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/raid1/www/Hosts/bankrupt/CAR_Public/010404.MBX C L A S S A C T I O N R E P O R T E R Wednesday, April 4, 2001, Vol. 3, No. 66 Headlines BOSTON POLICE: Six Cops Claim They're Denied Due OT Pay CHEVY CHASE: TLPJ Wins Right to Jury Trial for Credit Cardholders CIA: Mediation Fails; Employees Claim Denial of Right to Private Counsel COLORADO: Judge Fines State $1.4 Million Over Mentally Ill in Denver GEORGIA POWER: Race Bias Plaintiffs Seek Class-Action Status HIH: Regulator under Attack after Collapse of Insurer; Suit May Be Filed IBP, INC: The Emerson Firm Files Securities Lawsuit in South Dakota ILIFE.COM: Online Financial Information Provider Cleared of IPO Suit ILLINOIS DCFS: System of Investigations Ruled Unconstitutional KEITHLEY INSTRUMENTS: Edward J. Carreiro Announces on Securities Suit LEAD PAINT: Bay Area Court Ruling Bolsters Suit against Makers MICROSTRATEGY INC: Settlement Cleared in Investor Lawsuit OMTOOL, LTD.: Reaches Settlement-in-Principle in Securities Suit in NH SCHERING-PLOUGH: Gloomy Financial News Spawns Flood of Shareholder Suits SODEXHO-MARRIOTT: Website Shows Reports on E. Coli and Salmonella SOUTHERN CO.: Workers Say Documents Show Racial Bias STAFF LEASING: Settlement for Shareholder Suit in 1999 Pending Approval VENTRO CORP: Dyer & Shuman Commences Securites Suit in California VENTRO CORP: Savett Frutkin Announces Filing of Securities Suit in CA WJ COMMUNICATIONS: Has Paid for 4 Suits Filed in 1999 over Recap Merger ********* BOSTON POLICE: Six Cops Claim They're Denied Due OT Pay ------------------------------------------------------- Six Boston cops suing the police department for short-changing them on overtime have raked in upward of $ 50,000 a year on bonus shifts, often propelling them to the top 10 percent of wage-earners on the force, records show. While claiming they were being illegally nickel-and-dimed on OT, the officers pulled in a whopping $ 735,000 in overtime cash alone over the last four years, according to city payroll records. The pay, supplemented by extra income on paid details as high as $ 40,000 each year, put the rank-and-file cops well over $ 100,000-a-year in gross pay and pushed some into the highest strata of police wage-earners. One officer, John A. Conway from the special operations division, was buoyed by $ 185,000 in overtime pay over the four-year period to claim bragging rights as the second-highest paid cop in the 3,200-member department recently. The records, obtained by the Herald, could undermine the case filed in U.S. District Court by the six officers who claim poor treatment on overtime pay. City officials say the cops, some ranking members of the Boston Police Patrolmen's Association, are unfairly crying poormouth after years of milking the system. But their lawyer and union head defended the officers. "Just because they've done well on overtime does not mean the city should not follow the law," said Bryan Decker, the attorney for the six officers. The officers, Conway, Curtis Carroll, John J. Brown, Michael L. Woodson, Roudolphe P. Szegda and Michael O'Hara, filed the suit last week accusing the department of "willful refusal" to pay fair overtime wages. The suit claims the department is withholding pay for night and day differentials as well as educational incentives when paying overtime rates. The officers, all veterans, say the department is knowingly skirting the federal law mandating that time-and-a-half include all incentives. They're asking for back pay the last three years for themselves and all other cops they say have been hurt by the policy, a figure likely in the millions. The suit was met with criticism since the 11 ranking officers recently made headlines for pulling in more than $ 200,000 last year, much of it in overtime pay, details and education incentives offered through the Quinn Bill. Officers responded, saying those are only the higher-ups. In fact, Officer Michael O'Hara said, "For the lower end of the patrol officers, the overtime just isn't there." But it was for his fellow plaintiffs, according to payroll records. Carroll, who works in the department's operations division, topped the six, averaging $ 47,100 a year in overtime over the last four years, totaling more than $ 188,000. The records show the 15-year veteran's $ 56,500 base pay last year doubled to $ 112,500 with his OT, $ 6,700 in details and $ 5,500 Quinn Bill benefit. He is also one of those in the group who has a ranking position in the officers' union, serving on its Labor Management Committee. Conway, also in operations with 19 years on the job, ranked second in top department pay in 1998 with $ 142,137 and 9th in 1997 with $ 123,480. Each year since 1997, his overtime nearly outpaced his base pay and always allowed him to more than double his regular income, the records show. The other officers did almost as well: -- Brown, also in operations and the longest-serving member of the six, with 31-years on the job, took in $ 157,500 in overtime the last four years atop his more than $ 50,800 regular salary. -- Woodson, who is now on a leave of absence from the force, collected $ 95,265 in overtime over four years, an average of $ 23,800 each year. -- Szegda, a special operations motorcycle officer hired in 1977, earned $ 90,016 in overtime in that period, averaging $ 22,500. -- And O'Hara, a District 4 officer downtown, who sits on the BPPA's Detail and Overtime Committee, earned the least of the bunch - a still-respectable $ 20,423 in overtime. BPPA President Thomas Nee said the union didn't urge the officers to file suit but is supporting their claim, saying the department and City Hall were warned about the payroll problem for years. He said the overtime earned by the six officers "isn't the issue" and said the department is simply breaking the law. "These guys don't work 80 hours a week because they want to, they work 80 hours a week because they are told to, and they deserve to be paid fairly for those hours," Nee said. Decker, the officers' attorney, said several of them were on vacation and none were available for comment. But he said they are merely the first in what will likely be "hundreds" of plaintiffs to sign onto the suit. He said the officers who worked more overtime were hurt more than those who didn't. "Every hour they worked they are being shortchanged more," Decker said. (The Boston Herald, April 2, 2001) CHEVY CHASE: TLPJ Wins Right to Jury Trial for Credit Cardholders ----------------------------------------------------------------- Marylands highest court ruled unanimously March 8 that the plaintiffs in the Trial Lawyers for Public Justices national class action lawsuit against Chevy Chase Bank cannot be deprived of their constitutional right to a jury trial and their right to bring a class action. TLPJ filed Wells v. Chevy Chase in February 1999, charging the bank breached its contracts with credit cardholders by unilaterally raising interest rates above a promised 24 percent ceiling, and imposing new and higher fees. The companys agreement with its customers provided it would never charge more than 24 percent, but the company did so anyway. In May 1999, Chevy Chase filed a motion to halt the litigation and instead force the cardholders into arbitration. In August 1999, the trial court compelled the plaintiffs into arbitration, but TLPJ appealed the ruling to Marylands Court of Appeals. In the March 8 ruling, the court reversed the trial court and held that the terms of the cardholder contract that Chevy Chase drafted made it clear that the plaintiffs did not agree they could be forced to arbitrate these claims. The court held the cardholders could choose to arbitrate their claims if they wished, but they could not be compelled to arbitrate in a case like this one where they had chosen to go to court instead. The decision is a real victory for consumers, particularly credit cardholders, who will not have their day in court instead of a one-sided arbitration process to which they never agreed, stated TLPJ Staff Attorney F. Paul Bland Jr., lead counsel on the arbitration issue, who argued the case in Annapolis, Maryland, Nov. 6, 2000. Chevy Chase also attempted to evade litigation by arguing the high court could not hear the appeal because the consumers right to their day in court was pre-empted by the Federal Arbitration Act (FAA). The court rightly rejected Chevy Chases argument that the court couldn't even hear our appeal, said John T. Ward of Baltimores Ward, Kershaw and Minton, who is lead counsel in the case. The court recognized that state laws protecting consumer rights are only wiped away by federal law in a narrow set of circumstances, and that Marylands general pro-consumer procedures are still valid. Under the FAA, consumers generally cannot appeal a court order to compel arbitration until a final decision is issued in the case. But the court ruled consumers can immediately appeal a Maryland court order requiring arbitration as happened in this case even before the arbitration process begins. In addition to arguing that the contract language showed their clients had not agreed to arbitrate their claims, TLPJ introduced evidence in the trial court which shows the contract clause supposedly mandating arbitration was communicated to class members in a manner of designed to insure they did not notice it. The evidence also shows Chevy Chase knew, or should have known, its communications were completely ineffective. TLPJ submitted undisputed evidence showing that class members injured by Chevy Chases conduct would not be willing to arbitrate against Chevy Chase because, among other things, they would run the serious risk of having to pay the companys attorneys fees which are probably quite large. The evidence shows that, if the cardholders had been forced to submit their claims to this arbitration system, few, if any, of the hundreds of thousands of class members would have any realistic prospect of a remedy, said Bland. The case will now return to the trial court in Baltimore. In addition to Ward and Bland, TLPJs legal team in this case includes co-counsel Michael P. Malakoff of Malakoff Doyle & Finberg in Pittsburgh and TLPJ Consumer Rights Fellow Michael J. Quirk. (The Indiana Lawyer, March 28, 2001) CIA: Mediation Fails; Employees Claim Denial of Right to Private Counsel ------------------------------------------------------------------------ Court-supervised mediation has collapsed between the CIA and a group of current and former employees who allege that the agency has violated their right to private counsel, clearing the way for further litigation on the issue. The case has the potential to become a throbbing legal headache for Langley, which has tried -- and failed -- to have the lawsuit thrown out of court. Roy W. Krieger, an aggressive former Justice Department attorney, said he now represents more than 20 current and former employees who claim their right to counsel in internal disciplinary matters -- from failed polygraph examinations to disputed performance reviews -- has been impeded by the CIA. What's more, Krieger said he intends to ask U.S. District Judge Ricardo M. Urbina to certify the case as a class action, so any current or former employee who has ever retained or tried to retain private counsel for work-related representation could become eligible to join. Krieger filed suit on behalf of seven current and former employees almost two years ago but agreed last year at Urbina's suggestion to go to mediation. The talks broke down late last month. "It's unfortunate that we were unable to reach a negotiated settlement, but not necessarily surprising, given the magnitude of reforms the plaintiffs are seeking," Krieger said. While many of Krieger's clients will be identified only by initials or pseudonyms, one identified by name is John Spinelli, a former operations officer wounded in Somalia supporting U.N. peacekeepers in 1993. Spinelli claims the CIA refused to give his lawyer access to medical and personnel records needed to pursue a claim for disability compensation. CIA spokesman Mark Mansfield declined to comment on the case, but said agency employees can freely consult with private attorneys on internal personnel matters. INTELLIGENCE REFORM: Never bashful, former CIA case officer and open-source guru Robert D. Steele has taken his crusade for intelligence reform directly to the White House, telling President Bush in a recent letter that he is being ill-served by an intelligence community obsessed with secrets. "Our secret intelligence community is spending $ 30 billion a year focusing on the 5 percent of the information they can steal, while ignoring the 95 percent of the relevant information that is not online, not in English, and yet vital and very relevant to your strategic decisions," Steele wrote. Deputy CIA Director John E. McLaughlin said during an online session at washingtonpost.com that the CIA does, indeed, like to obtain secret information. "But we do also fully integrate open source information into our work and appreciate the contribution it makes," he said. McLaughlin also said that "most of our major papers now benefit from being read and critiqued by outside experts from the academic, business or think-tank world -- a recognition on our part that in today's world we do not have the market cornered on wisdom." Steele responded in an interview that desktop Internet access is a far cry from having a corps of analysts who are trained to find open information in many languages from many sources. "The problem with spies," Steele said, "is they only know secrets. In the information age, the center of gravity for national security is knowledge power, but the U.S. has an industrial-era spy system." CIA ABUZZ: The CIA's new executive director, A.B. "Buzzy" Krongard, minced no words as he addressed a standing room only crowd of senior managers inside the "bubble" auditorium at agency headquarters. The flamboyant former investment banker, Marine officer and martial arts enthusiast promised to be an "agent of change" and offered what he called a simple "mantra": "Country, first; agency, second; individual person, or component, last." Krongard also imparted four "observations": "1. Work first on being respected, not on being liked. You are here to do a job, not to win a popularity contest. It is far more important that your people respect you than that they like you. "2. Extend yourself for your co-professionals; be the best partner you can be in every endeavor. When the stabbing starts, the blood spatters everyone. "3. Be candid and conservative. Don't talk in euphemisms. Always deliver more than you promise and be 'up front' with the bad news. "4. Avoid cherry picking -- be ready to help do the dirty jobs as well as the glamour ones." (The Washington Post, April 03, 2001) COLORADO: Judge Fines State $1.4 Million Over Mentally Ill in Denver -------------------------------------------------------------------- A judge has fined the state $1.4 million, saying it is in contempt for failing to properly serve a group of chronically mentally ill Denver residents. District Court Judge Morris Hoffman also levied up to $50,000 in daily fines against the Department of Human Services until the system is corrected. Marva Hammons, top official at the department, said her office would appeal. Hoffman's decision Monday covers about 1,600 mentally ill state clients who settled a 1981 class-action lawsuit against the state in 1993. Hoffman was determining whether the state was living up to the settlement. The suit came to be named after Ruth Goebel, a mentally ill, homeless woman who froze to death in a Denver alley during the lawsuit's infancy. At a hearing in September, Hoffman warned the state it was falling short on requirements to provide money and establish housing for a group of mentally ill residents in Denver. He found that the state failed to seek out individuals who needed services or to spend money on providing those services. State officials contend they have spent $90 million to improve the lives of the plaintiffs since the early 1990s. "The $90 million represents a level of services that far exceeds those provided to other Colorado citizens suffering from mental illness," Hammons said in a written statement. Following the ruling Monday, state officials will have to submit to a court-appointed monitor to ensure housing obligations for the group are met. Hoffman also ordered compliance hearings every 90 days beginning in late June to gauge the state's performance. He also extended the 1993 settlement agreement into 2002 to make up for years the state didn't act. "In life there are intermittent victories. Sometimes those victories are short-lived. It is my hope that this one won't be," said Kathleen Mullen, the attorney who filed the suit on behalf of the mentally ill residents. "It is my hope that this order and the escalating sanctions will be a catalyst for the state, from the governor on down, to take a look at how they've treated these people." (The Associated Press State & Local Wire, April 3, 2001) GEORGIA POWER: Race Bias Plaintiffs Seek Class-Action Status ------------------------------------------------------------ Lawyers for African-American employees suing Georgia Power and its parent company filed 15 boxes of legal papers, photos and depositions Monday to support their request to broaden the suit to represent 2,400 black workers. To make the point publicly, the lawyers held a news conference during which noted litigator Johnnie L. Cochran Jr. scolded the company for "lying to the public" about nooses found by the workers and their racial connotation. The lawyers filed a long-awaited motion for class-action status in the lawsuit filed July 27 against Georgia Power Co. and parent Southern Co. on behalf of seven current and former employees. "They've done nothing about (the nooses). The time has come to put the lie to everything they say," Cochran said in a downtown hotel ballroom as he walked, television cameras in tow, from easel to easel, where photographs of nooses were displayed. "They're in a state of denial, and enough is enough." Cochran referred in particular to the company's contention last week that one of the nooses was part of a "no smoking" display by an employee. "Another lie!" he bellowed. Laura Gillig, a spokeswoman for Georgia Power, said the company will not comment on the specific claims made Monday and does not wish to "try the case in the news media." "We will resolve it in court," said Gillig, who reiterated that the company has a "zero tolerance policy against harassment and discrimination of any kind." The company has denied discrimination. Cochran said about 400 African-American employees of Georgia Power have contacted the legal team about a prospective class action. A month after the lawsuit was filed, the company said an internal investigation found that five nooses had been displayed at company facilities, mostly power plants. But at least 13 nooses were displayed at eight Georgia Power facilities, lawyers for the employees say. Ten photographs, including one of a dummy said to have been hanging by a rope around its neck, were included with the filing. All but two of the pictures had been turned over to the legal team by the company. Another exhibit showed a Ku Klux Klan cartoon said to have been posted in employee mailboxes and "jokes" replete with racist epithets found on a company bulletin board. "I was devastated ... I could not move for a few seconds, then tears came to my eyes thinking of my father who was hung by (the) KKK the year I was born," said one of the 111 African-American employees whose affidavits were filed. But A.W. "Bill'" Dahlberg, who recently retired as chief executive of Southern Co., said in a Jan. 30 deposition that he did not find the cartoon depicting KKK members singing "I'm Dreaming of a White Christmas" offensive. He thought it "made fun of the Klan," Dahlberg said, adding that if it were offensive to African-American employees, it should have been removed. To make their case for discrimination in personnel practices, the lawyers cited the company's own "diversity report card" dated August 1999 that found an $ 11,000 difference between average salaries of black and white workers classified as exempt from union contracts. In March 2000, another internal company report found the disparity continued, with a $ 13,000 salary difference between average salaries of white and black workers. The internal "report card" also found that none of the top 25 highest-paid Southern Co. employees was African-American and that black employees earned on average 20.7 percent less and received 5 percent less in annual incentives than white co-workers. It found that 39 percent of employees who were involuntarily terminated at Georgia Power were minority, although minorities constitute 20 percent of the work force. But the motion claims neither the report card, nor the lawsuit, "spurred any real change in senior management's indifference to the unequal treatment of African-American employees." An analysis of the company's statistics conducted for the plaintiffs by Janice Fanning Madden, a University of Pennsylvania labor economist, found that compensation for African-Americans was 18.7 percent to 20.33 percent lower than for whites for the period from 1995 to 1999. The "probability that a racially neutral process could have generated these differentials" was put by Madden at 26 in 10 trillion. An analysis of the company's employment practices conducted by Kevin Murphy, an industrial psychologist from Penn State University, is also part of the plaintiffs' case. "Southern Co. has in fact no effective policy to prevent or substantially minimize the likelihood of managers discriminating against black employees when making employment decisions," Murphy concluded. The company has 60 days to respond to Monday's motion. Then Judge Orinda Evans will hold a hearing and rule on whether the case will proceed as a class action. That decision is expected in late summer. In depositions filed Monday, Dahlberg and his successor as Southern Co. chief executive, Allen Franklin, testified they have not read the July 27 lawsuit. The employees' lawyers called this evidence of "continued indifference." Asked about nooses, Dahlberg said he had "no earthly idea that anybody today would consider that to be a racial symbol. None whatsoever." Georgia Power President David Ratcliffe said in his deposition he did not understand before the lawsuit that nooses in the workplace could be seen by African-American workers as an "intimidating artifact." He said he has "come to understand" that the display of nooses creates a hostile work environment. "We have tried to communicate to all our employees that the appearance of nooses in the workplace is offensive and therefore unacceptable," he said. Now 59 years old and part of a lawsuit alleging a pattern of racial discrimination and harassment of black employees at Georgia Power Co. and its parent, Southern Co., Cornelius Cooper and others in the lawsuit are tired of waiting for promotion. Each time a promotion went to someone else, Cooper waited for the "next time" he'd been promised. At times, the lineman for Georgia Power Co. had trained some of the people he watched get the promotions, but Cooper said his supervisors told him he needed more experience. Next time for sure, he'd be the one. So he believed them. And he waited. But 28 years later, "next time" for him never materialized. "They kept promising you and promising you," Cooper said. "It was always 'you were the second man,' (or) 'we're going to have something open up for you,' " Cooper said. "But if you've been at a place for 28 years and you can't name a black foreman, a black inspector or black anything, there's a problem." It wasn't any easier on the corporate side, said Carolyn Wilson, a 39-year-old supervisor in Southern Co.'s Energy Solutions Inc. unit. Wilson started working there 15 years ago writing letters in response to customer questions. Almost immediately, the Ohio native said, she sensed black employees were held a to different standard than their white counterparts who did the same jobs. "We were responsible for typing all the letters and composing them," she said, explaining that supervisors would review the letters before they were sent out. "We'd get our letters rejected and sent back, but our white co-workers would get smiley faces on theirs." One supervisor, she said, continually spoke about having a brother in Georgia's state police. "She was always telling us how big he was, that he was taller than 6 feet and that he didn't care for black people," Wilson said. When it came to special projects or asking to participate in them, Wilson said she and other black employees were told supervisors had as many participants as needed but that next time, they would be included. Working on such projects is important because it factors in employee evaluations, shows an employee has initiative and affects raises and advancement opportunities, she said. Despite what she and others say are entrenched discriminatory practices at Southern Co. and its subsidiaries, some of the plaintiffs who shared their stories Monday said they stayed because they needed their jobs. Others, including Charcella Green, an 18-year Georgia Power veteran, stayed because after investing many years into the company, they felt they had no choice but to fight. Green first heard about the lawsuit July 27, the day Georgia Power President David Ratcliffe announced to employees over closed-circuit television that a lawsuit alleging racial discrimination was being filed. Green, 51, of Decatur, works as a $63,000-a-year education adviser in the utility's Community and Economic Development department. She said she realized she had experienced what workers elsewhere in the company were alleging. So she contacted the law firm and joined as a plaintiff. She said she had been passed over for promotions she believed she deserved and for which she was well-qualified. "We had all applied for positions. Many had been interviewed for jobs and told 'you just needed a little something else,' " she said. Green applied twice for the position of manager of educational services. The first time, she was told by the woman who got the job that if she helped her "get up to speed, she would help me with an opportunity later." When the supervisor went on maternity leave in 1998, Green essentially "did her job." Then the woman did not return to the company. "I applied for it, and somebody else was given the position," she said. She has since completed a doctorate in social work and continued doing her job, before and since the lawsuit was filed. Green continues as part of her job to make presentations on economic development to school boards and administrators around the state. "I haven't had a problem with anyone," she said of her encounters with co-workers since filing the suit. Ratcliffe has even been "very cordial and friendly" when she has run into him, she said. "I felt it was important for me to come forward," said Wilson. "I want to be treated fairly and equally. Anything less is unacceptable." (Atlanta Journal and Constitution, April 3, 2001) HIH: Regulator under Attack after Collapse of Insurer; Suit May Be Filed ------------------------------------------------------------------------ The body responsible for ensuring banks and insurers are financially sound is under attack on at least two fronts following the collapse of Australia's second biggest general insurer, HIH. The Australian Prudential and Regulation Authority (APRA) may be one target of a legal claim on behalf of HIH Insurance Ltd policyholders and shareholders, it was suggested. And the Institute of Chartered Accountants in Australia (ICAA) called for an independent evaluation of APRA, saying its performance needed to be examined after the downfall of HIH and the AMP-owned GIO. Melbourne law firm Maurice Blackburn Cashman, already running a similar legal battle on behalf of GIO policyholders and shareholders, said it would investigate the feasibility of a HIH class action. Partner Steve Walsh told AAP the firm was looking at officers and directors responsible for the proper running of HIH, which was placed into provisional liquidation on March 15 after collapsing under losses exceeding $800 million. It has since been claimed that the New South Wales Motor Accidents Authority expressed concern about HIH's ability to pay third party car insurance claims last year. But when it moved to appoint an investigator into the listed insurer, it claims it was told by APRA to hold off for fear of spooking the stock market. Asked if APRA could be included in any legal claim, Mr Walsh said it was possible. According to a memo from MAA general manager David Bowen, MAA approached accountancy house PricewaterhouseCoopers in late October to organise the appointment of an inspector into HIH. "(But APRA advised MAA) that they would prefer that the MAA did not make such an appointment as APRA were working with the company and did not wish any pre-emptive activity that might cause further loss of market confidence at a time when the strategy was clearly aimed at keeping the company trading," the memo said. However, APRA chief executive Graeme Samuel wrote to Financial Services and Regulation Minister Joe Hockey, rejecting the MAA's claim. "At no point did APRA argue that the MAA should not appoint an inspector because that would cause a loss of market confidence in HIH," he said. Labor's assistant treasury spokesman Kelvin Thomson said APRA clearly knew of HIH's trouble but preferred to take a consultative approach. "The government ought to be issuing a 'please explain' to APRA to get rather better explanations of what occurred than have been received so far," Mr Thomson told ABC Radio. Meanwhile, the ICAA's regional manager for Western Australia Con Abbott said APRA's performance needed to be examined in relation to HIH, GIO and "any other significant business failure under its jurisdiction". (AAP Newsfeed, April 3, 2001) IBP, INC: The Emerson Firm Files Securities Lawsuit in South Dakota ------------------------------------------------------------------- The Emerson Firm, a law firm with offices in Houston, and Little Rock, Ark., announced on April 2 that it is filing a class action complaint in the United States District Court for the District of South Dakota on behalf of all individuals and institutional investors who purchased the common stock of IBP, Inc. (NYSE:IBP) between Feb. 7, 2000, and March 29, 2001, inclusive (the "Class Period"). The Complaint alleges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's business and financial condition, and as a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the Class Period. Specifically, the complaint alleges that on Dec. 29, 2000, the Securities and Exchange Commission ("SEC") sent IBP's lawyers a comment letter citing 45 instances of improper accounting during the Class Period. On March 13, 2001, the Company announced that it filed amended disclosure statements with the SEC due to "financial misstatements and irregularities." IBP also confirmed that it was taking a pretax charge of $47 million relating to a review of operations at its DFG Foods subsidiary ("DFG"). In addition, the Company was restating the Company's earnings for all of 1999 and the first three quarters of 2000, taking a $9.5 million non-cash charge against fourth quarter earnings as a result of a changed accounting method for executive compensation expenses. Finally, Defendants revealed for the first time that they were changing their accounting for revenue recognition, resulting in a charge to earnings of $2.4 million. Further, the Complaint alleges that Defendants continued to mislead the marketplace into believing that its announced merger with Tyson Foods, Inc. ("Tyson") would be completed. Defendants' allegedly false and misleading statements concerning the Tyson merger had its intended effect of artificially reinflating IBP's stock price. After the close of trading on March 29, 2001, however, Tyson publicly revealed that its merger with IBP would not go forward. This revelation has sent IBP's stock price plummeting. Contact: The Emerson Firm John G. Emerson Jr., 832/723-8850 E-mail: jge@emersonfirm.com ILIFE.COM: Online Financial Information Provider Cleared of IPO Suit -------------------------------------------------------------------- A securities class action stemming from the 1999 initial public offering of the online financial information provider ILife.com has been dismissed by a federal judge with the U.S. District Court for the Southern District of New York, who found the allegations largely inaccurate. The plaintiffs, purchasers of ILife stock whose holdings declined precipitously in value in the months following the IPO, had argued that a discrepancy between the printed and electronic versions of the IPO prospectus rendered the offering defective and that ILife had misrepresented the financial condition of the company in the offering materials.But Southern District Judge William H. Pauley III disagreed. Ruling in DeMaria v. Andersen Pauley concluded that Securities and Exchange Commission rules dictate that information included in a printed prospectus but omitted from the electronic version is automatically considered part of the registration statement filed with and declared effective by the SEC.And he found that many of the supposed omissions alleged by the plaintiffs had in fact been disclosed by ILife in the prospectus.ILife, a North Palm Beach, Fla.-based company now known as Bankrate Inc., filed an initial registration statement for the IPO, including a printed prospectus, that the SEC declared effective on May 13, 1999. The company subsequently filed the registration statement and prospectus electronically through the SEC's EDGAR filing system.As is customary, a bar graph in the printed version of the prospectus that depicted the online publishing revenues and net losses of ILife on a quarterly basis for 1998 and the first quarter of 1999 was represented in the electronic version with a narrative description of the chart. But there was one discrepancy between the bar graph in the printed version and the narrative in the electronic version: The description on the electronic prospectus identified ILife's net losses as publishing revenues and omitted any reference to net losses.The IPO took place on May 13, 1999; priced at $ 13 per share, it raised $ 45.5 million. Less than two weeks later, ILife announced its 1999 first-quarter results, including an increase in net losses to $ 6 million from $ 703,000 for the same period a year before.The stock price steadily declined over the next year, and by June 14, 2000, the day before the plaintiffs filed their suit, it was trading at $ 1.75 per share. Differences Challenged The suit was filed by name plaintiffs Brian DeMaria, Robert Brisken, Edward Sisco and Terry C. Whorton against five officers of ILife and the underwriters of the offering, ING Baring Furman Selz LLC, and Warburg Dillon Read. The suit alleged that because the printed prospectus given to the SEC was not the prospectus used in the offering of ILife stock to the investing public, purchases of the stock should be rescinded because they are "unregistered securities."In addition, the plaintiffs contended that the prospectus was materially false and misleading because it did not disclose financial results for the first quarter of 1999, despite the fact that the quarter ended 43 days before the IPO.The complaint also alleged that the prospectus failed, among other things, to include a purported reversal in ILife's trend of 25 percent revenue growth and a substantial increase in the ratio of net loss to revenue.In opposition, the defendants argued that the allegations in the complaint were either overstated or incorrect. They contended that the supposed decline in revenue growth was based on inaccurate rounding of the revenue figures, and that the growth had actually remained steady, from 19 percent for the fourth quarter of 1998 to 18 percent for the first quarter of 1999. (The plaintiffs had alleged a drop in growth from 25 percent to 10 percent over that span.)Similarly, on the claim of an increase in the net-loss-to-revenue ratio, the plaintiffs argued that ILife had absorbed a massive loss in the first quarter of 1999 that went undisclosed to investors at the time of the IPO.But the defendants responded, and Judge Pauley agreed, that the printed prospectus included, in a bar graph, itemized losses of about $ 6 million for the quarter. The prospectus also included an italicized disclaimer noting the investment's "high degree of risk," and a bold-type warning of the company's "history of losses" and the expectation of operating losses in the future. Facts Not In Evidence In his ruling, Pauley first found that the plaintiffs had alleged no facts that would provide them the standing to sue the underwriter defendants because none of them had bought stock directly from the underwriters. Second, as to the discrepancy between the versions of the prospectus, Pauley concluded that SEC Rule 304 provides that information included in the printed prospectus but omitted from the electronic one is deemed to be part of the Registration Statement filed with and declared effective by the SEC."As a result," he wrote, "there is no cognizable claim that the registration of ILife shares was defective."Finally, on the claim that information in the prospectus was materially false, the judge found that plaintiffs did have standing to sue despite being secondary purchasers of the stock.But he agreed with the defendants that the facts simply did not bear out the claim. "[T]he amended complaint contains a number of conclusory statements and characterizations that are not based in fact," Pauley wrote, "and, second, the Prospectus made substantial disclosure with respect to the precise omissions that undergird plaintiffs' claim."Plaintiffs were represented by I. Stephen Rabin and Brian P. Murray, of Rabin & Peckel. Martin I. Kaminsky, of Pollack & Kaminsky, represented the individual defendants. Jay B. Kasner and William A. McBride, of Skadden Arps, Slate Meagher & Flom, represented ING Baring Furman Selz and Warburg Dillon Read.This article previously appeared in New York Law Journal, an American Lawyer Media publication. (The Legal Intelligencer, April 2, 2001) ILLINOIS DCFS: System of Investigations Ruled Unconstitutional -------------------------------------------------------------- A federal judge Monday ordered the Illinois Department of Children and Family Services to revamp how it investigates allegations of child abuse and neglect, saying the system is unconstitutional and has too often led to false accusations of wrongdoing against child caretakers. The 102-page ruling by U.S. District Judge Rebecca Pallmeyer concluded that DCFS investigations are one-sided, decided on little evidence and unfairly blacklist professionals accused of wrongdoing. In issuing a preliminary injunction, Pallmeyer gave DCFS 60 days to come up with "a workable solution" with attorneys who brought a class-action lawsuit over the practices. Otherwise, the judge warned she might appoint a mediator to step in. DCFS officials called the decision narrow and said it would have no immediate effect on investigations of child abuse and neglect. Evidence in the case showed that about two-thirds of DCFS investigations result in no findings of abuse or neglect. But in the remaining cases, three-fourths of the child-care employees who had been accused by DCFS of abuse or neglect and appealed those findings were ultimately exonerated, though sometimes not until years later. "Something is seriously and obviously flawed in a system" in which so many cases are reversed on review, Pallmeyer said. Diane L. Redleaf, an attorney for the plaintiffs, said Pallmeyer's decision could have national ramifications because virtually every state investigates child abuse and neglect in a similar fashion. In Illinois, Redleaf said she thinks DCFS officials err on the side of children in these cases in part because of the widespread criticism the child welfare agency took for its botched handling of the horrific death of Joseph Wallace in 1993. The case of the 3-year-old boy, killed by his mentally ill mother after he was returned to her by the state, prompted wholesale reforms in the child welfare system. "The answer to that is you have to be accurate," said Redleaf, who indicated that in many instances DCFS investigators decided guilt or innocence on their first visits with the accused. Carolyn Kubitschek, a New York City lawyer and vice president of the National Coalition for Child Protection Reform, said Congress and state legislatures across the country overreacted to the problem of child abuse. Overburdened System With laws threatening to punish professionals who don't report suspicions of child abuse, the result has been a child welfare system overburdened by mostly unsubstantiated allegations, Kubitschek said. "I would say this is definitely a nationwide problem," she said. In her decision, Pallmeyer said she was most troubled by the low standard of proof required for DCFS investigators to find abuse or neglect--what DCFS refers to as a finding of "indicated," as opposed to unfounded. Investigators must find "credible evidence," but Pallmeyer said evidence in the lawsuit showed that DCFS investigators interpreted that to mean that any credible evidence of abuse or neglect was sufficient. That led investigators to be one-sided and superficial in their efforts, often disregarding evidence in favor of the accused, the judge said. But the consequences for the accused child-care workers--including social workers, day-care workers, foster parents and teachers--were harsh. According to evidence in the case, thousands lost their jobs over the years and were essentially blacklisted from further work in child care while the taint of the allegations hung over their heads. Delayed Appeals Compounding the unfairness of the DCFS system was what Pallmeyer called the "indefensible delays" child-care workers faced in their appeals of accusations of wrongdoing. The losers weren't just qualified child-care workers but also the children of Illinois, Pallmeyer said. "First, when a caregiver is unjustly indicated, and consequently barred from any contact with the children for whom he or she cared, it is the children who lose the benefit of a stable environment," the judge wrote. "The court is also concerned that while the appeal of an indicated individual languishes in the administrative process, actual perpetrators, not targeted during cursory investigations, remain at work in the child-care field." Furthermore, Pallmeyer said, "the extraordinary delays may well result in exoneration of guilty parties." One plaintiff in the lawsuit, a 10-year-old girl from Downstate Carterville who helped out at a day-care center her parents ran in their home, was investigated for helping young children pull up their pants, her lawyers said. After a finding of abuse, DCFS required that she remain out of her own home for 14 hours a day for months, the lawyers said. She stayed with family friends and her grandmother and at other times just drove around in the family van with her father. Years later, her name was cleared of wrongdoing, but not before she threatened suicide, the lawyers said. "It was nerve racking," the girl's mother said. Some advocates say the decision will help hold DCFS workers to higher standards for gathering evidence and determining whether a child was abused or neglected. But others, including DCFS officials, worry the decision might increase the burden of proof so much that children will be harmed. "Our overall concern about the finding is there might be some children placed at risk," said Carolyn Cochran Kopel, chief of staff for DCFS. DCFS officials said the ruling was narrow, affecting only child-care employees. But Redleaf said the system Pallmeyer found to be unconstitutional also applied to parents accused of abuse or neglect. Both the attorney general's office and DCFS said they are considering whether they will appeal Pallmeyer's decision. Improved Performance The ruling comes at a time when DCFS has been performing much better than in past years, advocates said. Benjamin Wolf, the American Civil Liberties Union lawyer whose suit against DCFS led to a 1991 court order to reform the agency, said the department has made significant improvements recently, including finding more stable adoptive homes and reducing caseloads for workers. "While it's still not adequate, kids are less likely to be hurt now than five years ago," Wolf said. On Monday, the state announced that the number of children abused and neglected declined nearly 3 percent in the past year. Since 1995, the number of cases has declined by 26 percent. And last summer, the department met every requirement set by the Council on Accreditation for Children and Family Services, the second statewide agency in the country to meet the private group's tough standards. John Poertner, director of the Children and Family Research Center at the University of Illinois at Urbana-Champaign, said Illinois could follow the lead of states such as Kansas and New York, where lawsuits have led to requirements for a higher standard of proof for neglect and abuse. "It's troublesome that someone can have an individual report and that report can keep that person out of a job when it may not have been a serious matter, when they may not have had enough evidence," Poertner said. "On the flip side, raising the standard of proof could put some children in danger." (Chicago Tribune, April 3, 2001) KEITHLEY INSTRUMENTS: Edward J. Carreiro Announces on Securities Suit --------------------------------------------------------------------- Law Offices of Edward J. Carreiro, of Hatboro, PA, on April 2 announced that a class action lawsuit has been filed against Keithley Instruments, Inc. and its officers resulting from violation of the federal and/or state securities laws for those individuals who purchased the Keithley Instruments, Inc. stock in the following class period: Corporation Class Period Keithley Instruments, Inc. NYSE:KEI 1/18/01 - 3/9/01 Contact: Law Offices of Edward J. Carreiro, Hatboro Edward J. Carreiro, Esquire, 215/672-7600 carreirolaw@yahoo.com LEAD PAINT: Bay Area Court Ruling Bolsters Suit against Makers -------------------------------------------------------------- Bay Area legal authorities say their class-action lawsuit accusing major chemical companies of conspiring to sell poisonous lead-based paint got a boost on Monday, when a Providence, R.I., judge declined to throw out a similar case by the Rhode Island attorney general's office. "There's a two-front battle now," said attorney Bruce Simon of Cotchett, Pitre & Simon in Burlingame, which has been working on the case with the offices of the Santa Clara county counsel and district attorney, and the Oakland city attorney. "The Rhode Island court has struck an important blow against the walls of immunity that manufacturers have tried to hide behind," said Alan Tieger, deputy Santa Clara county counsel. Other California jurisdictions suing are San Francisco and Solano, Santa Cruz and Kern counties. The California suit, filed in Santa Clara County Superior Court last year, says the companies attempted to "thwart government regulation and full disclosure of the damage caused by their products." Potential financial damages are expected to range into the billions of dollars, according to attorneys for the California cities and counties. This could make the suit the most significant consumer litigation since the wave of legal actions against the tobacco industry. But attorneys and representatives for the manufacturers downplayed Rhode Island Superior Court Judge Michael Silverstein's 31-page ruling, despite the fact that it upheld most of Rhode Island Attorney General Sheldon Whitehouse's arguments. "We regard this as a significant victory," said Dick Thornburgh, the former U.S. attorney general who has been retained by five of the companies. "The court threw out all of the attorney general's product-liability claims; also all claims relating to special-education costs. . . . It's apparent the attorney general is trying to scapegoat an industry." The judge, however, upheld charges of civil conspiracy, unjust enrichment, and violations of Rhode Island's trade practices and consumer protection law. Under questioning by reporters, Thornburgh stood by the victory claim. He said the ruling should not "give any encouragement" to plaintiffs in California and flatly ruled out settlement talks in either state. "He can interpret it however he wants to. We think it helps validate the case we brought here in California," said Oakland City Attorney John Russo. San Francisco City Attorney Louise Renne said in a statement that the Rhode Island ruling "confirms that public lawyers can bring this type of lawsuit against the manufacturers of lead paint to remedy the terrible public-health problem they've created." The Rhode Island attorney general had argued in his suit, first filed in 1999, that the companies conspired to sell lead-based paint even though it had been identified as the cause of thousands of cases of ill health nationwide, especially among children in older inner-city housing. The chemical companies called for the case to be dismissed, arguing that Whitehouse lacked authority to bring the suit. Silverstein rejected that argument, saying that if there were no such legal authority, "Wrongs to the public interest would not be able to be vindicated by the state." The companies include Sherwin-Williams, the nation's largest paint company; BP Arco, successor to Atlantic Richfield and the Anaconda Lead Products and International Smelting and Refining companies; American Cyanamid; E.I. Du Pont de Nemours; O'Brien Corp.; SCM Chemicals; NL Industries; and the Lead Industries Association. Inhalation of paint dust causes severe illness, the effects of which may show up as neurological disorders costing the public millions in medical treatment and remedial education. Lead paint has been outlawed for more than 20 years, but Bay Area housing still includes many affected units. San Francisco has identified nearly 600 lead-poisoned children in the past 10 years, according to Deputy City Attorney Ingrid Evans.E-mail Scott Winokur at swinokur@sfchronicle.com. (The San Francisco Chronicle, April 3, 2001) MICROSTRATEGY INC: Settlement Cleared in Investor Lawsuit --------------------------------------------------------- MicroStrategy Inc.'s year-long legal battle with shareholders accusing it of fraud officially ended Monday when a federal judge approved a class-action settlement that awards investors an I.O.U. due in five years, but no cash upfront. The settlement approved by U.S. District Court Judge T.S. Ellis III in Alexandria may deliver only pennies on the dollar for investors who bought MicroStrategy stock before the Vienna software firm reported in March 2000 that it had overstated years of revenue and earnings and its share price plummeted. Last March the stock hit an all-time intraday high of $ 333, and was trading at $ 226.75 before the company corrected its accounting. The stock closed Monday at an all-time low of $ 2.56. The company's annual report, filed with the Securities and Exchange Commission, noted that the settlement allows MicroStrategy to pay the I.O.U., which is due in five years, in stock. That "may result in substantial dilution" of investors' holdings and "may result in downward pressure on the price" of the stock, the filing said. Shareholder Samuel B. Rothman of Falls Church, a lawyer at a federal agency, was the only shareholder to formally object to the settlement, and he withdrew his opposition after reviewing it more closely. Rothman said in an interview that, given MicroStrategy's condition, the settlement was reasonable, though "I don't know that I will get anything out of it." Rothman said he wasn't worried about the potential dilution. "How much worse can it get?" he asked rhetorically. An expert for the plaintiffs had estimated that the 57,000 class members could recover no more than $ 711 million if they won a trial against MicroStrategy and senior executives, according to court papers. But such a judgment would likely have driven MicroStrategy into bankruptcy, leaving investors with little more than worthless paper, lawyers for shareholders argued. In addition to the I.O.U., the settlement awards shareholders interest payments on the note, $ 16.5 million in MicroStrategy stock, and warrants -- which are similar to stock options -- giving them the right to purchase 1.9 million MicroStrategy shares at a price of $ 40 per share. Seven shareholders with combined holdings of fewer than 5,000 shares opted not to participate, preserving their rights to litigate separately, said John K. Villa of Williams & Connolly, an attorney for MicroStrategy. The class-action suit is still pending against MicroStrategy's audit firm, PricewaterhouseCoopers. In its annual report, MicroStrategy also said it paid more than $ 1 million of legal fees last year for chairman and chief executive Michael J. Saylor's personal defense in the class-action litigation and a Securities and Exchange Commission investigation resolved earlier. The company said it paid $ 334,553 for chief operating officer Sanju K. Bansal's defense. The MicroStrategy spokeswoman said it is customary for companies to pay such costs. The annual report said NCR Corp., which does business with MicroStrategy, last month indicated that it may seek to enforce technology patents against MicroStrategy. "In the event NCR seeks to enforce any of these patents and if such patents are found to be valid and enforceable against the Company, the Company's business, operating results and financial condition may be materially adversely affected," MicroStrategy reported. Neither MicroStrategy nor NCR would comment on the issue. (The Washington Post, April 03, 2001) OMTOOL, LTD.: Reaches Settlement-in-Principle in Securities Suit in NH ---------------------------------------------------------------------- Omtool, Ltd. (NASDAQ: OMTL) announced that as of March 31, 2001 it has reached a settlement-in-principle to settle the class action litigation that was brought in October 1999 against Omtool and certain of its current and former officers and directors in the federal district court for the district of New Hampshire. (Lalor, et al. v. Omtool, Ltd., et al., Civil Action No.99-469M). The litigation was purportedly brought on behalf of certain shareholders who had purchased shares of Omtool stock and alleged violations of the federal securities laws. Under the terms of the settlement-in-principle, a settlement fund will be established in the total amount of $6 million, of which $4.3 million will be paid by Omtool's insurers and the rest will be paid by the Company. The settlement-in-principle is subject to the signing of a definitive settlement agreement and final approval by the federal district court in New Hampshire. As the settlement-in-principle was reached after Omtool's press release on January 25, 2001, announcing its preliminary financial results for the fourth quarter and the year ended December 31, 2000, the amounts to be contributed by Omtool to the settlement fund were not reflected in the January 25, 2001 press release but are reflected in the consolidated financial statements contained in Omtool's Form 10-K filed with the Securities and Exchange Commission. Adjusting for the Company's contribution under the settlement agreement-in-principle, the net loss for the year ended December 31, 2000 reflected in the 10-K filed is $(0.44) per share as opposed to the $(0.30) per share announced on January 25, 2001. "While Omtool continues to deny each of the Plaintiffs' claims in their entirety, we believe that this settlement is in the Company's best interests. By disposing of this suit now, Omtool's management team and employees will avoid potentially years of distraction caused by the demands of the lawsuit, as well as the very significant expenses and uncertainties that would be associated with continued litigation," said Robert L. Voelk, Omtool's Chief Executive Officer. "In short, we can focus our efforts on marketing and selling our secure, confirmed e-mail product, Genidocs, to our existing customers as well as to continue to pursue opportunities to market and sell Genidocs to other Fortune 1000 companies," Voelk added. Omtool, headquartered in Salem, New Hampshire, designs, develops, markets and supports open, client/server software solutions. SCHERING-PLOUGH: Gloomy Financial News Spawns Flood of Shareholder Suits ------------------------------------------------------------------------ Mass-tort litigators have nothing on securities-fraud lawyers when it comes to spotting potential plaintiffs and sprinting to the courthouse to file. It was late in the afternoon on Feb. 15 when Schering-Plough Corp. announced that problems at several plants would reduce sales and earnings expectations for the quarter and the year and would delay Food and Drug Administration approval of a new drug viewed as key to the company's profits. Within a day, the first shareholders' suit, Myers v. Schering-Plough Corp., 01-Civ.-0829, had been filed in federal court in Newark against the Kenilworth-based pharmaceutical company, its chief executive officer and chairman Richard Kogan and its vice president and controller Thomas Kelly. As of last week, at least 14 virtually identical complaints had been docketed. They allege fraud under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, based on false representations and failure to disclose adverse information. They also say Kogan, Kelly and others engaged in insider trading, under section 20(a), by selling company stock at prices they allegedly knew were artificially inflated by the company's failure to provide accurate information. The complaints allege $41.3 million in insider trading, with Kogan and Kelly pocketing almost $10 million and $570,000 respectively. At the heart of the case is Schering's most profitable product, the allergy drug Claritin, sales of which account for about one-fourth of Schering's revenues. The Claritin patent will expire next year, and the problems disclosed on Feb. 15 caused the FDA to delay final approval of another drug -- desloratidine -- that Schering plans to sell as "Clarinex" once the Claritin patent expires. *The complaints charge that Schering's Jan. 25 announcement -- that it had received an "approvable" letter from the FDA for desloratidine on Jan. 19 and was "only one step away" from final approval -- was materially misleading, since the defendants knew that production deficiencies would impede FDA approval. When Schering did admit problems on Feb. 15, the complaints describe the response of the market as "immediate and punitive" with a drop in stock price from $48.32 to $38.25 between the close of trading that day and its opening the next. One of the few divergences among the complaints is in how they define the putative class. Though they all define it as those who purchased Schering common stock during the class period, ending on the date of the Feb. 15 announcement, they do not all start the period on the same date. Most of the cases start the clock on July 25, 2000, the date, in the language of at least one complaint, when Schering's manufacturing problems " increased to the extent that defendants had a duty to disclose that ... (they) were much more severe and pervasive than had been represented." Schering issued a press release on that day announcing its second-quarter results. One complaint, Ratzersdorfer v. Schering-Plough Corp., 01-Civ-1301, starts the class period on July 5, 2000 -- when Schering allegedly responded to a report that its Manati, Puerto Rico, plant had been under investigation by the FDA for quality control violations by claiming that the problems had been resolved. Yet another case opens the class period as early as March 2, 2000, when Schering filed its Form 10-K for 1999 with the Securities and Exchange Commission, according to the complaint. That complaint, filed on March 14 in Warner v. Schering-Plough Corp., 01-Civ- 1244, charges the 10-K filing states that the company received a warning letter from the FDA about manufacturing problems at its New Jersey locations and met with the FDA but could not predict whether its remedial actions would resolve the FDA's concerns. Morristown attorney William Pinilis, who is of counsel to New York's Kaplan, Kilsheimer & Fox, is local counsel in Warner for Kaplan, Kilsheimer and firms based in Boston and Baltimore. Other plaintiffs' law firms are located in such places as Los Angeles, Little Rock, West Palm Beach, Philadelphia and, mostly, New York. The brass ring the lawyers hope for is that one of their clients will be chosen lead plaintiff, with the likely result that they will be local counsel for lead attorneys in the case. They will not know until after April 17, when the 60 days to apply for lead plaintiff status closes. After that, U.S. District Judge Katherine Hayden has 30 days to name as lead plaintiff the class member or members "most capable of adequately representing the interests of class members." There is a rebuttable presumption that the most adequate plaintiff is the one with the largest financial interest, often a pension fund or other institutional investor. "No big funds have filed as far as I know," says Allyn Lite, a partner with Newark's Lite DePalma Greenberg & Rivas, who is local counsel for three out- of-state firms in Ratzersdorfer and in six other of the class actions. " Sometimes large institutional investors take a lot of time to decide if they want to get involved." (New Jersey Law Journal, April 2, 2001) SODEXHO-MARRIOTT: Website Shows Reports on E. Coli and Salmonella ----------------------------------------------------------------- The free site, www.eyeonsodexho.org, includes public information about Sodexho Marriott's (NYSE:SDH) food safety record, employment-related litigation and the company's controversial labor relations record. The site was posted by the Hotel Employees and Restaurant Employees International Union (HERE). Among the public documents that can be downloaded from the site are: -- A copy of a County health department report on a recent E. coli outbreak at a Wisconsin elementary school cafeteria managed by Sodexho-Marriott -- A copy of a Maryland state disease control report on a salmonella outbreak at a non-profit hospital where Sodexho-Marriott manages food service operations -- A database of all employment-related lawsuits involving Sodexho-Marriott filed in federal courts since March 1998 -- A full text copy of the pleadings in the national class action discrimination litigation against Sodexho Marriott in the federal court of the District of Columbia brought by ten of the company's current and former African American managers -- A list of the company's OSHA citations -- A full text copy of a complaint filed with the General Accounting Office by a minority contractor seeking to overturn the US Marine Corps' recent award of two lucrative contracts to Sodexho Marriott -- Links to various articles detailing food safety issues and labor disputes The site also allows users to report food safety or employment problems. "We believe a website is the most efficient way to disseminate and collect information about Sodexho Marriott," says Vincent Baltazar, an HERE research analyst and one of the designers of the website. Baltazar says his union gets dozens of requests a month for information about Sodexho-Marriott. Sodexho Marriott Services was formed in 1998 by the merger of Paris-based Sodexho USA and the food service and facility management operations of Marriott International. Sodexho-Marriott is now the largest North American food service contractor, followed by Philadelphia-based Aramark and London-based Compass Group. These "Big Three" contractors have rapidly transformed the institutional food service market. "Sodexho exemplifies the new realities of the food service marketplace," says Baltazar. "We hope the website is a useful database for food service professionals and institutions who want information about the largest food service operator." Baltazar says the union is also collecting similar information about other food service contractors and may launch additional websites in the near future. SOUTHERN CO.: Workers Say Documents Show Racial Bias ---------------------------------------------------- Black workers provided documents from Southern Co. they say support a lawsuit accusing the largest U.S. power producer of racial discrimination. In a court filing, the employees included a U.S. statistical analysis indicating blacks were paid less than white counterparts. The workers also provided company records they said show company officials were aware of nooses hung on corporate property and widespread use of racial epithets. The plaintiffs' lawyers, who asked for class-action status for the suit, obtained the company records under a pretrial order by U.S. District Judge Orinda Evans. The suit, filed in July 2000, seeks unspecified damages. Atlanta-based Southern shares rose 20 cents to close at $ 35.29 on the NYSE. (Los Angeles Times, April 3, 2001) STAFF LEASING: Settlement for Shareholder Suit in 1999 Pending Approval ----------------------------------------------------------------------- On April 30, 1999 the plaintiff, a shareholder of the Company, brought a class action in the Twelfth Judicial Division, Manatee County, Florida against the Company and certain of its directors alleging that the directors and senior officers of the Company breached their fiduciary duty to shareholders by failing to pursue a proposal from Paribas Principal Partners to acquire the Company in order to entrench themselves in the management of the Company. (Lawrence E. Egle V. Staff Leasing, Inc., Et Al.) Plaintiffs seek injunctive relief and unspecified damages including attorneys' and experts'fees. Defendants and counsel for the putative plaintiff class have reached a preliminary agreement on terms of a settlement, following mediation. The settlement is subject to court approval, following notice to the putative class. Management does not expect any settlement to have a material effect on the Company's financial position. VENTRO CORP: Dyer & Shuman Commences Securites Suit in California ----------------------------------------------------------------- The Denver, Colorado-based law firm of Dyer & Shuman, LLP announced on April 2 that a class action lawsuit was commenced by Dyer & Shuman, LLP in the United States District Court for the Northern District of California on behalf of purchasers of Ventro Corporation (Nasdaq:VNTR) common stock between February 15, 2000, and December 6, 2000. The complaint alleges that the company and certain of its officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. During the class period, Ventro built and operated platforms for vertical business-to-business ("B2B") e-commerce marketplace companies. The complaint alleges that by December 1999, defendants knew that Ventro's existing business model did not work. Moreover, by the beginning of the class period it was evident to defendants that Ventro did not possess the technology to successfully compete as a marketplace. Defendants knew this would severely impair Ventro's future revenue growth. However, defendants wanted to raise additional money through debt offerings before the bottom fell out of Ventro's stock price. Thus, defendants continued to make positive but false statements about Ventro's business and future revenues. As a result, Ventro's stock traded as high as $243-1/2 per share during the class period. On December 6, 2000, Ventro announced a restructuring in which it closed down two out of three of its main B2B marketplaces. In early 2001, it was revealed that Ventro's CEO and the other defendants had realized by December 1999 that Ventro's business model of independent marketplaces did not make sense and it was revealed that even Ventro's partners were not satisfied with Ventro's technology for operating the marketplaces. By this time Ventro's stock had declined to less than $2 per share, inflicting billions of dollars of damage on plaintiff and the class. Defendants' misconduct has wiped out over $4 billion in market capitalization as Ventro stock has fallen 99% from its class period high of over $243 per share as the truth about Ventro, its operations and prospects began to reach the market. Contact: Dyer & Shuman, LLP, Denver Jeffrey A. Berens, Esq., 303/861-3003 or 800/711-6483 Facsimile: 303/830-6920 jberens@dyershuman.com VENTRO CORP: Savett Frutkin Announces Filing of Securities Suit in CA --------------------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C. hereby gives notice that a class action complaint was filed in the United States District Court for the Northern District of California, located at 450 Golden Gate Ave., San Francisco, CA 94102, on behalf of a class of persons who purchased the common stock of Ventro Corporation (NASDAQ:VNTR) during the period between February 15, 2000 through December 6, 2000 ("Class Period") and who were damaged thereby. The complaint charges Ventro and its senior officers, David P. Perry, James G. Stewart, Robin A. Abrams, William C. Klintworth, Jr., Martha D. Greer, David Weber and James S. Wambach with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that defendants disseminated false and misleading statements concerning the Company's business model and its earnings for fiscal 2000 which resulted in artificially inflated prices for the Company's common stock. Ventro builds and operates platforms for vertical business-to-business ("B2B") e-commerce marketplace companies. The complaint alleges that by December 1999, defendants knew that Ventro's existing business model did not work. Moreover, by the beginning of the Class Period it was evident that defendants knew that Ventro did not possess the technology to successfully compete as a marketplace. Defendants knew this would severely impair Ventro's future revenue growth. However, defendants wanted to raise additional money through debt offerings before the bottom fell out of Ventro's stock price. Thus, defendants continued to make positive but false statements about Ventro's business and future revenues. As a result, Ventro's stock traded as high as $243.50 per share during the Class Period. The complaint further alleges that in addition to having actual knowledge of the falsity of their statements, each of the defendants had the motive and opportunity to perpetrate a fraudulent scheme and course of business in order to issue $250 million in convertible notes in April 2000 and to sell or otherwise dispose of $54 million worth of their own Ventro shares at prices as high as $ 220 per share, or 100 times higher than the price to which Ventro shares dropped at the end of the Class Period. Ventro had also filed a registration statement to sell an additional 1.8 million shares of Ventro stock, including 120,000 by its CEO, when market demand declined somewhat in March 2000 for B2B stocks, causing the secondary offering not to take place. Then, on December 6, 2000 Ventro announced a restructuring in which it closed down two out of three of its main B2B marketplaces. On January 1, 2001 Ventro's CEO admitted in an interview that by December 1999 he and the other defendants realized that Ventro's business model of independent marketplaces didn't make sense. By this time, Ventro's stock had declined to less than $2 per share, inflicting billions of dollars of damage on plaintiffs and the Class. Defendants' misconduct has wiped out over $4 billion in market capitalization as Ventro stock has fallen 99% from its Class Period high of over $243 per share as the truth about Ventro, its operations and prospects began to reach the market. Ventro ultimately announced no revenue for the fourth quarter 2000, a loss of $618 million for fiscal 2000, the resignations of its Chief Operating Officer, its Chief Financial Officer and its Vice President of Marketing and acknowledged it had refunded millions of dollars in fees it had previously recognized as revenue. Contact: SAVETT FRUTKIN PODELL & RYAN, P.C. Katharine M. Ryan Renee C. Nixon 215/923-5400 or 800/993-3233 E-mail: mail@savettlaw.com WJ COMMUNICATIONS: Has Paid for 4 Suits Filed in 1999 over Recap Merger ----------------------------------------------------------------------- In 1999, four shareholder class action lawsuits were filed against the company and its former directors in the California Superior Court for the County of Santa Clara: Rosenzweig v. Watkins-Johnson Company, et al., Case No.CV885528; Soshtain v. Watkins-Johnson Co., et al., Case No. CV785560; Leong v. Watkins-Johnson Co., et al., Case No. CV785683; Fong v. Watkins-Johnson Co., et al., Case No. CV785683. These lawsuits alleged essentially the same grounds for relief, namely that the individual defendants breached their fiduciary duty to the company's shareowners in connection with the recapitalization merger, which was completed on January 31, 2000. On January 14, 2000, all parties to the class action executed a memorandum of understanding to settle the lawsuits. An estimated settlement payment and related legal fees, of approximately $500,000 has been accrued and included in the December 31, 1999 results of operations. Final settlement was reached with no admission of liability and approved by the court during the company's fourth quarter of 2000. The company paid the previously accrued settlement in the first quarter of 2001 as full and final payment of the court approved settlement agreement. ********* 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 * * *