their cause will help heal racial tensions. They are convinced that white
America will repent and embrace them if only they learn the facts: that 25
million blacks died during slavery. That slaves built the U.S. Capitol.
That generations of free blacks couldn't vote or serve on juries, couldn't
work in certain jobs or buy homes in certain neighborhoods, couldn't get an
education or climb into the middle class because of laws written to hold
them back. That some legalized bigotry continued as the 21st century was
about to dawn; it was not until last month, for instance, that Alabama
voters repealed a clause in their constitution barring blacks from marrying

Rep. Tony P. Hall (D-Ohio), a white lawmaker sympathetic to at least
studying reparations, says it will take years, if not decades, of racial
reconciliation before the issue can even be addressed in Congress.

But black activists contend Hall has it backward: Discuss reparations
first, they say, and only then will reconciliation be possible. "The reason
that racism festers and divides to this day is that it has never really
been addressed head-on," said J.L. Chestnut, an Alabama attorney and
longtime advisor to Martin Luther King Jr. "This country has been in
denial." (Los Angeles Times, December 11, 2000)

SLAVERY REPARATION: Issues To Iron Out Before Making Case
They say they can win a reparation lawsuit. But first they must figure out
a few details: Whom to sue. On whose behalf. In what court. And on what
legal theory.

Nine top class-action and civil-rights lawyers--including men who have won
huge settlements against the tobacco industry and the maker of the fen-phen
diet drugs--have met several times over the last few months to plot

They face several challenges.

First, there's the statute of limitations. Slavery ended 135 years ago. The
most egregious laws oppressing free blacks, such as voter tests that denied
them the ballot, were repealed decades ago. However, Congress could waive
the statute of limitations. It did for the lawsuit filed on behalf of black
farmers who had been denied loans by the U.S. Department of Agriculture.
Lawyers also could argue that slavery and segregation should be exempt from
time limits because they are crimes against humanity. That approach worked
for Nazi slave laborers forced to toil for German firms during World War

Lawyer Alexander Pires, who represented the black farmers, asserts that the
plaintiffs in any reparation case simply would be "black America."

But his colleagues are struggling to parse that phrase. Should they sue on
behalf of living blacks who were denied specific opportunities, such as a
mortgage or higher education? Or on behalf of the black underclass, which
arguably suffers most from the legacy of slavery? Should they include only
African Americans who can trace their ancestry to slaves?

Identifying defendants is tricky as well. The federal government is an
obvious target. So are states that enacted laws designed to harm blacks.
But most suits against the government require a specific defendant be
named--and the people who enacted and enforced the worst laws are long

Other possible defendants include corporations or private individuals who
profited from slavery. The Hartford Courant newspaper in Connecticut, for
example, ran wanted ads for runaway slaves.

As for the legal underpinning of a suit, the U.S. 9th Circuit Court of
Appeals in 1995 dismissed a suit by several blacks who demanded reparations
for slavery and the prejudice it fostered. The court found no legal theory
to back up their claim and said such grievances should be brought to

To get around that precedent, Pires and company are considering a
straightforward breach-of-contract suit alleging the government broke its
promise to give each freed black 40 acres and a mule. Or several suits
alleging specific civil-rights violations stretching back to the Jim Crow

In the end, the legal strategy may not be as important as the public
relations campaign. With enough pressure, Pires predicted, Congress will
approve reparations. (Los Angeles Times, December 11, 2000)

SLAVERY REPARATION: New Law in CA Aims at Policy Disclosure by Insurers
A new state law aimed at illuminating the legacy of slavery will order
insurers doing business in California to make public any "slave insurance"
policies they may have issued during the 19th century.

The law, sponsored by state Sen. Tom Hayden (D-Los Angeles), will take
effect Jan. 1. It has no punitive impact on insurance companies. But
scholars and activists, who say it is the first state measure of its kind,
believe it could provide ammunition for the nascent black reparations
movement. That effort is attempting to model itself after the success of
Holocaust survivors, who in recent years have won billions of dollars from
European companies associated with the Third Reich.

Supporters have yet to fashion a specific legal strategy. But they believe
that forcing insurance companies to disclose issuance of slave insurance
would create potential targets of lawsuits which, in turn, might embolden
other African Americans to file suits against other industries that
indirectly profited from slavery.

The slave-insurance bill originally required hearings to determine whether
African Americans have legal standing to seek compensation from insurance
companies. It contended that money paid to the owners of slave insurance
was actually owed to the descendants of slaves. But the bill passed the
Legislature in a weaker form, lacking any hearings or compensatory

Nevertheless, Washington attorney Alexander Pires, one of a bevy of lawyers
around the country preparing a class-action reparations lawsuit against
numerous industries and government agencies, says California's law will
strengthen his hand.

"The more we hear about these things, the easier it's going to be for
plaintiffs to say: 'Look, this is not a fairy tale, this is true,' " he

Slave insurance was common among slave traders and the largest slaveholders
until 1863, when American bondage was prohibited. The practice probably
originated in Europe as a way for slave traders to insulate themselves from
the great risks associated with the transportation of African slaves across
the Atlantic Ocean.

One of the best-known court cases involving slave insurance took place in
the 1780s when the captain of a slave ship called the Zong was accused of
fraud. As it sailed from Africa with a full load of slaves, the Zong was
wracked with cholera and nearly ran out of food and water. The captain
threw 200 slaves overboard and was embroiled in a tortuous legal fight when
he tried to collect insurance upon his return to England.

Some scholars argue that slave insurance may have been a predecessor to
modern-day life insurance.

By the 1800s, a single slave in the United States could be worth as much as
$ 30,000 in today's dollars. "Slaves were big-time investments," said
Walter Johnson, a New York University history professor and author.
"Generally, the buying of slave insurance would be preceded by a medical
exam in the slave market. It would be a real complete, naked, invasive
physical examination."

Then, depending on the age, skills and health of the slave, an insurance
company would set a price. If the slave died, the slaveholder would be the

Earlier this year, Aetna Inc., the nation's largest insurer, publicly
apologized for selling slave insurance policies in the 1850s after a New
York woman contacted the Harford, Conn.-based company to seek an apology
and reparations.

In recent years, Reps. John Conyers Jr. (D-Mich) and Jesse L. Jackson Jr.
(D-Ill.) have repeatedly supported bills calling for federal commissions to
research the impact of American slavery and to recommend "appropriate

Jackson said he supported the California law and hopes to see similar laws
enacted elsewhere. "The nation must come to grips with the truth and
consequences of its history."

The insurance industry is both willing and wary. Although they registered
no opposition to the final version of the bill and have pledged to fully
comply, some industry officials expressed concern over efforts to seek
reparations, and downplay the involvement of modern-day companies in the
slave trade.

Thus far, Aetna executives say they have come up with only a handful of
slave insurance policies--to the derision of history scholars and
reparations activists. But Robert Hartwig, chief economist for a New
York-based insurance industry trade group, said most of the firms operating
before 1863 have either dissolved or were bought by other companies long

Hartwig says some insurers have already begun to look into their archives,
but Hartwig said he knew of no other companies that had acknowledged
issuing slave insurance policies. Apart from practical considerations about
finding insurance companies involved in slavery, Hartwig also questions the
fairness of singling out his industry. "If you want to cast a net of blame
for slavery, you're going to have to cast it over the entire 19th century
economy and virtually every industry and company which can trace its roots
back to the mid-1800s," he said. "The question is why now, why insurers,
and does this nation need to tear open wounds which are still being healed

Eric Foner, a noted Civil War historian and author, said such disclosure is
not only necessary, but helpful because "it directs attention to the
centrality of slavery in American history."

However, he agreed with Hartwig's point that the insurance industry wasn't
the only sector of the American economy involved in slavery. "The entire
New World was based on African slavery," said Yale historian David Davis,
"and a large number of the jobs in France and England were dependent on
slavery. Fortunes were made all over the place either directly from the
selling and labor of slaves or insurance or clothes and food and all the
things that slave owners needed to outfit their slaves to work. "So it
would seem to me to be impossible today to get a fair representation of all
the capital involved."

A movement seeking reparations for the descendants of American slaves
surges. (Los Angeles Times, December 11, 2000)

STATE AUTO: Releases Pending Meridian Mutual Merger; Some Seek to Enjoin
State Automobile Mutual Insurance Company (State Auto Mutual) released on
December 11 the following statement regarding recent developments relating
to its pending merger with Meridian Mutual Insurance Company and purchase
of the outstanding publicly owned shares of Meridian Insurance Group, Inc.

"State Automobile Mutual is aware of Greg Shepard's efforts to seek a court
order to enjoin the pending transaction between MIGI and State Auto Mutual.
State Auto Mutual believes the per share price agreed to in this
transaction fairly values MIGI, and the transaction is fair to all of the
companies' constituents. We are confident the transaction will ultimately
close, following receipt of regulatory, policyholder, and shareholder
approvals," said Robert L. Bailey, State Auto Chairman.

State Auto Mutual is the parent of State Auto Financial Corporation (State
Auto Financial), a regional property and casualty insurance holding company
engaged primarily in writing personal and commercial automobile,
homeowners, commercial multi-peril, workers' compensation and fire
insurance. The companies currently market their products through more than
13,100 agents associated with approximately 2,200 agencies in 26 states.
Products are marketed primarily in the Midwest and Eastern United States,
excluding New York, New Jersey and the New England states.

Except for historical information, all other information in this news
release consists of forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected, anticipated or implied.
The most significant of these uncertainties are described in State Auto
Financial's Form 10-K and Form 10-Q reports and exhibits to those reports,
and include (but are not limited to) legislative changes at both the state
and federal level, state and federal regulatory rule making promulgation's,
class action litigation involving the insurance industry and judicial
decisions affecting claims, policy coverages and the general costs of doing
business, the impact of competition on products and pricing, inflation in
the costs of the products and services insurance pays for, product
development, geographic spread of risk, weather and weather-related events,
and other types of catastrophic events. State Auto Financial undertakes no
obligation to update or revise any forward-looking statements.

This release is neither an offer to sell nor a solicitation of an offer to
buy the securities of either company, nor a solicitation of a proxy. Any
such offer or solicitation will only be made in compliance with applicable
securities law.

STEWART ENTERPRISES: Announces Securities Suits in Louisiana Dismissed
Stewart Enterprises, Inc. (Nasdaq NMS:STEI) announced on December 11 that
the United States District Court for the Eastern District of Louisiana has
granted its motion to dismiss the consolidated complaint arising from 16
putative securities class action lawsuits that were filed in the fall of
1999 against the Company, certain of its directors and officers, and the
lead underwriters in the Company's January, 1999 common stock offering.

The court dismissed the complaint against all defendants for failure to
state a claim. In the conclusion to a lengthy opinion, the Court said even
if it were: "... viewing the complaint in favor of the plaintiffs and
taking all of the facts pleaded in the complaint as true, the court
concludes that the plaintiffs can prove no set of facts which would entitle
them to relief."

The announcement says that founded in 1910, Stewart Enterprises is the
third largest provider of products and services in the death care industry
in North America, currently owning and operating 627 funeral homes and 163
cemeteries in North America, South America, Europe and the Pacific Rim.

TOBACCO LITIGATION: Supreme Court Declines to Hear Northwest Appeal
The Supreme Court let a flight attendant sue Northwest Airlines on her
claim that she was harmed by secondhand smoke during flights to Asia.

The court, on a 6-3 vote Monday, declined to hear Northwest's appeal that
argued the lawsuit was pre-empted by the federal law that deregulated the
airline industry.

Voting to grant review were Chief Justice William H. Rehnquist and Justices
Sandra Day O'Connor and Clarence Thomas. Writing for the three, O'Connor
said the case ''presents an important issue'' that has divided federal
appeals courts and should be resolved by the nation's highest court.

The case was filed by Julie Duncan of Seattle, who said she suffered lung
problems and chronic infections apparently related to secondhand smoke.

Northwest prohibited smoking on domestic flights in 1988, before the ban
was required by federal law, but continued to allow smoking on flights to
and from Japan for another decade. The airline said it did so to compete
with other airlines that let passengers smoke.

Duncan's lawsuit, which sought class-action status, said Northwest violated
its duty under Washington state law to provide a safe and healthy working

The 1978 Airline Deregulation Act pre-empts all state lawsuits related to
airline rates, routes or services.

A federal judge dismissed the lawsuit, saying that allowing Duncan's claim
to proceed would amount to allowing state regulation of a ''service''
provided by Northwest on its trans-Pacific flights.

But the 9th U.S. Circuit Court of Appeals reinstated Duncan's lawsuit last
April. Allowing smoking on some flights is not a ''service'' provided by an
airline, the court said.

The court also said the prospect of damages from a personal-injury lawsuit
would not affect an airline's services enough to warrant pre-emption under
the federal law.

In the appeal acted on Monday, Northwest's lawyers said airlines should not
have to ''tailor their operations'' to comply with laws in various states.

Duncan's lawyers said the deregulation law was not intended to protect
airlines from personal-injury claims.

The case is Northwest Airlines v. Duncan, 00-404.

For the appeals court ruling in Duncan v. Northwest Airlines:
http://www.uscourts.gov/links.htmland click on 9th Circuit. (AP Online,
December 11, 2000)

TOSHIBA, GATEWAY: Allegedly Defective Floppy Disk Devices Cost Millions
Two PC vendors last month agreed to financial settlements with the
government for selling allegedly overpriced or defective equipment to

Toshiba Corp., the parent of Toshiba America Information Systems Inc.,
settled a class-action suit for $ 23 million for defective floppy disk
controllers in notebook computers that sometimes corrupted data, the
Justice Department said.

Gateway Inc. agreed to pay the government $ 9 million to settle allegations
that it failed between 1994 and 1997 to pass along savings, as required, on
its General Services Administration schedule sales. When prices fell
between ordering and shipment, Gateway did not give the government the
reductions, Justice said. (Government Computer News, November 6, 2000)

TWINLAB: Third Quarter Sales Down 6.7%; Revenues Down 5.6%
Dietary supplement manufacturer Twinlab has asked for an extension in the
deadline to file its third-quarter results report, because it is conducting
an investigation into an $ 8 million inventory shortage at its Utah
division. Shortly, after the announcement, class action lawsuits were filed
by several firms acting on behalf of the company's shareholders.

Twinlab also said that sales of its herbal products have been
disappointing, and it has reduced its herbal sales projection for 2000 and
decided to discontinue production of certain herbal lines. The company said
its third-quarter net sales were $ 76.4 million, down 6.7% compared to a
year ago while, for the nine months, revenues were $ 215.0 million, down
5.6%. (Nutraceuticals International, December 1, 2000)

U.S. FOREST: Settles Lawsuit with Female Workers over Sexual Harrassment
The U.S. Forest Service has settled a class action lawsuit with thousands
of current and former female workers by agreeing to stem a pattern of
sexual harassment within the agency.

Agency spokesman Matt Mathes said the Forest Service agreed with the terms
of the settlement and will fully abide by them. "We think it's a fair
settlement, and we think it's going to take care of some problems that were
brought to our attention," Mathes said.

Brad Yamauchi, the employees' attorney, said his clients were pleased the
settlement "establishes a framework for the agency and protects future
generations of female workers."

In 1995, Lesa Donnelly and Ginelle O'Connor filed a lawsuit against the
agency alleging "a pattern and practice" of sexual harassment and
retaliation in Region 5 of the Forest Service. In 1997, the complaint
expanded into a class action lawsuit covering all past and current female
employees of Region 5 since Feb. 1, 1994.

Many of the members of the class action suit still have individual EEO
cases pending against the agency, including Donnelly and O'Conner, who have
dozens between them, said Yamauchi, of Minami, Lew & Tamaki in San

The U.S. District Court for the Northern District of California has
scheduled a fairness hearing on Feb. 2, 2001 to consider the terms of the
settlement. If finalized, the settlement would effect about 6,000 female
workers in the California region, Mathes said.

The tentative terms of the settlement require the Forest Service to:

* Eliminate sexual harassment and the hostile environment against

* Implement a zero tolerance policy against the sexual harassment of

* Ensure that persons committing or contributing to sexual harassment
   are held accountable for their actions.

* Eliminate reprisal against those who exercise their rights to complain
   about sexual harassment.

* Ensure that issues regarding sexual harassment are addressed and
   resolved in a timely and effective manner.

* Give finality to the resolution of all claims asserted in the action.

Region 5 officials would also be required to keep semi-annual reports on
the effectiveness of their efforts and create a federal women's program
position. The duties of the new position have not been finalized.

A monitoring council will be established to oversee the agency's progress
and equal employment opportunity programs. A neutral mediator will chair
the council. Representatives chosen by the agency and members of the
lawsuit will make up the remaining seats.

The settlement also creates a task force to monitor the agency's mentoring
program. The task force will report to the council proposals for ensuring
that members of the lawsuit "are provided appropriate mentoring, including
assistance with respect to issues relating to sexual harassment."

In addition, the agency is required to form a task force to find ways to
reward all workers "who perform exceptionally in the civil rights
components of their duties." The task force will also help the agency
consider the civil rights performance records of employees seeking
promotion or advancement, the settlement said.

Although the settlement doesn't require the Forest Service to pay the
employees monetary damages, it does require the agency to set aside 100,000
per year for scholarships. The scholarships will be available to men and
woman, the settlement said.

Forest Service officials also agreed to host an annual women's conference,
open to all Region 5 female workers, according to the settlement. Mathes
said the parties mutually agreed to the settlement terms. "We should
absolutely meet these goals," he said. "It will be a problem if we don't."

Additional information on the lawsuit can be found on the Internet at
www.r5.fs.fed.us/class-action. (Federal EEO Advisor, December 7, 2000)

USDA: Women Farmers, Elderly Farm Sue Over Discrimination
Five farmers, including two from Montana, are suing the U.S. Department of
Agriculture, claiming the agency discriminated against female and elderly
farmers in loan programs and other assistance.

They allege the department's lending arm, the Farm Service Agency, required
more collateral for loans from elderly or female farmers, and that the FSA
approved smaller loans for them than they did young, white, male farmers.

The class-action federal lawsuit, which seeks $3 billion in damages, is
similar to claims filed against the USDA on behalf of black and American
Indian farmers in other states.

USDA settled the lawsuit by black farmers for more than $2.2 billion.

Rosemary Love of Harlem is the lead plaintiff in the latest lawsuit. She
contends she wasn't offered the same federal help to bail out her Hi-Line
sheep ranch during the farm crisis in the 1980s as male farmers in similar
financial straits. She said the FSA's actions drove her family into

Susan McAvoy, a USDA spokesman, told the Great Falls Tribune the agency
would not comment on specific cases. "Any type of discrimination cases
would be a concern," she said, adding that Agriculture Secretary Dan
Glickman "has made several attempts within the agency to try to remedy
this." "He's made it a priority in the agency to educate employees and
remind employees of the importance of civil rights," McAvoy added.

Roger Meredith, director of the Montana FSA's loan program, denied a
discrimination problem, saying he believes wholeheartedly in its practices.

Three other female farmers from Georgia, California and Florida are named
as plaintiffs, along with 73-year-old James Murnion, who farms near
Shawmut, south east of Harlowtown. He alleges he was denied refinancing for
his farm debt because of his age.

The farmers are represented by Washington, D.C., attorney Phillip Fraas,
who helped win the lawsuit brought by black farmers. He said female and
elderly farmers have run into the same type of discrimination problem in
the FSA. "It seems there is a pervasive problem at the (Agriculture
Department) with minority or vulnerable groups generally," he said. "We
think that since they settled with black farmers, to the extent that women
farmers have the same complaint, they should settle with the women, also.
It has been a severe problem. It's been allowed to really get out of hand."

Agriculture Secretary Dan Glickman has until Dec. 19 to respond to the
lawsuit, which was filed in U.S. District Court in the District of Columbia
in October.

Fraas said he expects at least a dozen other farmers will join in the
class-action lawsuit. (The Associated Press State & Local Wire, December
11, 2000)

VITAMIN PRICE-FIXING: BASF Hopes to Get over Role in Scandal
BASF of Germany says that group sales for the third quarter of 2000 rose
27% to 9.19 billion euros ($ 7.90 billion), while operating income before
special items increased 10.4% to 765 million euros. Health and nutrition
sales were up 28.2% in the quarter to 1.65 billion euros.

However, BASF is still battling to put the memory of its role in the global
vitamin price-fixing scandal (NIs passim). Charges resulting from the
company's settlement in the USA with indirect purchasers of vitamins were
higher than expected, and not fully covered by provisions previously made
by the firm.

Eggert Voscherau, board member responsible for health and nutrition, told
NI at the company's fall press conference in Ludwigshafen that provisions
were made in euros, but payments were made in dollars, hence the
discrepancy. He also spoke of the difference between paying fines and
settling class action lawsuits, as the latter could drag on for some
considerable time.

                   "Valley of tears" for BASF

The vitamins issue "is a valley of tears that we have to go through," Mr
Voscherau said, and all those firms implicated need to reposition
themselves. He added that BASF and the other companies will probably have
to wait until 2002 before the market returns to normal. When asked about
what sort of fines BASF can expect from the European Union antitrust
authorities over the vitamins case, chairman Juergen Strube said that
provisions have been made but he would not reveal how much, as the EU has
as yet not intimated the level of fines it may impose.

However, much of the press conference was dominated by rumors that the
company is planning to sell off Knoll, its pharmaceutical business, for
around $ 6 billion. Eli Lilly heads the list of companies thought to be
interested in buying Knoll, followed by Bristol-Myers Squibb, Pharmacia
Corp, Sanofi-Synthelabo and Procter & Gamble. If there is any truth in the
rumor, it will be interesting to see what happens to the structure of
BASF's health and nutrition segment. (Nutraceuticals International,
December 1, 2000)

WATER CONTAMINATION: Walkerton E. Coli Inquiry Testimony Angers Many
If it's a lynch mob you're looking for, you won't find one in this rural
town of 5,000. Not after seven deaths and hundreds upon hundreds of
illnesses in May.

But there's anger, especially after water foreman Frank Koebel told the
tainted-water inquiry of the deception perpetrated by him and his boss and
brother Stan Koebel, manager of the public utilities commission:

* Records falsified to keep government inspectors off their backs;

* Critical safety guidelines violated because they were too onerous;

* Drinking on the job.

"It blew me away," says Pauline Gay, who told inquiry commissioner Justice
Dennis O'Connor in August that those in charge of the water system had
acted like people who insist on driving drunk and end up killing someone.
"It was just an analogy at the time. I had no idea they really were (like
drunk drivers)."

But if Frank Koebel's testimony raised the town's emotional temperature, so
did the news that Stan Koebel had negotiated a $ 98,000 severance package,
including 100 banked vacation days he'll now never get to take.

                           Willing to Forgive

Even so, there also seems to be a saintly willingness to forgive. That's
partly because neither Koebel appeared to have had any inkling he was
playing with people's lives. "People in the community realize that in no
way did they think it could create the tragedy that it did," says Jim
Kroeplin, whose first cousin was struck down by the E. coli bacteria.

In fact, Frank Koebel's faith in the purity of the town's water was only
shaken when he heard of the first death.

Almost no one knew how deadly E. coli in water can be -- certainly not the
environment ministry staff charged with overseeing the Koebels.
Furthermore, the ministry staff had known for years about serious problems
with Walkerton's water and never made a fuss.

That's why Cathy McDonald, whose two children fell horribly ill and whose
husband is a representative plaintiff in a proposed class-action suit that
names Stan Koebel as a defendant, measures her words carefully. "I feel
like there's lots of blame to go round," she says.

The Koebels, she notes, were licensed to run the water system only because
of their almost three decades each on the job, not because they had any
formal training or qualifications.

That, McDonald says, is the fault of the Koebels' superiors. (The Toronto
Sun, December 11, 2000)

* IT Security Focus Moves From Coders To Lawyers
Cost of insuring against attack will establish its importance on government
agendas, feds say

Establishing a legal framework has become essential for computer security,
but "we don't have that yet," the National Security Council's Jeffrey
Hunker says.

Only clear lines of liability tied to the costs of systems risks will make
security a priority among senior managers, said Robert Miller, deputy
director of the Commerce Department's Critical Infrastructure Assurance
Office (CIAO).

"Auditors and insurance underwriters are playing an increasingly important
role" in risk management by helping put price tags on security, Miller

Hunker and Miller were among the federal speakers at a global
infrastructure protection conference that the Open Group, a consortium of
information technology vendors and users, held last month in Arlington, Va.

                            Teamwork needed

The pair, along with other government speakers, emphasized the need for
cooperation between the public and private sectors.

"It is a national security issue that the government by itself cannot
address," said Hunker, the National Security Council's senior director for
critical infrastructure. Government networks are vulnerable to attack
through commercial networks, and national transportation and energy grids
are vulnerable to attacks through both, from individual hackers all the way
up to coordinated efforts by hostile nations, Hunker said.

"The next major sets of conflicts that occur will have a major component of
cyberwarfare," he said.

A number of nations--friendly and not so friendly--have announced
"significant offensive cyberattack programs," Hunker said. "We know what
they can do because we know what we can do. The problem is here, and it's
only going to get worse."

Cyberwarfare so far has not been terribly sophisticated, Hunker said.
Revolutionaries in Sri Lanka and Mexico have defaced Web sites to attract
attention to their causes.

"You saw it in the former Yugoslavia, and now you see it again in the
fighting in the Middle East," he said. But recent Web hacks and
denial-of-service attacks against Arab and Israeli sites appear to be the
work of individuals or groups of hackers rather than organized efforts by

"It's not very sophisticated, but it's getting people's attention," Hunker
said. "It is being used more persistently, and that trend is going to

In many cases, the technical ability to protect systems outstrips the
will--private or governmental--to implement protection.

CIAO is working on Version 2.0 of a federal critical infrastructure
protection plan, due out next year, and the emerging perception is that the
issue is primarily one of risk management, Miller said.

Defining the limits of liability and setting prices for insurance will help
set pricing mechanisms for risk management, speakers said.

"We've always regarded this as being as much an organizational and a
leadership issue as a technical issue," Hunker said. "This is one of the
major lessons from Y2K."

The massive drive to prepare public and private systems for the year 2000
was spurred largely by legal and liability issues. Insurance companies put
limits on the coverage they would provide and pressured customers to fix
problems, Hunker said. "That got people's attention."

To help create the same kind of legal awareness for security, Hunker's
office has held the first of a series of conferences with state bar
associations, and it held five conferences last year with auditors and
directors of organizations, he said.

But the jolt to make security an issue in the boardroom may come from the
courtroom. "We somehow have escaped massive litigation in that area,"
Miller said. "We can expect major class actions."

Hunker agreed. "The first day that a major New York trading house has its
functions disrupted is going to be the day we see a multibillion-dollar
lawsuit," he said. (Government Computer News, November 6, 2000)

* Reports of Racism at Work Seen to Be Increasing in NC and Nationwide
Workers in offices and factories across North Carolina and the country are
reporting incidents of racial and ethnic harassment in record numbers,
including allegations of racist slurs, graffiti, noose hangings and slights
in hiring and promotions.

Charges of workplace racial harassment doubled in North Carolina in the
past four years, according to the U.S. Equal Employment Opportunity
Commission, a federal agency that enforces anti-discrimination laws in the
workplace. In the Triangle region alone, workers have filed 62 complaints
with the EEOC against local employers this year, up from just 16 in 1996.

The results are far-reaching: Companies are spending millions of dollars to
fend off lawsuits. They are hiring trainers to help improve workplace
relationships everywhere from construction sites to corporate offices. And
employers are adopting new rules to head off offensive behavior that might
have been tolerated a decade ago.

Earlier this month, for example, the EEOC announced that it settled a
harassment lawsuit against Sara Lee Corp. on behalf of a black employee at
the company's former knit products facility in Forest City. The EEOC
alleged that discrimination included racist name-calling, jokes, graffiti
and the hanging of a noose in the workplace.

The monetary award is confidential, but Sara Lee agreed to train employees
and managers on employment laws and the company's anti-discrimination
policy. The noose incident occurred nine years ago and Peggy Carter, a
company spokeswoman, said it could have been related to a cowboy movie that
some workers had seen.

In another case, Atlanta-based Coca-Cola Co. agreed last month to pay $
192.5 million to settle a lawsuit filed by black employees who alleged that
the company discriminated against them in pay and promotions. As part of
the settlement, the largest in U.S. history, the company will hire an
ombudsman to investigate complaints of discrimination and harassment.

There appears to be no single factor driving the surge in discrimination
complaints, said Joe Doherty, deputy district director in the EEOC office
in Charlotte. He said the upswing could stem from a greater awareness of
rights in the workplace. Others point to such factors as stronger racial
harassment laws, stepped-up publicity of hate crimes, or younger workers
less familiar with laws barring discrimination.

"There's a new generation of workers today who were not raised in the civil
rights movement, who may not have been aware of the laws that came about
because of that time," said Mindy Weinstein, the EEOC's regional attorney
in Charlotte. "We think it's largely a reflection of what's going on in
society as a whole."

Stewart Fisher, a Durham lawyer who represents workers in discrimination
lawsuits, said recent changes in employment law would give companies more
responsibility for their employees' behavior on the job. The Civil Rights
Act of 1991, for example, allows discrimination victims to collect up to $
300,000 in compensatory and punitive damages.

And although many companies have policies that prohibit discrimination,
Fisher said, some companies lack strong training programs for supervisors
and mid-level managers. That, he suggested, sometimes encourages managers
to overlook racial tensions that erupt among workers.

He gave an example of a company that allegedly allowed workers to be
harassed. In 1998, he said, he handled a case in which a Durham Superior
Court judge upheld a $ 2 million award to a black employee who filed suit
against Nello L. Teer construction company. The trial included testimony
that company employees called black workers "n---ers" and that blacks were
kept from drinking out of the same coffee pot as whites.

Some of the workplace tensions, Fisher said, result from minorities' taking
jobs traditionally held by white workers. "As minorities move up in the
workplace, as the law does what it's supposed to do and gives people an
equal opportunity to compete for jobs, folks who have been in the dominant
group resent that," Fisher said.

Five years ago Michael Emran thought he had landed a plum $ 55,000-a-year
job as a network engineer at a division of Lockheed Martin, a defense
contractor in Research Triangle Park. He was part of a team that designed
and developed multimillion-dollar software programs.

                        Complaints Not Heeded

But in 1998, he said, things changed. At first, Emran said, he was passed
over for promotions. Then, he alleged, the abuse started. Co-workers, he
said, called him "ayatollah," "camel" and "bombmaker," jabs at his Iranian
heritage. He said a supervisor told him he didn't want to work with
foreigners. He complained to managers, he said, but nothing was done.

In February, Emran filed a lawsuit in Durham Superior Court alleging that
his company discriminated against him and ignored the harassment that led
to depression and panic attacks. He's still waiting for his case to go to

His lawsuit is one of several filed individually by former Lockheed Martin
employees in the Triangle. In Georgia, 11 African-American employees have
filed two suits against Lockheed, alleging they found hangman's nooses, Ku
Klux Klan materials and notes with "Back to Africa" written on them at
their work stations. The EEOC announced that it wants to become a party to
the suits, which seek class-action status.

Emran, who's on disability leave, said he felt like an outsider at his job.
"You had to be part of the old boys' club," said Emran, 47, who lives in
Angier in Harnett County with his wife and four children. "The way they
were treating me, it was like I was the one who took the hostages in Iran.
I came to America to get more freedom. There should be no race issues

In its response to the suit Emran filed in March, Lockheed denied the
allegations and requested that the suit be dismissed. Hugh Burns, spokesman
for Lockheed Martin, said the company would not comment on the pending
lawsuits in North Carolina or Georgia, but he did say Lockheed has a policy
prohibiting harassment of any kind.

"We have zero tolerance for any type of harassment," Burns said from
Lockheed's corporate headquarters in Bethesda, Md. "Our policy is to
thoroughly investigate it and take appropriate action. The appropriate
action could run the entire gamut. A lot of it depends on what the
situation was."

In many cases, employers take issue with how their employees or the EEOC
portray the alleged harassment.

In April, the EEOC filed a lawsuit against Crowder Construction Co. in
Charlotte on behalf of black employees who alleged racial harassment. In
one incident, a supervisor allegedly approached a black co-worker with a
noose and said, "This is what we used to do to you."

                       Company Denies Incidents

Philip Van Hoy, a Charlotte lawyer representing Crowder, said that white
employees did not harass their black co-workers and that the "noose"
described in the EEOC's lawsuit was actually a construction rigging device
used in employee training. Van Hoy questioned the motive behind the recent
crop of harassment suits that the EEOC has filed against companies.

"There's no question that there was a noose used to demonstrate a
construction rigging process," Van Hoy said. "The EEOC has brought a number
of these cases around the country. They're claiming that the racial
atmosphere in the 1950s is creeping back into the workplace. (The lawsuits)
all have a noose involved one way or another. I don't know what their
motivations are."

Albemarle Mental Health Center in Elizabeth City takes issue with a racial
and sexual discrimination complaint that Miriam Dukes filed this year
against a supervisor.

Last fall, Dukes said, her unit director called her "stupid" and "crazy" in
front of her co-workers and clients. In September, a judge with the state
Office of Administrative Hearings ordered the center's attorney and Dukes'
attorney to submit a recommendation for a settlement to the case.

Dukes, who is black, said she doesn't believe her supervisor would have
called her names if she were white. "I don't think he would have called
another white female that," Dukes said. "Never in my life did I think I
would experience any humiliation like this."

Dukes' supervisor declined to comment on the incident.

But John Morrison, attorney for the Albemarle Mental Health Center, said
Dukes' supervisor denies calling her names and said that race played no
part in their heated exchange. The center director, Charles Franklin,
investigated Dukes' complaint and reprimanded Dukes and her supervisor for
unprofessional conduct, Morrison said. He added that Dukes also didn't
allege that racial discrimination had taken place until after Franklin
completed his investigation.

"In my opinion," Morrison said, "the center bent over backwards to make
sure she had a fair proceeding. One employee said something inappropriate
to another employee. That employee returned in kind, and the (center's)
director told both of them that they acted unprofessionally."

                    Diversity Gets More Stress

It's this kind of dispute that is prompting companies to pay more attention
to diversity issues through training, said Bruce Clarke, an employment
attorney in Raleigh.

Clarke said that behavior that might have been tolerated 20 years ago, such
as an employee displaying a Confederate flag on his locker, or employees
teasing each other with slurs, is now offensive.

"What we tell employers is to treat racial harassment like you would treat
sexual harassment - the light of day has to be shown upon it, and it has to
be eradicated," Clarke said. "You can't have tolerance for friendly banter
that could be seen by others as harassment."

                     IBM Explores Diversity

Locally, IBM now has separate employee task forces for men, women, blacks,
Hispanics, Asians, Native Americans, gays and lesbians, and people with
disabilities. Each group explores issues of diversity and other topics in
discussions and workshops.

The company created the groups at its locations in the mid-'90s, said John
Lucy, an IBM spokesman.

At Carolina Power & Light, now known as Progress Energy, employees and
managers have formed a diversity council to get workers talking with each
other. The council is made up of 20 employees, including Bill Cavanaugh,
Progress Energy's chairman, president and chief executive officer, as well
as managers and administrative assistants. Ten council members are white
and 10 are minorities, including African-Americans and Hispanics, said
Aaron Perlut, a spokesman.

"It's a very grass-roots proactive management approach towards providing an
environment in which all people across all lines feel comfortable," Perlut

Saint-Gobain Containers, formerly Ball-Foster Glass Container Co., which
has plants in Wilson and Henderson, said its workplace environment has
improved since the company started an employee training program. The
program was prompted by a class-action lawsuit filed in 1997 on behalf of
90 black employees of Ball Foster.

One of the employees, Leon Herndon, said his Wilson supervisors ignored him
when he complained of harassment from co-workers in the '80s and '90s. He
worked for years as a mold cleaner who sandblasted molds for beer and soda
bottles. When he tried to move into a higher-paying job as a mold
repairman, he alleged, white co-workers called him "N---er Herndon" as they
walked past him, wrote graffiti on his locker and poured ink on his

                       Fired After Incident

"They thought I was lying, that I was making it up," Herndon, 48, said of
his employers. He filed a harassment complaint with the EEOC in 1994. Two
years later, the company fired Herndon after he struck a co-worker who
allegedly harassed him while he was working.

Saint-Gobain denies that employees illegally harassed each other on the
job, but in 1998, it paid $ 275,000 to settle the class-action suit. The
company also paid workers $ 100,000 to participate in two four-hour
sessions that taught them how to work better with people from different
backgrounds, said the company's lawyer, Thomas A. Farr of Raleigh.
Saint-Gobain also trains managers and supervisors on how to interact with

"The company has never admitted any liability or wrongdoing," Farr said.
"We do, however, think that our employees have benefited from training that
we have as a result of the lawsuit.

"It's certainly possible that there were inappropriate words used (in the
past). We absolutely don't condone that, but did the company violate the
law? No, we never violated the law. The focus of this training was to teach
people to be more respectful of people from different backgrounds."

                  Increasing harassment on the job

Harassment complaints across the state have increased in recent years,
according to the state Equal Employment Opportunity Commission. Here are
harassment claims numbers for fiscal years 1996 through 2000@*:




Greensboro 3250243727

State totals205275266228404

Here's the number of harassment lawsuits filed in North Carolina by the
EEOC from fiscal years 1996 to 2000@*:


Number of suits1 1 1 1 2

@*fiscal years run from oct. 1 to sept. 30

(Source: Equal Employment Opportunity Commission, Charlotte; published in
(The News and Observer (Raleigh, NC), December 11, 2000))


S U B S C R I P T I O N  I N F O R M A T I O N

Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk, Managing Editor.

Copyright 1999.  All rights reserved.  ISSN 1525-2272.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

The CAR subscription rate is $575 for six months delivered via e-mail.
Additional e-mail subscriptions for members of the same firm for the
term of the initial subscription or balance thereof are $25 each.  For
subscription information, contact Christopher Beard at 301/951-6400.

                    * * *  End of Transmission  * * *