/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010103.MBX C L A S S A C T I O N R E P O R T E R Wednesday, January 3, 2001, Vol. 3, No. 2 Headlines AMERICAN CORRECTIVE: IA Suit Says Threats Used to Recover Bounced Checks CABOT CORP: Faces Lawsuits in IL and PA over Beryllium Liability CREDIT CARDS: More Firms Prefer Settlement under Wall Street Pressure DIESEL-FUEL: Aussis Seek Compensation for Diesel Content Damaged Engines ECONNECT: SEC Report Shows Summary of Securities Lawsuits ECONNECT: Settles 2000 SEC Complaint over Misleading Press Releases ECONNECT: Tells Investors of Late Filings Due to 1999 SEC Injunction FLEET MORTGAGE: MN A.G. Called a Consumer Privacy Activist GBI CAPITAL: TX Ct Grants Dismissal of Suit Re Underwriting of Mitcham HMOs: Physician-Favored PacifiCare Reported to Crumble on Wall Street MAJOR LEAGUE: Soccer Players Score Nought in Federal Antitrust Lawsuit NATIONWIDE VL: Ohio Ct Refuses to Dismiss Deferred Annuity Products Suit PA DEPT: Public Welfare Suit Settled with Wraparound Services in 60 Days RAILS TO TRAILS: Panhandle Trail Land Owner Seeks Class Action Status TOBACCO LITIGATION: Apartment Smoking May Be Banned Statewide in CA * Feds May Release Bad Doctors List Reversing Secrecy Policy of 20 Years ********* AMERICAN CORRECTIVE: IA Suit Says Threats Used to Recover Bounced Checks ------------------------------------------------------------------------ A southern Iowa woman alleges in a federal lawsuit that a California company that recovers bounced checks has staged a shakedown of her and hundreds of other Iowans. Lori Liles, of Eldon, is suing American Corrective Counseling Services Inc., which is contracted by county attorneys in Polk, Jefferson and Dubuque counties to collect bad checks for businesses in those areas. Liles alleges in the suit that the company demanded that she pay $177.08 in restitution and fees after she bounced a $42.08 check at a Fairfield Wal-Mart last year. She also alleges the firm threatened criminal prosecution when it didn't have the power to do so. Liles' attorneys want to make their claim a class-action lawsuit and seek damages and refunds for Iowa residents. The firm is allowed to charge bad-check writers $125 each for an eight-hour class on financial responsibility based on its agreement with the county attorneys. American Corrective Counseling officials say the classes are optional, but Liles' attorneys said that the company's letters make it seem mandatory. A sample letter from the company was included in the federal suit. It said: "We are now processing this complaint for criminal prosecution. The County Attorney will agree to forgo prosecution if you attend a special educational class AND pay the total balance due WITHIN 30 DAYS FROM THE DATE OF THIS NOTICE." Some county attorneys never evaluate the cases or file criminal charges, New London attorney Steven Ort said. That means check-bouncers are threatened with criminal prosecution under false authority and pretense, which violates state and federal debt-collection laws, he said. The check bouncers are told there's a criminal complaint on file coming from the county attorney's office, but it isn't true, Ort said. "The county attorney never sees anything," he said. Ort said it amounts to "prosecution for profits." "This is not right - 125 bucks and no county attorney even looked at this," he said. Don Mealing, the company president, denies that prosecutors don't see the complaints. Mealing said bounced checks reach his office after businesses make repeated attempts to collect the money themselves, and all complaints pass through the county attorney's office. Everything the firm does is controlled by the prosecutor, but that doesn't mean the attorney will prosecute every case , Mealing said. The firm isn't a collection agency, Mealing said. He said that prosecutors file criminal charges in 3 to 5 percent of half of the company's cases, and that the firm recovers bounced checks in the other half. The company acted on 1,448 complaints from Polk County merchants through five months last year. Fred Gay, a Polk County assistant county attorney, supported his office's arrangement with the company early last year in the Fordham Urban Law Journal. he couldn't be reached for comment. Company attorneys have asked U.S. District Judge Ronald Longstaff to dismiss the lawsuit or rule in their favor before the case goes to trial. (The Associated Press State & Local Wire, January 2, 2001) CABOT CORP: Faces Lawsuits in IL and PA over Beryllium Liability ---------------------------------------------------------------- Several lawsuits have been filed in 2000 in connection with Cabot's discontinued beryllium operations. Cabot entered the beryllium industry through an acquisition in 1978. It ceased manufacturing beryllium products at one of the acquired facilities in 1980, and another portion of Cabot's former beryllium business was sold to NGK Metals, Inc. in 1986. Two individuals who have resided for many years in the immediate vicinity of Cabot's former beryllium facility located in Reading, Pennsylvania have brought suit in United States District Court for the Eastern District of Pennsylvania against Cabot and NGK for personal injury allegedly caused by beryllium particle emissions produced at that facility over the course of many decades. There are also approximately ten other beryllium liability cases pending against Cabot in Tennessee, Pennsylvania, Illinois and California. Class Actions In addition, other individuals who reside within a 6-mile zone surrounding the Reading facility have filed a purported class action in Pennsylvania state court seeking the creation of a trust fund to pay for the medical monitoring of the surrounding resident population. Another class action has been filed in Pennsylvania state court purportedly on behalf of all former employees of Cabot and NGK in Pennsylvania also seeking medical monitoring. A third class action, also filed in the United States District Court for the Eastern District of Pennsylvania, purports to assert claims on behalf of a nationwide class of workers who have been employed by customers of various beryllium manufacturers including Cabot. Plaintiffs in this action seek the creation of a "medical surveillance and screening program" for all class members. Finally, other individuals who reside within a 6-mile zone surrounding Cabot's former facility in Hazelton have filed a purported class action in Pennsylvania state court seeking the creation of a trust fund to pay for the medical monitoring of the surrounding resident population. The Company believes it has valid defenses to these actions and will assert them vigorously in the various venues in which claims have been asserted. In addition, Cabot is indemnified by NGK in connection with many of these matters. Moreover, recent federal legislation creating a federally funded compensation scheme for beryllium workers injured or otherwise requiring medical screening or testing may well affect certain of these pending beryllium cases. CREDIT CARDS: More Firms Prefer Settlement under Wall Street Pressure --------------------------------------------------------------------- With shakiness on Wall Street and stock prices and reputations on the line, more credit card companies are settling class actions rather than going through time-consuming and costly litigation, according to lawyers and experts who follow the industry. The two latest instances came to light recently: Providian Financial Corp. of San Francisco said that it would pay $105 million to settle accusations against its marketing and sales practices, and Bank One Corp. proposed to pay nearly $40 million to settle complaints from customers of its First USA unit. In both situations -- as in cases that unfolded last year -- the companies said they did not think they had done anything wrong but were eager to get pesky litigation out of the way. Industry observers said that the companies acted wisely, and that it made for better customer relations to offer money to unhappy cardholders than to press points in court about late fee policies and other matters. Wall Street seemed to smile on the strategy. Providian's stock rose $4.5, to close at $57.5. Bank One's stock fell $1.065, to $36.625. Nancy R. Wilsker, an lawyer specializing in bank regulatory law at the Boston law firm of Brown, Rudnick, Freed & Gesmer, said the banking companies seemed to be trying for a "pragmatic solution" with the settlements. "When a bank makes an offer like this, my experience is they are trying to do the right thing both for their own business and, as they see it, for their customers," she said. In the past, when companies believed they had not done anything wrong, they would fight such lawsuits, Ms. Wilsker said. "Today, they look at the cost of the litigation, the duration of the litigation, and the effect it will have on the market's view of the bank, and the likelihood there will be an award against them even if they are right. When they look at all those things, there's more impetus to settle now than ever before." Since the companies' legal fees and possible payments to the plaintiff's attorneys could wind up costing hundreds of millions of dollars, even if the companies believe they are right, "it isn't worth the principle," Ms. Wilsker said. "They say, 'Let's settle it and move on.' " Leonard A. Bernstein, partner and the chairman of the consumer financial services group for Newark, N.J., law firm of Reed Smith LLP, said the lawsuits send a message to banking companies that customer service "must be very responsive and flexible to avoid the huge difficulties" like a lawsuit. "The class-action hammer can be very damaging." Banking companies are now instructing customer service representatives to cancel late fees on many occasions when cardholders call up and complain, Mr. Bernstein said. This step is not "only for customer retention, but that's where class actions are bred for disgruntled customers," he said. Several class actions were filed last year against card companies. The suit against Providian was by far the most costly. In August, Citibank agreed to pay $45 million to settle a suit claiming that credit card customers had been forced to pay extra interest and late fees even when monthly payments had arrived on time. Citi did not admit any blame, but said it settled to "avoid the expense of litigation." The next month Chase Manhattan Corp. agreed to pay $22.2 million over virtually the same matter. Bank One's settlement proposal -- which was brought to public attention by the Wall Street Journal last Thursday December 28 -- states that First USA "denies any wrongdoing and will vigorously defend itself if the settlement is not approved." The U.S. District Court for the Southern District of Illinois will conduct a hearing Jan. 24 on the proposal. Ed Mierzwinski, executive director of the U.S. Public Research Group, called Bank One's proposal "paltry" compared with Providian's settlement. "I hope this is only the tip of the iceberg, because from what I've seen, their practices have been among the most unconscionable and anti-consumer of any company in the business," he said. The class action alleged that First USA assessed late fees to customers who had paid on time. The $105 million settlement was Providian's second hit of the year. In June, the company agreed to pay $300 million to consumers to settle a class action and an administrative enforcement action from the Office of the Comptroller of the Currency. The lawsuit had contended that Providian routinely added fee-based products that customers had not requested, such as credit protection, to its credit cards, and charged consumers for them. After that settlement, Providian launched a public relations campaign aimed at cleaning up its image and improving customer satisfaction. The remaining consumer suits against Providian were consolidated into two class actions, which would be resolved through the second settlement proposal. That sum is still subject to court approval. The class action period for Providian suit dates from March 1995, to Dec. 14, 2000. Jonathan K. Levine, a lawyer with the New York firm of Kaplan Kilsheimer & Fox LLP who represents the Providian plaintiffs, said he could not say how many customers were involved -- perhaps millions -- and the amounts they receive from the settlement would depend on how much they had lost. "These suits are sending a message to the companies that these deceptive business practices will not be tolerated," he said. Alan Elias, a spokesman for Providian, took issue with the dates Mr. Levine named, and said that Providian had changed its policies long before Dec. 14. "If they're talking about something that occurred" two weeks ago, "they're dead wrong," he said. "The business practices that have been the subject of these lawsuits are literally and figuratively about the past. They have nothing to do with the Providian of today or the Providian of the future." Providian reviewed all its solicitation materials and marketing practices over the past 18 months "to ensure that we are being as clear and forthright with all of our materials and disclosures," Mr. Elias said. For example, the so-called Schumer box, which states the monthly interest rate, is now printed in 18-point type, and the fine print "is not fine anymore," he said. "It's big." Joel J. Houck, senior analyst at A.G. Edwards & Sons Inc., said the $405 million Providian would pay in the two settlements "looks like a lot of money, but over the three-to-five year period is nothing." Since the company's stock rebound on the day the second settlement was announced indicates that the amount "wasn't as bad as people were thinking," he said. The Bank One case is farther from being settled than Providian's, but analysts said the vigorous efforts by Jamie Dimon, Bank One's new chief executive officer, to execute a turnaround would likely mean that the company will try hard to tie things up and move on. "In context of Bank One's financial challenges in 2000, this isn't really all that material," said David C. Stumpf, a bank analyst for A.G. Edwards. The market is willing "to look at the positive side, the silver lining of what the company is doing," he said. "Jamie Dimon and the management team are viewed positively on the Street, even if they're having a negative financial impact in the short run." Mr. Houck said that 2000 was the year that consumer backlash came to a head. "I don't know if there will be another round of scrutiny" this year, he said. "The regulators have looked at these issues." David Bartone, a Washington banking attorney, said, "I think all of the companies are aware of the fact that consumers are more educated and aware of manipulative practices. But it's not to say it's going to be permanent. Things like this will happen again." (The American Banker, January 2, 2001) DIESEL-FUEL: Aussis Seek Compensation for Diesel Content Damaged Engines ------------------------------------------------------------------------ Thousands of Queensland 4WD owners, contractors and farmers are expected to seek compensation to repair damaged engines stemming from a recent change in diesel-fuel content. The state's major motoring body the RACQ has received hundreds of phonecalls in the past week from irate members, while farming groups and individual companies were looking at their compensation options. The problem follows a move in July last year by BP Australia to refine new low-sulphur diesel fuel at its Brisbane refinery. The introduction of the new fuel coincided with shrinkage of synthetic rubber injector pump seals and the leakage of diesel in motors built before 1995. RACQ spokesman Gary Fites said there was substantial evidence pointing to BP and the motoring body was seeking to contact the company and other relevant industry groups over the situation. "BP has some questions to answer," Mr Fites said. "We want those responsible for the supply of the fuel which has caused the problems to compensate those people who've had unnecessary expense imposed on them." Mr Fites said BP has given "verbal assurances" that the diesel formulation has been changed to prevent an occurrence of the problem. A similar problem occured early last year in Western Australia following BPs introduction of low sulphur diesel. It is understood that the new refinery process was established to meet federal Environment Protection Agency guidelines. However the new diesel fuel had a lower aromatic level which harmed engine seals in diesel-powered vehicles over five years old. Contractors and other groups are understood to be considering class actions against BP and the state and federal governments which were behind the new regulations. AgForce chief executive Michael O'Neill said his organisation was gathering information on the situation. "We are looking at formulating a proper response in respect to compensation," Mr O'Neill said. "The costs to farmers can range from several hundred dollars and over $1,000 depending up the type of machinery they use." He said the peak farming body was also speaking to New Zealand groups which were beleived to have received compensation from BP following a similar situation. (AAP Newsfeed, January 2, 2001) ECONNECT: SEC Report Shows Summary of Securities Lawsuits --------------------------------------------------------- As previously reported in the CAR, securities lawsuits have been filed against the company in 2000. The company�s report filed with the SEC lists 31 such lawsuits filed from March to May 2000: Einhorn, et al. v. eConnect, Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00- 02674 MMM (JWJx); Eckstein, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-02700 DDP (CWx); Bernstein, et al. v. eConnect, Inc., et al., Case No. 00-02703 FMC (BQRx); Colangelo, et al. v. eConnect, Inc., et al., Case No. 00-02743 SVW (SHx); Baron, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-02757 WJR (CTx); Warstler, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-02758 R (SHx); Prager, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-02759 GHK (RCx); Weisblum, et al. v. eConnect and Thomas S. Hughes, Case No. 00- 02770 MRP (CTx); Mazda, et al. v. eConnect, et al., Case No. 00-02776 LGB (Mcx); Pirraglia, et al. v. eConnect, et al., Case No. 00-02875 SVW (CWx); Hershkop and Hershkop, et al. v. eConnect and Thomas S. Hughes, Case No. 00-03095 MRP (RNRx); Bacun, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-03161 FMC (JWJx); Fine, et al. v. eConnect, Inc. and Thomas Hughes, Case No. 00- 03290 SVW (BQRx); Smith, et al. v. eConnect, Thomas Hughes, Case No. 00-03301 DT (Mcx); Reimer, et al. v. eConnect, Thomas Hughes, Case No. 00-03405 JSL; Tepper, et al. v. eConnect and Thomas S. Hughes, Case No. 00- 03444 WJR (CTx); Bury, et al. v. eConnect, Thomas Hughes, Case No. 00-03446 ABC; Villari, et al. v. eConnect, Thomas Hughes, Case No. 00-03447 LGB (SHx); Ringel, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-03591 RSWL (RNBx); Massaro, et al. v. eConnect, Inc., Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-03671 DDP (MANx); Gardner, et al. v. eConnect, Inc., Thomas S. Hughes, Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-03897 MMM (RZx); Schneyer, et al. v. eConnect, Case No. CV-00-03783 MMM (JWJx); Ginocchi, et al. v. eConnect, Case No. 00-04003 MMM (JWJx); Matrisciani, et al. v. eConnect, Case No. 00-04181 MMM (JWJx); Dutton, et al. v. eConnect, Case No. 00-04505 LGB (Ex); Shaw, et al. v. eConnect, Case No. 00-04637 LGB (Ex); Gowrie, et al. v. eConnect, Case No. 00-04686 LGB (Ex); Belcher, et al. v. eConnect, Case No.00-04792 LGB (Ex); Lively, et al. v. eConnect, Case No. 00-03112 MMM (JWJx); Levine, et al. v. eConnect, Case No. 00-03649 MMM (JWJx); and Berkowitz, et al. v. eConnect, Case No. 00-04152 MMM (JWJx). The foregoing thirty-one actions were filed on various dates between March 14, 2000 and early May 2000, inclusive, and are all pending in the United States District Court for the Central District of California. These actions are brought by various putative classes of the purchasers of the company's common stock. The putative classes alleged, none of which have been certified, range from no earlier than November 18, 1999 through March 13, 2000. Plaintiffs in the various actions assert that the company and Thomas S. Hughes, as well as (in certain of the actions) Jack M. Hall, Diane Hewitt, Anthony L. Hall, and Kevin J. Lewis, have violated Section 10(b) of the Exchange Act (false or misleading statements and omissions which deceived stock purchasers) and also Section 20(a) of the Exchange Act (liability as a "controlling person" with respect to a primary violation of securities laws). The principal allegations concern various alleged material misrepresentations and omissions which supposedly made the company's public statements on and after November 18, 1999 (and/or on and after November 23, 1999) false and misleading, thereby artificially inflating the market in and for the company's common stock. No class has yet been certified in connection with any of these actions. All cases have been combined into one case before the Honorable Margaret M. Morrow, entitled In Re eConnect, Inc. Securities Litigation, Master File No. 00-02674 MMM (JWJx). Negotiations are underway regarding the settlement of these actions. Additionally, a shareholder of the company named John P. Maloney, filed an individual action for "securities fraud and misrepresentation" against the company and Mr. Hughes on May 12, 2000 in small claims court in Torrance, California. The company subsequently removed the action to the United States District Court for the Central District of California, and requested that it be consolidated with In Re eConnect, Inc. Securities Litigation. However, on September 11, 2000, the Honorable Margaret M. Morrow ruled that Mr. Maloney's action should be remanded to the state small claims court. Subsequently, Mr. Maloney's action was settled amicably and dismissed. Short-Swing Trading Complaint On September 6, 2000, Richard Morales, a purported shareholder of the company, filed an action in the United States District Court for the Southern District of New York against the company and Mr. Hughes. This action, Richard Morales v. eConnect and Thomas Hughes, Case No. 00 CIVIL 6695 (AKH), alleges that short-swing trading of common stock were issued by the company to Mr. Hughes in violation of Section 16(b) of the Securities Exchange Act of 1934. On November 29, 2000, the plaintiff voluntarily dismissed this action. ECONNECT: Settles 2000 SEC Complaint over Misleading Press Releases ------------------------------------------------------------------- In a complaint filed on March 23, 2000 (Securities and Exchange Commission v. eConnect and Thomas S. Hughes, Civil Action No. CV 00 02959 AHM (C.D. Cal.)), the SEC alleged that since February 28, 2000, the company issued false and misleading press releases claiming: (1) the company and its joint venture partner had a unique licensing arrangement with PalmPilot; and (2) a subsidiary of the company had a strategic alliance with a brokerage firm concerning a system that would permit cash transactions over the Internet. The complaint further alleges that the press releases, which were disseminated through a wire service as well as by postings on internet bulletin boards, caused a dramatic rise in the price of the company's stock from $1.39 on February 28 to a high of $21.88 on March 9, 2000, on heavy trading volume. The SEC suspended trading in the company's common stock on the Over the Counter Bulletin Board on March 13 for a period of 10 trading days (trading resumed on the National Quotation Bureau's Pink Sheets on March 27, 2000). The complaint alleges that despite the trading suspension and the SEC's related investigation, the company and Mr. Hughes continued to issue false and misleading statements concerning the company's business opportunities. In addition to the interim relief granted, the Commission seeks a final judgment against the company and Mr. Hughes enjoining them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (the anti-fraud provisions of that act) and assessing civil penalties against them. On March 24, 2000, a temporary restraining order was issued in the above-entitled action prohibiting the company and Mr. Hughes, from committing violations of the antifraud provisions of the federal securities laws. The company and Mr. Hughes consented to the temporary restraining order. On April 6, 2000, without admitting or denying the allegations contained in said complaint, the company and Mr. Hughes entered into a settlement by consent that has resulted in the entry of permanent injunctive relief. The settlement agreement with the SEC was accepted and a judgment of permanent injunction was entered by the Court on April 7, 2000. The judgment that the company and Mr. Hughes consented to prohibits the company and Mr. Hughes from taking any action or making any statement, or failing to make any statement that would violate Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court has yet to determine whether disgorgement, civil penalties or other relief should be assessed against the company and/or Mr. Hughes. ECONNECT: Tells Investors of Late Filings Due to 1999 SEC Injunction -------------------------------------------------------------------- On March 12, 1999, the Securities and Exchange Commission ("SEC") filed a complaint alleging the company had failed to make available to the investing public current and accurate information about its financial condition and results of operations through the filing of periodic reports as required by the Securities Exchange Act of 1934 (specifically, the Form 10- KSB for the 1997 and 1998 fiscal years, the Form 10QSB for each of the first three quarters of fiscal 1998, and the corresponding Notifications of Late Filings (Form 12b-25)). The SEC sought in this action to compel the company to file delinquent reports and enjoin the company from further violations of the reporting requirements. The company consented to the entry of a final judgment granting the relief sought by the SEC. Although this action has been concluded, since the permanent injunction was entered the company has been late with the following reports: Form 10QSB for the quarter ended February 28, 1999 (due by April 29, 1999 because of the filing of a Form 12b-25) - filed with the SEC on May 28, 1999 Form 10QSB for the quarter ended June 30, 1999 (due by August 14, 1999) - filed with the SEC on August 23, 1999 (due to an error in the CIK code for the company entered on the EDGAR electronic filing system) Form 10-QSB for the transition period ended December 31, 1998 (due by July 5, 1999) - filed with the SEC on September 3, 1999 Form 8-K to reflect a certain acquisition by the company (due by May 21, 1999) - filed with the SEC on November 15, 1999 Form 8-K to reflect two acquisitions by the company (due by September 15, 1999) - filed with the SEC on November 16, 1999 Form 10-KSB for the period ended on December 31, 1999 (due by April 14, 2000) - filed with the SEC on May 9, 2000 Form 10-QSB for the quarter ended March 31, 2000 (due by May 22, 2000). The Form 10-QSB's for the quarters ended June 30, 2000 and September 30, 2000 were timely filed. FLEET MORTGAGE: MN A.G. Called a Consumer Privacy Activist ---------------------------------------------------------- With his sortie against Fleet Mortgage last Thursday December 28, Minnesota Attorney General Mike Hatch emerged as a public crusader for consumer privacy -- and the latest gadfly to take on the big financial services companies. However, unlike Mr. Hatch's other big-bank target, Fleet has vowed to fight his suit and tersely refuted the charges as "inflammatory" and "inaccurate." The suit against Fleet -- which alleges that it shared customer information with telemarketers and charged fees on mortgage accounts without authorization is the fourth public action Mr. Hatch's office has taken on privacy in two years and the second against a major financial institution. "Mr. Hatch clearly has been a real activist, and is using a theory of a law to hold Fleet liable," said Dan Forte, president and chief executive officer of Massachusetts Bankers Association. "He's been out front on these issues, and he has made this a high priority on his agenda." In 1999 the attorney general alleged in a lawsuit that U.S. Bancorp had earned over $4 million by illegally sharing detailed customer information with MemberWorks Inc., a telemarketer. U.S. Bancorp quickly announced a new privacy policy and settled the suit three weeks after it was filed. Privacy remains a festering issue in the debate over the shape of modern financial services. Over the last two years the issue has received lots of attention from Congress, public-interest lawyers, and consumers. Indeed, regulators have yet to hash out the details of the Gramm-Leach-Bliley Act's privacy provisions. But the heightened emotional and political passions the topic incites have limited what financial institutions can do to defend themselves. What's more, the privacy fight contributed to a particularly tough year for financial firms in the area of consumer protections, as issues ranging from predatory lending to bias in insurance underwriting to credit-card late-fee abuses garnered increased scrutiny. While some firms, including several credit card providers hit by class actions, quietly rolled with the punches and succumbed to pressure to settle out of court (see related story on page 1), for now Fleet appears to be one of the few willing to fight the charges. In the latest suit, Mr. Hatch charges that the FleetBoston Financial Corp. unit shared its customers' home mortgage account numbers, contact numbers, and other personal information with telemarketing companies. The suit alleges that telemarketers sold membership organizations that purportedly offered discounts on and coupons for services ranging from car maintenance to legal fees, the suit charges. Fleet and the telemarketing firms allegedly led consumers to believe that they were agreeing to free trials in a membership club. "Fleet bills the customer's mortgage account for the club unless the customer affirmatively acts to cancel within 30 days," the suit says. The charges appeared without any written consent from the homeowner, and Fleet retained a percentage of the sales as profits, according to the suit. Minnesota Assistant Attorney General Prentiss Cox said the suit is similar to the action against U.S. Bancorp in that the office is alleging misrepresentations and violations of the consumer protection laws in the sharing of personal financial data, but he said there are two key differences. First, Mr. Cox said, Fleet, whose alleged activities he called "appalling," shared mortgage account numbers, which consumers do not understand can be billed for items wholly unrelated to principle interest, tax, and insurance. Second, "we allege that Fleet is liable under Minnesota consumer protection laws for the deceptive telemarketing program in which they fully participated with the telemarketer." Fleet said that the Minnesota Attorney General's office announced the suit before providing the company with a copy of the lawsuit or an opportunity to discuss the allegations. The company said that the charges contain allegations that are "inaccurate and are based on incomplete facts," and that it would vigorously defend itself. Mr. Cox said the attorney general's office sat down to talk with Fleet officials, but the company "made it very clear that they were going to continue to solicit and charge consumers as long as we just continued to talk to them." He also said Fleet made a decision to continue its business conduct, even though it was aware of the concerns. Fleet has known for some time that its customers believe they have been charged for these membership programs without authorization, Mr. Cox alleged. Bert Ely, a financial institutions consultant with Ely & Co. in Alexandria, Va., said that the debate and concern over privacy escalated dramatically last year, but he cautioned that regulatory and statutory specifics remain unclear and should be given a chance to play out. "One wonders to what extent is the Minnesota Attorney General ahead of the curve or maybe off on a tangent that does not reflect current law or can be reasonably divined from current law," he said. "And he may even be going beyond where things seem to be headed." One thing, however, appears certain: Financial institutions, observers say, must be incredibly careful with the information they share and the partnerships they form, regardless of public policy. "This is a big issue that needs to evolve over the next few years, and we will see more legislation filed," Mr. Forte said. "We're telling our members to get geared up. The privacy rules from Graham Leach Bliley are coming into effect. Get up and ready, and give them a chance to work." Mr. Ely said banks must be very careful how information-sharing arrangements are set up, and in some cases the companies should seek clarification of the rules. "But we are dealing with an elected public official, and politics can never totally removed from this process," he said. "To the extent that some cynicism might arise in certain quarters over what's behind this thing, that would be understandable." Rodrigo J. Alba, director of residential finance/regulatory affairs for the Mortgage Bankers Association, said that Gramm-Leach-Bliley's privacy regulations were written broadly and often without any regard for the intricacies of a mortgage transaction. "These novel and elusive provisions will provide very fertile ground for the class action bar and over-zealous enforcement officials to come after lenders and financial institutions," he said. "Make no mistake about it, the new mandates, even if confusing and untested, will serve as a basis to tightly scrutinize activities of all lenders and financial institutions." (The American Banker, January 2, 2001) GBI CAPITAL: TX Ct Grants Dismissal of Suit Re Underwriting of Mitcham ---------------------------------------------------------------------- As reported by GBI Capital Management Corp in its filing with the SEC, in January 1999, GBI Capital Partners was named as a defendant in a class action lawsuit commenced in the United States District Court for the Southern District of Texas relating to a secondary public offering of Mitcham Industries, Inc. for which it served as an underwriter with Jefferies & Company, Inc. and Rauscher Pierce Refsnes, Inc. (the "Moskowitz Class Action"). That offering involved the sale of approximately $35,000,000 in securities, although the amount of damages claimed was undeterminable at the time. GBI Capital Partners, along with the other underwriters, is entitled to be indemnified by Mitcham Industries, Inc. pursuant to the underwriting agreement executed in connection with that offering, subject to certain qualifications, reservations and limitations as provided in that underwriting agreement. On September 28, 1999, the underwriter defendants' (including GBI Capital Partners) motion to dismiss this lawsuit against them was granted by the Court. On or about December 8, 1999, plaintiffs filed an amended complaint. On January 18, 2000, the underwriter defendants filed a motion to dismiss the amended complaint. On October 2, 2000, the underwriter defendants' motion to dismiss the amended complaint was granted by the Court. HMOs: Physician-Favored PacifiCare Reported to Crumble on Wall Street --------------------------------------------------------------------- PacifiCare Health Systems, one of the nation's largest health insurance companies and the biggest provider of Medicare HMO members in the U.S., expected to have some internal problems in 2000 due to cuts in Medicare reimbursement and rising medical costs. Yet, no one could have predicted that the California-based insurer would have three different CEOs, an 80% drop in its stock price and layoffs involving nearly 1,000 employees inside of a year. With the company backing away from its current payment method and focusing on limited and controlled growth, PacifiCare intends to restore its strength and earnings potential over the long term. Looking Back In many ways, 2000 ended just the way it began, with Santa Ana, CA-based PacifiCare Health Systems announcing changes in its chief executive officer position and more job cuts, leading healthcare insiders to speculate that the company soon would be merged or sold to a major competitor. PacifiCare was profitable when the year began. It was one of the few California HMOs that recorded a profit in 1999, according to the California Medical Association, with income up 38% to $278.5 million and operating revenue rising 5% to $9.5 billion. But by year's end, PacifiCare had announced a fourth-quarter restructuring charge of $15 million to $17 million for severance and related employee benefits, and a class-action lawsuit was filed against the company and several of its executives in California state court, claiming PacifiCare had deceived shareholders for financial gain. So much for finding a buyer anytime soon. The lawsuit was filed December 20, 2000, on behalf of everyone who bought PacifiCare stock from October 27, 1999, to October 10, 2000. It also alleges that the nation's largest Medicare HMO artificially inflated its stock price by misrepresenting how much its switch from capitated provider contracts to shared-risk contracts would impair earnings. The next day, Howard G. Phanstiel was announced as president and CEO of PacifiCare after serving as its interim president and CEO since October 2000--Phanstiel began his new position with a docket full of problems. From January when PacifiCare laid off 400 workers to December when it announced layoffs of another 550, it was virtually one setback after another for the company. In February, for instance, PacifiCare completed its acquisition of Harris Methodist Health Plans from Texas Health Resources, adding nearly 300,000 commercial and Medicare+Choice members to one of its core markets. But in November, the Texas Department of Insurance put PacifiCare of Texas on administrative oversight because of concerns over quality of care, late payments to physicians and adequate access to physicians. In February, Alan Hoops announced that he would be leaving PacifiCare by March 2001 after 23 years with the company, the last seven as chief executive officer. But he was gone by late June 2000, replaced by Robert O'Leary, a former CEO of Premier Inc. In response, PacifiCare shares dropped 6.9%, which Wall Street attributed to O'Leary's lack of managed care experience. O'Leary lasted until mid-October when changes in PacifiCare's business model and, more importantly, an 80% drop in the company's stock made him realize that the job was much more than he could handle. O'Leary was replaced by Phanstiel. In July 2000, PacifiCare dropped its Secure Horizons Medicare HMO in 15 rural counties covering five states, and capped enrollment in many counties of California, Texas, Oregon, Colorado and Washington. In Orange County, CA, St. Joseph's Health System, the region's largest medical group, abruptly canceled its contract with PacifiCare due to low reimbursement rates, affecting 120,000 HMO members, followed by the Greater Newport Physicians group, which provided care for 40,000 PacifiCare patients. Meanwhile, PacifiCare's profits continued to nosedive, medical costs continued to soar, several investor services downgraded the company's outlook to "negative" and stocks plummeted to $12 a share. Said one financial analyst, "I don't see how it can get much worse for them." Wait and see. Analysis PacifiCare has two major problems. One is the company's large Medicare business, covering more than 1 million beneficiaries. Since 1997, when Congress passed the Balanced Budget Act limiting the percentage of reimbursement increases to 2% annually, PacifiCare has been getting squeezed more and more by the federal government until the company no longer could afford the cost of providing basic care. PacifiCare has expanded a freeze on new Medicare HMO enrollment to 41 counties in five states, which has helped cut costs some. However, that has led to lower earnings, including the company's ability to adapt to the increasing number of shared-risk contracts with providers, and the reduced flexibility of its operating companies to produce cash for the consolidated organization, which lowered its credit rating. The other problem is PacifiCare's huge concentration of members in California. Approximately 1.8 million of its 3 million commercial HMO members, plus 567,000 Medicare+Choice members, live in the Golden State, which has been rocked the past several years with physician groups going bankrupt and hospitals demanding costlier contracts. And the situation continues to grow worse. In November 2000, PacifiCare officials set aside a reserve against the possible loss of $9.7 million loaned to financially troubled KPC Medical Management (Anaheim, CA). The $9.7 million was part of a $24 million charge against third-quarter earnings taken by the company to cover costs associated with insolvent physician groups and uncollectable loans. A few weeks later, KPC went bankrupt. PacifiCare likely will never see that money again. Ironically, the reason California's medical groups are going broke is due to the capitated payments paid by insurers. Unlike other managed care organizations in the state, PacifiCare continued to cling to capitation, which reimburses providers on a fixed per member/per month basis regardless of how much care is needed, because it shifted all the financial risk to the provider and helped cap the insurer's medical costs. In 1999, about 80% of PacifiCare's HMO members were covered under capitated contracts. But in 2000, hospitals increasingly have refused to assume that financial risk, which caught PacifiCare off guard. Now, only about 60% of PacifiCare's members are under such arrangements, meaning the company is sharing more of the risk--and the cost--in providing care. That has driven PacifiCare's costs skyward and hurt the company's profitability, particularly at a time when PacifiCare was facing some strong opposition from several insurers including WellPoint Health Networks, Foundation Health Systems and Aetna Inc. In the third quarter of 2000, PacifiCare's commercial premiums rose 13% on average, but that was only enough to compensate for the last two to three years of underpricing its products. PacifiCare has had a difficult time predicting costs, which have soared in the past year. One analyst told the New York Times that the company repriced 70% of their commercial business using flawed estimates of shared-risk costs. The other 30% likely will be priced aggressively to compensate for the anticipated loss, although provider instability will hurt the insurer's ability to get hospitals to accept part of the risk. PacifiCare expects to see its membership convert from capitation agreements to shared-risk contracts with providers in 2001 as an increasing number of hospitals make the switch, according to CEO Phanstiel. He told analysts in November 2000 that another 15% to 20% of the hospitals contracted with the insurers will convert from capitation. In addition, PacifiCare has been taking on greater underwriting risk to compensate for its move away from a capitated payment system, which should help. Looking Ahead Before O'Leary resigned, PacifiCare officials warned that it expected to have difficulty transitioning from a capitated payment system to a shared-risk system with providers through the remainder of 2000, and that its full-year earnings would fall well below analysts' estimates. They added that while legislation was pending before Congress to boost annual Medicare premiums to 3% from its present 2%, there was no assurance that any bill would be enacted before year's end. In reality, the House and Senate have passed a bill that is now awaiting President Clinton's signature that would increase the minimum payment for Medicare HMO members. The bill would increase Medicare premiums to 3% on March 1, returning to 2% after Oct. 1. Phanstiel, who has a background in finance and insurance, is realistic about PacifiCare's short-term future. He hopes to "show signs of progress" in the company's finances as it enters a new period of "limited and controlled growth," as shown in the decision to freeze new membership for the Medicare+Choice program in 2001. But even he admits it will be at least two years before any turnaround can be completed. Whether he is the man for the job long-term remains to be seen. Further cutbacks in markets outside of California and more layoffs are still possible. PacifiCare needs to continue its quest of reaching an equal number of commercial HMO and Secure Horizon enrollees to offset any future losses associated with the Medicare business. In November 2000, PacifiCare announced that it expected fourth-quarter profit to range from 20 cents a share to 30 cents a share, beating the 7 cents a share projected by First Call/Thompson Financial. If that holds true, and PacifiCare's balance sheet and cash flow remain in good shape, the company may be well on its way toward realizing significant progress, and possibly profitability, by the end of 2001. Now the question is whether PacifiCare is rebuilding itself to remain a major player in the health insurance business, or is simply making itself more attractive to a suitor. Yet, if it's the latter, not many companies would want to acquire a million Medicare members when there is no guarantee that reimbursement rates will improve in 2001 or 2002. PacifiCare is an attractive company because of the markets it is in--California, Texas, Colorado--but the downside (i.e., much of it being Medicare business) could be too much for any company such as Aetna to risk taking. Actually, it would be a shame to see PacifiCare break up, particularly in California, where it continues to have a solid reputation. In a recent Healthcare Association of Southern California survey of 85 physician groups and 154 hospitals statewide, PacifiCare was rated the best health plan of the eight evaluated, which included Aetna, CIGNA, Blue Cross of California, Blue Shield of California, United HealthCare and Health Net. PacifiCare was rated highest in member services, contracting practices and, ironically, capitation. The best guess is that PacifiCare will struggle along by itself for the next two years, then may consider merging with one of the industry giants. Much will depend on Congress and PacifiCare's newly assembled management team. One thing is for sure, 2001 couldn't be any worse than 2000. But never say never. Resource: Medical Data International's "Managed Care IQ Provider & Payer Database," December 2000. (By Michael Casey, Managed Care Analyst Medical Data International, Medical Industry Today, January 2, 2001) MAJOR LEAGUE: Soccer Players Score Nought in Federal Antitrust Lawsuit ---------------------------------------------------------------------- New York A federal jury in Boston has rejected an antitrust action against Major League Soccer and the United States Soccer Federation brought by players claiming that the defendants have conspired to establish a monopoly, restrain competition and keep down salaries. On Dec. 11, the jury determined that Major League Soccer does not have a monopoly in the market for professional soccer players because the players have the option of finding jobs in leagues outside the United States, noted lead defense counsel Michael Cardozo of New York's Proskauer Rose. Because the jury found no monopoly power in the relevant market, it did not rule on the other antitrust charges claimed by the plaintiffs, Cardozo said. In 1993, the U.S. Soccer Federation selected Major League Soccer over several other applicants as the only major professional soccer league in the United States, said Cardozo. This selection was made final in 1995, and the league started in 1996. The league has teams in 12 U.S. cities, Cardozo said. Unlike most professional sports leagues, Major League Soccer was set up as a single limited liability company. All teams are owned by the league, said Cardozo; investors are given the right to own one of the teams. The league sets salaries for all players, he added. In 1997, eight professional soccer players sued the league and the federation, charging violations of antitrust regulations. The plaintiffs were certified as a class that year, said plaintiffs' attorney Jeffrey Kessler of New York's Weil Gotshal & Manges. The plaintiffs contended that the process of selecting Major League Soccer as the only top-level professional league in the United States violated Sec. II of the Sherman Antitrust Act and that the league's single-entity structure violates Sec. I. In April, District Judge George O'Toole dismissed the latter claim. The eight plaintiffs were seeking a total of $ 1.4 million, to be trebled. The plaintiffs will appeal the jury's decision as well as Judge O'Toole's rulings, said Kessler. This article previously appeared in The National Law Journal, an American Lawyer Media publication. (The Legal Intelligencer, December 21, 2000) NATIONWIDE VL: Ohio Ct Refuses to Dismiss Deferred Annuity Products Suit ------------------------------------------------------------------------ On October 29, 1998, Nationwide VL Separate Account-C was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought asa class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by Nationwide and the other named Nationwide affiliates which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. No class has been certified. On June 11, 1999, Nationwide and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the Court denied the motion to dismiss the amended complaint filed by Nationwide and the other named defendants. Nationwide intends to defend this lawsuit vigorously. PA DEPT: Public Welfare Suit Settled with Wraparound Services in 60 Days ------------------------------------------------------------------------ When Nicole Turman asked the state in June 1999 for a trained assistant to help with her developmentally disabled son, she was told she would have to wait. And wait. And wait. Eleven months later, Turman, of Windber, Somerset County, finally got what she was entitled to under federal law -- a therapeutic support staffer, or TSS worker, who would come to her house or to her son's school to provide him with the stimulation and therapy he needed. Now, advocates for the disabled hope delays such as hers will become a thing of the past. A class-action lawsuit filed by the Disabilities Law Project in June 1999 against the Pennsylvania Department of Public Welfare has resulted in a tentative settlement that will require the state to provide families with the behavioral health rehabilitation, or "wraparound services," they need within 60 days. The plaintiffs -- seven children who filed the lawsuit on behalf of themselves and all Medical Assistance recipients younger than 21 eligible for such help -- claimed the state Welfare Department was violating their federal rights because services weren't being provided to them promptly. Wraparound services are relatively new in the treatment of children who are mentally, behaviorally or developmentally disabled. The services are tailored to, or "wrapped around," families and their individual needs, instead of requiring families with high-risk children and youths to fit into established programs, some of them out of state. It's not clear how many children in Pennsylvania are eligible for the services, or how long families have had to wait for them, but one of the named plaintiffs in the lawsuit had experienced a two-year delay in getting help. And another plaintiff, "Kirk T.," received only 1.5 days of behavioral treatment, despite suicidal behavior, repeated hospitalizations and a recommendation by his psychologist that he receive 40 hours per week of "specialized intensive behavioral treatment." Notice of the settlement, which was signed by U.S. District Judge Ronald Buckwalter early this month, has been sent to all Medicaid families with eligible children younger than 20, inviting them to comment at a final court hearing in Philadelphia on Jan. 29. The settlement requires that, during the 60-day period after a family first asks for help, county providers conduct an evaluation, an interagency team meeting and a review of the request for services. The Welfare Department also will be required to collect information showing whether families have experienced delays. If, after a year, there are still long waiting lists, the court will review the settlement agreement and make changes. State welfare officials declined to comment, citing the pending court hearing. But department spokesman Jay Pagni noted that the court had praised the state's efforts to expand wraparound services, which about 300 children received in 1993 and more than 19,000 children got in 1999. The budget for wraparound programs in Pennsylvania has also increased dramatically, from $ 2 million in 1993 to $ 222 million last year, although much of that was federal money. The settlement not only establishes stricter timelines for compliance but also eases some requirements for hiring TSS workers -- the real problem behind all the delays, said one advocate. "The state wasn't denying children the services; they just weren't able to find qualified people to take the jobs," said Rachel Mann, a lawyer with the Disabilities Law Project in Philadelphia. TSS workers were required to have four years of college plus one year of experience in working with children, Mann said. With salaries averaging $ 10 to $ 15 an hour for a high-stress position, there were relatively few applicants right out of college. With that in mind, new standards for TSS workers were crafted under the settlement that call for a minimum of two years of college and three years of experience working with children. Providers also will be required to provide training and monitoring of these workers. "It's not that the money is so terrible," said John Lovelace, chief program officer of Community Care Behavioral Health, which is Allegheny County's managed care program for Medicaid recipients. "It's finding someone willing to handle the demands of this kind of work." About 1,000 children have wraparound plans in the county today, he said, with about 35 providers or agencies working to meet their needs. As more becomes known about mental and behavioral disorders, the number of eligible children has skyrocketed, and treatment has become diversified. "Ten years ago, it was either outpatient or inpatient," said Lovelace. Now, a family can choose a case manager to organize all the logistics of their child's care, from transportation to paperwork, or rely on wraparound services to provide more limited individualized clinical treatment, from drug and alcohol rehabilitation to educational support. While some advocates of the wraparound approach say it's more cost-effective, Lovelace cautions that "the jury is still out. Some children who might be spending more time in a hospital might not be under the wraparound approach, but as a rule, seriously disturbed kids need a lot of support and that can be expensive." For Turman, it's money well spent. A TSS worker has made all the difference to her 7-year-old son, Harper, who suffers from Cornelia deLange Syndrome, a rare genetic disorder with only 3,000 identified cases worldwide. Children with the disorder can experience severe physical and developmental delays and severe mental retardation, although Harper Turman has only a mild case, with near-normal intelligence. Still, "his nervous system is somewhat off-kilter," his mother said, requiring a great deal of sensory stimulation and therapy. He has a need for constant motion, which calms and soothes him. With the help of his TSS worker and a detailed behavioral plan to deal with safety issues and impulse control, Harper is now settling comfortably into school. He has a large, square platform swing attached by four ropes that he uses there, along with a weighted vest, to help alleviate his need for movement in a safe manner, and the TSS worker helps with his communication problems. "Before, he was having lots of difficulties, and the school didn't think they could educate him," Turman said. "It was prepared to send him away to another very restrictive special education program, where he would be in a small class with only other kids with disabilities." For a boy who wants desperately to be "just like other kids," that would have been disastrous, she said. "But now, while he does have special education sometime during the day, he is mostly in a regular classroom with typically developing kids, and he's doing very well. (Pittsburgh Post-Gazette, December 29, 2000) RAILS TO TRAILS: Panhandle Trail Land Owner Seeks Class Action Status --------------------------------------------------------------------- Marion Taylor says the federal government should pay her for land it is using in a Rails-to-Trails project. If her lawsuit, filed last month, is certified as a class-action case, other landowners along Pennsylvania rail trails could join it to try to collect money, too, said attorney David Cohen of Washington, D.C. Taylor lives along the Panhandle Trail, which extends 29 miles from Collier Township near Pittsburgh to Weirton, W.Va. The Rails-to-Trails program converts former rail lines into walking and biking paths. The Panhandle Trail land was last used by Conrail in 1995, but it was originally built by the Pittsburgh and Steubenville Railroad Co. in the 1850s, Taylor's lawsuit states. Taylor says the owner of what is now her property granted an easement to Pittsburgh and Steubenville Railroad. Because that railroad isn't using the land, Taylor says it is hers and the government should pay her fair market value for it. Taylor is seeking less than $10,000 in damages. (The Associated Press State & Local Wire, January 2, 2001) TOBACCO LITIGATION: Apartment Smoking May Be Banned Statewide in CA ------------------------------------------------------------------- Two years after California expanded its toughest-in-the-nation ban on workplace smoking to cover all bars and restaurants, both bar profits and the law's popularity are on the rise � and a new movement to expand smoking restrictions into the home has begun. The new move began in the ultraliberal Los Angeles suburb of West Hollywood, where the City Council in November passed an ordinance allowing nonsmoking apartment dwellers to file complaints when tobacco smoke drifts into their windows or doors from a neighbor's unit. Tenants who refuse city arbitration will face fines and eviction. So far, densely-populated West Hollywood is the only California city with such a law, but city councils in other liberal bastions like Santa Monica and San Francisco say they'll monitor how the measure works and may imitate it soon. "Smoke is a serious health hazard to people who have health problems and can't take being next to that smoke," said West Hollywood Councilman Paul Koretz. "But many of these people are on relatively low, fixed incomes and can't afford to move when they're bothered by their neighbors." Unlike the local measure, which passed with little significant opposition, the statewide workplace restrictions that took effect two years ago met strong resistance. But reports from California's business tax agency and the results of a state-funded poll of bar owners and customers indicate consumer acceptance of the ban on smoking in bars is on the rise and that business at bars has increased, even though most regular barflies still don't like it. The survey, conducted by the San Francisco-based Field Institute, found that 92 percent of restaurants and 59 percent of bars are complying with the anti-smoking law. Those are increases of about 10 percent from a year earlier. Among 1,000 persons who described themselves as "recent bar patrons," 44 percent said they support the smoking ban, up from 24 percent in 1998. And 75 percent of bar customers described having a smoke-free environment in taverns and restaurants as "important." That was an increase from 66 percent in late 1998. The state's Board of Equalization, meanwhile, reported that sales were up 7.4 percent at restaurants and bars since the smoking ban took effect. Taxable receipts increased 9.1 percent at establishments licensed to sell only beer and wine and 6.3 percent at those serving all types of liquor. "The only one being hurt in all this is the tobacco industry," boasted Los Angeles County Supervisor Zev Yaroslavsky, who helped write city smoking restrictions while a Los Angeles councilman in the 1980s. "Bars and restaurants have been one of the last bastions of tobacco use, but the culture is changing." The National Smoking Alliance, however, quickly challenged the results of the state survey. "The anecdotal information we have is that fewer than 50 percent of restaurants and bars are complying with the law," said the group's president, Tom Humber. "Plus, a lot of places have added to their outdoor patios to accommodate their smoking customers." But Los Angeles County officials said they believe the survey numbers are correct. The county has randomly inspected 700 establishments during peak nighttime hours each year since the smoking ban took effect, and a public health department spokesman said the poll numbers closely approximate the county's experience. Citing the poll's finding that 55 percent of bar customers say they enjoy smoke-free bars more than smoke-filled ones, state Health Director Diana Bonta said, "The majority of bars and bar patrons are complying with the law." But defiance continues at many bars, even though Los Angeles police alone issued 207 citations for violating the law in 1999. No one has tracked the number of violations statewide. "We'll never knuckle under," said the owner of one tavern in the Venice district of Los Angeles where the state-required sign advertising the ban is posted upside down. "As long as my customers want to smoke, I'll let them. No government is going to change me." (By Thomas D. Elias, The Washington Times, January 2, 2001) * Feds May Release Bad Doctors List Reversing Secrecy Policy of 20 Years ------------------------------------------------------------------------ Federal health officials say they will soon allow Medicare beneficiaries to obtain information about doctors who may have made errors, a move that reverses a policy that has kept medical mistakes secret for more than 20 years, The New York Times reported Tuesday. Under new Department of Health and Human Services rules, patients will be told if their care met professionally recognized standards and if there has been any action against their doctors or hospitals. Patients could use the information against the health care providers in lawsuits or other actions alleging substandard treatment, the paper said. Under current federal law, a group of medical quality experts informs the patient of the final disposition of the complaint but can only release information about a doctor with the doctor's consent. The new policy, which eliminates the doctors' veto power, comes in response to a lawsuit against the federal government by the son of a Medicare patient who died in a Jacksonville, Fla., hospital six days after being admitted because of an asthma attack. The Department of Health and Human Services recently told the Florida review organization to release the information to the patient's son, whose lawsuit is still pending, and said it would change the Medicare policy to help other people obtain health care information. (Published in the Associated Press, January 2, 2001) ********* 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 * * *