/raid1/www/Hosts/bankrupt/CAR_Public/020107.mbx
C L A S S A C T I O N R E P O R T E R
Monday, January 7, 2002, Vol. 4, No. 4
Headlines
BAXTER INTERNATIONAL: Prosecutors Drop Investigation of Dialyzer Plant
FORD MOTOR: TX Court Certifies Consumer Suit Over Undelivered Radiators
INSURANCE COMPANIES: Disabled Consumers Sue For AL Loan Act Violations
KENT INTERNATIONAL: Recalls 28,000 Mini Bicycles For Accident Hazard
MICROSOFT CORPORATION: FL Officials Endorse $1B Settlement Agreement
MINNESOTA: State Officials Reach Settlement In Supermax Prisoners' Suit
NEW YORK: Parents To Sue Archdiocese For December Tuition Reimbursement
SERVICE CORPORATION: Grave Desecrations Suit Affecting Jews Nationwide
TENNESSEE: Wilder Considers "Unfair" Tax Policy Suit Against U.S. Govt
Securities Fraud
AMERICAN ELECTRIC: OH Federal Court Throws Out Securities Fraud Suit
ACLN LTD.: Cauley Geller Commences Securities Suit in S.D. New York
ACLN LTD.: Levy Levy Commences Securities Violations Suit In S.D. NY
CORNING INC.: Wechsler Harwood Commences Securities Suit in W.D. NY
DJ ORTHOPEDICS: Wechsler Harwood Initiates Securities Suit in S.D. NY
ENRON CORPORATION: Indiana Joins Federal Suit Over Pension Fund Losses
HOMESTORE.COM: Admits $95M Overstatement In 2001 Advertising Revenues
HOMESTORE.COM: Levy Levy Initiates Securities Suit in C.D. California
HOMESTORE.COM: Wechsler Harwood Commences Securities Suit in C.D. CA
LOGON AMERICA: Schiffrin Barroway Commences Securities Suit In RI
XO COMMUNICATIONS: Marc Henzel Commences Securities Suit in E.D. VA
XO COMMUNICATIONS: Cauley Geller Lodges Securities Suit in E.D. VA
XO COMMUNICATIONS: Wolf Haldenstein Lodges Securities Suit in E.D. VA
XO COMMUNICATIONS: Wechsler Harwood Lodges Securities Suit in E.D. VA
XOMA LTD.: January Lead Plaintiff Deadline Set In Securities Suit
* Market Downturn Causes 92% Increase in Securities Suits in 2001
*********
BAXTER INTERNATIONAL: Prosecutors Drop Investigation of Dialyzer Plant
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Swedish prosecutor Tom Clevenhult has abandoned his investigation of
Baxter International Inc.'s Ronneby plant that produced dialysis
filters linked to more than 50 deaths worldwide, according to an
Associated Press report. The deaths have prompted class actions
filings in Illinois.
Mr. Clevenhult said he found no evidence of faulty procedures or of
wrongdoing by any of the employees at the plant. In a written
decision, he stated "Nothing has emerged that indicates that this is
anything but a chain of unfortunate circumstances that together led to
the tragic deaths that occurred in several different countries."
In November last year, Mr. Clevenhult started the investigation after
the Company acknowledged chemical residue in its dialysis filters
appeared linked to deaths in Croatia, Spain, Taiwan, Germany, Italy,
Colombia and the United States. Earlier, the Company recalled its A
and AF series dialyzers. The A and AF series were part of the
Company's acquisition of Althin Medical AB in March 2000. Another line
of dialyzers called AX was discontinued last February.
Questioning about 10 managers and employees at the plant and consulting
with health officials and medical experts, Mr. Clevenhult concluded it
would have been very difficult for the company "to predict the chemical
reaction that apparently resulted when the liquid in question came in
contact with patients' blood." The Company welcomed the prosecutor's
decision, but is continuing its own investigation into the case.
FORD MOTOR: TX Court Certifies Consumer Suit Over Undelivered Radiators
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Nueces County District Court certified as a class action a lawsuit
filed against Ford Motor Company (NYSE: F) on behalf of some 80,000
Texas owners of Ford F-150 trucks, alleging that the Company charged
the vehicles' owners for equipment that they did not receive.
Lawyers William Edwards III, David Burkett and Steve Kanner filed the
suit last April on behalf of approximately 80,000 Texas consumers who
purchased new 2000- and 2001-model Ford F-150 pick-ups with the "Class
III Towing Group" or the "Heavy-Duty Electrical/Cooling Group" option
packages.
The F-150 owners paid $350 to $400 each for the Class III Towing Group
option package and $210 for the Heavy-Duty Electrical/Cooling Group
option package. Although the Company represented to consumers that both
options were to include an upgraded heavy-duty radiator, it did not
install the upgraded heavy-duty radiators on the vehicles.
Ford has publicly admitted its wrongdoings and has offered affected
customers a choice between $100 cash, a $500 "Owner Loyalty
Certificate" good toward the purchase or lease of a new Ford, or
replacement of their existing radiators with the upgraded heavy-duty
radiator. However, the Company claims it will take months for a
radiator to be replaced and it would take years to replace them all.
The Company recently mailed a promotional brochure outlining these
options to approximately 145,000 F-150 owners who are potential Class
members. Included in the mailing was a negotiable personal check for
$100. The brochure advises owners that, by cashing the check, they
waive their eligibility to receive either of the other options.
Mr. Edwards cited a passage in the Company's recent mailing that
explains to F-150 owners that they did not receive the heavy-duty
upgraded radiator that the Company said was included in the Heavy-Duty
Electrical Cooling System Package, and for which the owners paid, due
to "a publication error" in the auto manufacturer's sales materials.
"Ford's mailing makes it sound as if the company was completely unaware
that the trucks they were selling were not equipped as represented, but
the evidence shows otherwise," he said.
Evidence reveals that the Company received customer complaints about
the radiator, which indicates that the auto manufacturer knew about the
problem, yet did nothing to correct it. Instead, Mr. Edwards alleges
the Company ignored its contractual obligation to ensure that the
upgraded heavy-duty radiators were installed on every vehicle that
included the options packages and continued to charge customers the
full price for the upgrade packages that they did not receive.
He asserts "Ford's mailing is misleading.What appears to be a good-
faith attempt to make the F-150 owners whole is a thinly veiled effort
to gloss over the facts of the case and induce owners to do something
that may not be in their best interests. When all the facts are known,
the mailing is merely a furtherance of the deceptive course that Ford
has taken since it first received complaints from consumers that they
did not receive the upgraded equipment for which they paid."
Mr. Edwards welcomed the ruling as ".an extremely positive development
for the plaintiffs.It is difficult to attain class certification under
today's laws. Obviously, the Judge scrutinized the facts of the case
carefully and determined that this case is best treated as a class-
action that benefits all who purchased trucks in Texas, rather than
have them each file individual lawsuits."
For more information, contact William Edwards by Phone: 800-305-7968 or
800-475-0971 or visit the Website: http://www.f150radiator.com/
INSURANCE COMPANIES: Disabled Consumers Sue For AL Loan Act Violations
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Insurers Voyager Life Insurance Company and Industrial Credit
Corporation (ICC) faces a class action pending in Alabama Federal Court
filed alleging the Company violated the Alabama Small Loan Act by
selling worthless credit-disability insurance policies to disabled
consumers. The class consists of unemployed disabled individuals who
entered a consumer-loan agreement with ICC while purchasing credit-
disability insurance from Voyager.
The sale of credit-disability insurance as part of transactions
involving consumer loans sparked the suit. ICC, a provider of small
consumer loans, commonly sold credit-disability insurance from Voyager
as part of its loan agreements with consumers.
The suit alleges that ICC sold credit-disability insurance to disabled
individuals who were unemployed at the time the insurance policies were
purchased, while the policies excluded coverage of persons who were
unemployed and disabled. As a result, the action maintains, the
insurance policies were worthless to the class of disabled consumers
who purchased them.
KENT INTERNATIONAL: Recalls 28,000 Mini Bicycles For Accident Hazard
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Kent International, Inc. is cooperating with the US Consumer Product
Safety Commission (CPSC) by voluntarily recalling about 28,000 "Midget
Racer" mini-bicycles. The front fork assembly on these mini-bicycles
can loosen or break, and cause the rider to lose control and crash.
The "Midget Racer" mini-bicycle is yellow with 8-inch black rubber
tires, black seat and black handgrips. The mini-bicycle is about 31-
inches long and 23-inches high. "MIDGET RACER" and "KENT" are written
in red lettering on the frame of the bicycle.
Discount department, bicycle, wholesale club and toy stores sold these
mini-bicycles in New Jersey, New York, Rhode Island, Minnesota and
Massachusetts from October 2001 through November 2001, for about $70.
Though Kent previously notified many of the consumers who purchased the
recalled mini-bicycles about the recall, about 2,200 of the mini-
bicycles have not been returned.
All mini-bicycles have black plastic caps on the tops of the
front-wheel fork. Mini-bicycles with black plastic caps covering
the chrome portion of the tops and sides of the front-wheel fork are
not included in this recall.
For further information, contact the Company by Phone: 800-451-5368
between 8:30 am and 4:30 pm ET Monday through Friday.
MICROSOFT CORPORATION: FL Officials Endorse $1B Settlement Agreement
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Florida's educational leaders endorsed Microsoft Corporation's
controversial $1 billion settlement proposal last week, saying that the
agreement could help offset millions of dollars lost to schools in
state budget cutbacks made in December, HernandoToday.com reported.
The software giant developed the proposal to settle hundreds of private
class actions accusing the Company of "anti-competitive" behavior and
of overcharging customers for its Windows program. Under the
settlement, the Company will fund a five-year education program for
economically disadvantaged students that will provide more than 12,500
schools nationwide with money, computer hardware, software, technical
assistance, as well as training for more than 400,000 teachers.
Educators, critics and rivals of the Company have criticized the
settlement, saying the settlement was not a harsh enough punishment,
and that it would allow the Company to further increase its market
share.
However, state officials said that nearly 416,000 students and more
than 600 schools would benefit from the settlement. A spokesperson for
Education Commissioner Charles Christ said the proposal offers
"critical resources" for students in the aftermath of state education
budget reductions caused by declining sales tax revenues in the wake of
Sept. 11. The National Education Association (NEA) and the United
Negro College Fund also have come out in support of the plan.
An earlier project was initiated with a group of high-tech firms called
ZapMe! The group provided free computers in exchange for being allowed
to post advertisements on the computers viewed daily by students. The
plan was criticized and ZapMe! later went bankrupt.
HernandoToday.com reports that the district spent nearly $1 million on
technology from July 1 to October 2001. Plans to have giant technology
companies help foot the bill have drawn mixed reviews.
MINNESOTA: State Officials Reach Settlement In Supermax Prisoners' Suit
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Minnesota state officials have agreed to a tentative settlement in the
class action filed by 18 prisoners of the state's ultra-security
Supermax prison, alleging cruel treatment and inhumane living
conditions, according to an Associated Press report.
The settlement provides that the prison will no longer be called
"Supermax." The name pointed to the prison's reputation of housing
"the worst of the worst inmates" and jeopardized its purpose of
reforming prisoners with behavioral problems, Ed Garvey, lawyer for the
plaintiffs, said.
Mr. Garvey added that the settlement requires prison officials to:
(1) provide outdoor recreation space for inmates;
(2) give them extra clothes if they're cold;
(3) heat and cool the indoor recreation areas;
(4) provide face-to-face visits for inmates in the two least
restrictive levels; and
(5) provide locations in Milwaukee and Racine where inmates'
families can communicate with them via teleconferencing.
Dennis E. Jones 'El and Micha'el Johnson, the two inmates who initially
brought the suit, will likely receive undetermined monetary damages as
part of the settlement, Mr. Garvey added.
NEW YORK: Parents To Sue Archdiocese For December Tuition Reimbursement
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The New York Archdiocese faces a possible class action from parents of
Moore Catholic and Monsignor Farrell High School students seeking
reimbursement for tuition paid for the month of December, when the
schools' teachers were out on strike.
The Lay Faculty Association (LFA), which represents 90 teachers at both
schools, walked out of classes on November 29, after failing to come to
terms with the church regarding their contracts. They returned to the
classroom last week as negotiations ensued between both sides.
However, they may resume the strike in mid-January if no deal is
reached by then.
A meeting of parents has been set on January 11 to discuss legal
avenues to get reimbursement for the December tuition. According to
Vivian Cacace, whose son is a sophomore at Moore, "The meeting isn't
canceled just because teachers are coming back. If they came to a
solution and the contracts were signed, a meeting wouldn't be
imminent.We are looking for legal guidance. We want the archdiocese to
know that there are many parents who are interested and worried."
Joseph Zwilling, spokesman for the archdiocese, told the Staten Island
Advance, that tuition is an annual fee spread out over 10 payments for
the convenience of the parents. Legally, parents are responsible to pay
full tuition as long as school is open.
Aside from the money, parents said their main concern is that teachers
return to the classroom for good and that both sides reach a fair
settlement soon. Already, this is the longest strike in the union's
history.
Another parent, Margherita Sansone-Fuss, said "I'm praying they will
work this out before the teachers need to go out again.Both sides
really need to make concessions. The children are the pawns in all of
this."
SERVICE CORPORATION: Grave Desecrations Suit Affecting Jews Nationwide
----------------------------------------------------------------------
The allegations in the class action brought against Service Corporation
International (SCI) over desecrations in the company-owned Florida
cemetery Menorah Gardens and Funeral Services could have far-reaching
effects on Jews across the United States.
According to JTA News, the suit alleges the Cemetery:
(1) mishandled hundreds of bodies;
(2) buried remains in the wrong places or in ways that encroached
on other plots; and
(3) discarded remains or replaced them with other bodies to cover
mistakes and make more room.
SCI is the country's largest funeral company, owning 55 Jewish funeral
homes in the United States and 485 cemeteries worldwide, Robyn
Sadowsky, Company spokeswoman, told JTA news. Ms. Sadowsky, however,
did not specify how many of the 485 are, like the ones in the Florida
lawsuit, Jewish cemeteries.
The pending class action has unearthed the other times when the Company
clashed with the Jewish community. In 1999, a report by the New York
City Consumer Affairs Commission charged the Company with price-
gouging, marketing overly-expensive services, and providing services
inconsistent with traditional Jewish funeral practices.
The report asserted that Jews were particularly vulnerable to the
Company's practices, as they have little time to shop around or compare
prices. Additionally, SCI owned 14 out of New York's 28 Jewish funeral
homes, including 4 out of 5 in Manhattan.
As a result, the New York Attorney General charged the Company with
"monopolistic practices that reduced competition in the New York
market." The case was later settled out-of-court and resulted to the
Company's sale of three of its Jewish funeral homes in New York.
The Jewish community in Maryland has also complained about the
Company's cemetery in Maryland, charging it with not burying people in
the right plots and of forcing families to make payments and sign
contracts on Shabbat. David Zinner, the head of a new Washington-based
national group, Kavod v'Nachum, that is forming to provide resources
and information on Jewish funeral practices, said he was disturbed to
learn of the case in Florida, noting that if allegations are proven,
"not only did they mess up morally, spiritually and ethically, but also
legally."
Jules Polonetsky, who oversaw the 1999 report as New York's consumer
affairs commissioner, said he wasn't surprised to learn of the Florida
case. He asserts similar abuses have ".happened elsewhere before, and
sadly, without a greater level of communal oversight of what happens in
the funeral and cemetery world, it's destined to happen again."
He added that aside from SCI, many nonprofit and independently owned
cemeteries also have been known to commit the same offenses in the
suit. He volunteered that part of the problem is that hardly anyone in
the Jewish community is monitoring the cemeteries or advocating for
people who have plots there, and given Americans' squeamishness about
death, it is difficult to mobilize people for funeral-related activism.
Company officials said in a statement earlier this month that the
practices alleged in the lawsuit were "completely contrary to our
policies and procedures" and that the company is conducting an internal
review.
TENNESSEE: Wilder Considers "Unfair" Tax Policy Suit Against U.S. Govt
----------------------------------------------------------------------
Tennessee Lt. Gov. John Wilder is contemplating filing a class action
in Memphis Federal Court against the United States government. He wants
to challenge an "unfair" 1986 tax law which prohibits the individual
taxpayer from deducting sales taxes when he fills out his or her annual
income tax return for the Internal Revenue Service.
Mr. Wilder asserts that each year, Tennesseans spend millions of
dollars paying sales taxes on everything from appliances and cars to
clothes and baby food. It is unfair, he says that individual taxpayers
are "penalized," while corporations are allowed to deduct annualized
sales taxes.
He said "There's nothing right about it. Instead of taxing citizens,
suppose Uncle Sam sent his budget down here to the State of Tennessee
and said, `I'm going to tax your taxes for the whole amount, and you've
got to do it.' That's what he's doing when he taxes taxes."
Mr. Wilder initially planned to lobby for legislation ending the
state's 6-percent sales tax and replacing the sales tax with a gross
receipts tax to be paid by business, but he later abandoned his plane
after an IRS ruling declared gross receipts tax "non-deductible."
Under the class action, six people would be listed as plaintiffs and
they would be certified to represent all Tennesseans who itemize their
deductions.
Securities Fraud
AMERICAN ELECTRIC: OH Federal Court Throws Out Securities Fraud Suit
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The United States District Court for the Southern District of Ohio
dismissed with prejudice a consolidated shareholder class action filed
against American Electric Power (NYSE: AEP) on behalf of all investors
who purchased AEP common stock between July 25, 1997 and June 25, 1999.
The suit, commenced in June 2000, alleges that the Company and certain
of its officers violated federal securities laws by making materially
false and misleading statements regarding the impaired condition of its
D.C. Cook nuclear power plant and the adverse affect that the problems
had, and would have, on the AEP's business and its financial results.
The Company allegedly made misleading statements concerning the
condition, length of outage and the cost of restart of the Cook plant,
which artificially inflated the company's stock price and damaged
shareholders.
For more information, visit the firm's Website: http://www.aep.com
ACLN LTD.: Cauley Geller Commences Securities Suit in S.D. New York
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Cauley Geller Bowman & Coates LLP initiated a securities class action
in the US District Court for the Southern District of New York on
behalf of purchasers of ACLN, Ltd. (NYSE: ASW) publicly traded
securities between June 29, 2000 and December 20, 2001, inclusive. The
suit names as defendants the Company and:
(1) Joseph Bisschops,
(2) Aldo Labiad, and
(3) Alex De Ridder
The suit alleges the defendant issued a series of material
misrepresentations to the market during the class period, thereby
artificially inflating the price of the Company's securities.
Beginning in June 2000, and continuing throughout the class period,
defendants issued multiple press releases and filed quarterly and
annual reports with the SEC which highlighted the Company's growth and
strong financial performance.
As alleged in the suit, these statements were materially false and
misleading because they failed to described the true state of financial
affairs at the Company. Specifically, the complaint charges that
defendants:
(i) failed to disclose certain self-dealing transactions between
Mr. Bisschops and certain private entities which he
controlled;
(ii) overstated the Company's assets by listing a shipping vessel,
the Sea Atef, as an asset when, in fact, the Company did not
own the Sea Atef;
(iii) understated the Company's selling, general and administrative
expenses, causing its net income to be overstated; and
(iv) violated generally accepted accounting principles and the
Company's own stated policy with regard to recognition of
revenue by reporting revenue for the cars that it sold as soon
as the ship carrying the cars left the port and not when the
shipment was completed.
The truth about these statements finally came to light on December 20,
2001, in an article published by Herb Greenberg on TheStreet.com. In
response to the questions raised in Greenberg's article, the Company's
shares plunged 64%, falling $16.71 to close at $9.40 per share.
For more information, contact Jackie Addison, Sue Null or Shelly
Nicholson by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone:
1-888-551-9944 (toll-free) by E-mail: info@classlawyer.com or visit the
firm's Website: http://www.classlawyer.com
ACLN LTD.: Levy Levy Commences Securities Violations Suit In S.D. NY
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Levy and Levy PC initiated a securities class action against ACLN Ltd.
(NYSE:ASW) in the United States District Court, Southern District of
New York, on behalf of purchasers of the Company's securities between
June 29, 2000 and December 20, 2001, inclusive. The suit also names as
defendants:
(1) Joseph Bisschops,
(2) Aldo Labiad and
(3) Alex De Ridder
The suit alleges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, by issuing materially false and misleading statements to
the market.
Beginning on June 29, 2000, and continuing throughout the class period,
defendants issued multiple press releases and filed quarterly and
annual reports with the SEC which highlighted the Company's growth and
strong financial performance. These statements were materially false
and misleading because they failed to describe the true state of
financial affairs at the Company. Specifically, defendants:
(i) failed to disclose certain self- dealing transactions between
Mr. Bisschops and certain private entities which he
controlled;
(ii) overstated the Company's assets by listing a shipping vessel,
the Sea Atef, as an asset when, in fact, the Company did not
own the Sea Atef;
(iii) understated the Company's selling, general and administrative
expenses, causing its net income to be overstated; and
(iv) violated generally accepted accounting principles and the
Company's own stated policy with regard to recognition of
revenue by reporting revenue for the cars that it sold as soon
as the ship carrying the cars left the port and not when the
shipment was completed.
The truth about these statements finally came to light on December 20,
2001, in an article published by Herb Greenberg on The Street.com. In
response to the questions raised in Greenberg's article, the Company's
shares plunged 64%, falling $16.71 to close at $9.40 per share.
For further details, contact Stephen G. Levy by Mail: One Stamford
Plaza, 263 Tresser Blvd., 9th Floor, Stamford, CT 06901 by Phone: 866-
338-3674 (toll free), 203-564-1920 or by E-mail: LLNYCT@aol.com
CORNING INC.: Wechsler Harwood Commences Securities Suit in W.D. NY
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Wechsler Harwood Halebian & Feffer LLP initiated a securities class
action on behalf of all purchasers of the common stock of Corning, Inc.
(NYSE:GLW) pursuant to the November 2, 2000 prospectus in the United
States District Court for the Western District of New York.
The suit alleges that defendants violated Sections 11, 12(a)(2) and 15
of the Securities Act of 1933 by issuing a materially false and
misleading registration statement and prospectus in connection with the
Company's offering of common stock and debentures in November 2000.
Specifically, the complaint alleges that the prospectus was materially
false and misleading, among other reasons, because:
(1) it stated that demand for the Company's products was robust;
(2) it omitted to disclose that the Company was amassing hundreds
of millions of dollars of obsolete inventory that would have
to be written-off; and
(3) because, given the foregoing, the projection of 25% earnings
growth in 2001, contained in the prospectus, was lacking in a
reasonable basis at all times.
In July 2001, the Company announced it was taking a $5.1 billion charge
primarily related to two recent acquisitions, that it would also write
off $300 million in excess and obsolete inventory, and that it would
cut 1,000 jobs and close three plants. The Company also reported a
massive second-quarter loss of $4.76 billion, or $5.13 per share.
Company shares closed that day at $13.77, down 80% from the offering
price.
For more information, contact David Leifer by Mail: 488 Madison Avenue
8th Floor New York, New York 10022 by Phone: 877-935-7400 (Toll Free)
or by E-mail: dleifer@whhf.com
DJ ORTHOPEDICS: Wechsler Harwood Initiates Securities Suit in S.D. NY
---------------------------------------------------------------------
Wechsler Harwood Halebian & Feffer LLP commenced a securities class
action in the United States District Court for the Southern District of
New York on behalf of all shareholders that acquired the common stock
of DJ Orthopedics, Inc. pursuant or traceable to the Company's initial
public offering on November 15, 2001, against the Company, certain of
its officers and directors and its underwriters.
The complaint alleges that defendants violated Sections 11, 12(a)(2),
and 15 of the Securities Act of 1933, by issuing a registration
statement and prospectus in connection with an initial public offering
of common stock which contained materially false and misleading
statements and omissions.
Specifically, the complaint alleges that shortly after the commencement
of trading on November 15, 2001, the IPO share price dropped
precipitously from $17 per share upon news that analysts adjusted
downward the Company's fourth quarter earnings forecast. Fourth quarter
earnings estimates were touted by defendants in "road shows" to
investors prior to the IPO. Defendants did not halt the IPO or trading
in the stock, even though the registration statement and prospectus
failed to disclose, that the fourth quarter estimates were adjusted
downward.
The news drove the price of the Company's shares down by at least 10%,
to close at $15.25 per share, on heavy trading volume of 7.3 million
shares. By its third full day of trading, the Company's shares were
down to $13.16 per share, or over 22% off the IPO price.
For more information, contact David Leifer by Mail: 488 Madison Avenue
8th Floor, New York, New York 10022 by Phone: 877-935-7400 (Toll Free)
or by E-mail: dleifer@whhf.com
ENRON CORPORATION: Indiana Joins Federal Suit Over Pension Fund Losses
----------------------------------------------------------------------
Indiana's Public Employees Retirement Fund and the Teachers Retirement
Fund, two of the state's largest public pension funds, plan to join a
federal class action against fallen energy giant Enron Corporation
(NYSE:ENE) after they collectively lost $24.2 million in the Company's
collapse.
The Company, which was, at one time, the nation's seventh largest
company, saw its stock plummet from $85 per share to about only 26
cents. The Company later filed for Chapter 11 bankruptcy protection
after it revealed losses of more than $1 billion for some of its
divisions. Enron then disclosed that hundreds of millions of dollars of
debt had been obscured through transfers to affiliated companies.
About 150,000 workers, mostly state and local government employees, pay
into the employee fund, while roughly 49,000 retirees or their families
are drawing from the fund. Compared with the other states, Indiana's
funds were not as hard hit, however - the teacher fund lost about $2.25
million while the employee fund lost roughly $22 million.
William Butler, Executive Director of the employee fund, said "Twenty-
two million dollars is not insignificant by anyone's measure.But when
you look at it in the context of the whole fund, it's thankfully not a
very big number."
He added that they will "certainly be involved as a plaintiff in this
action.As long as there is any prospect for recovery, I think it is
incumbent on us to protect our members' money."
New York State, which also is suing Enron, lost $58 million of its $112
billion pension fund in the plunge. Ohio's two largest funds, one for
public employees and another for teachers, lost a combined $114.5
million.
HOMESTORE.COM: Admits $95M Overstatement In 2001 Advertising Revenues
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Online real estate broker Homestore.com announced late last week that
it overstated its online advertising revenue in the first three
quarters of 2001 by as much as $95 million, or 27 percent of the $351
million in sales it reported in the period, according to an Internet
News report.
Results of the Company's internal inquiry show that it misstated ad
revenue because of "transactions that should have been accounted for as
barter transactions." The Company earns from subscriptions it sells to
real estate agents, and from advertisements on its site.
The Company added that it plans to restate its financial reports for
the first nine months of 2001 when it completes the inquiry and is
reviewing transactions from 2000 as well.
A Company spokesman declined to elaborate further on the results, and
said Homestore.com can't yet quantify the total dollar value of
restatements it might issue. The Company also declined to comment on
the pending securities class actions in the US District Court for the
Central District of California.
HOMESTORE.COM: Levy Levy Initiates Securities Suit in C.D. California
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Levy and Levy PC commenced a securities class action in the United
States District Court for the Central District of California on behalf
of purchasers of Homestore.com, Inc. (Nasdaq: HOMS) common stock during
the period between July 20, 2000 and December 21, 2001.
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. On July 2000,
after the close of the market, the Company issued a release of its
positive 2Q00 results, causing its stock price to soar by more than $7,
or 25%, the following trading day.
As part of their effort to boost the price of the Company's stock, the
suit alleges defendants misrepresented its true prospects in an effort
to conceal improper acts until they were able to sell at least $16
million of their own Company stock. In order to overstate revenues and
assets in 2nd, 3rd and 4th Quarters 2000, and 1st, 2nd and 3rd Quarter
2001, the Company violated generally accepted accounting principles and
SEC rules by engaging in improper "roundtrip" transactions. These
transactions had the effect of dramatically overstating revenues and
assets.
Though unbeknownst to the public, this practice came to an end in
Homestore.com's 3rd Quarter 2001 as its main roundtrip partner stopped
facilitating these types of transactions. Following the release of the
Company's 3rd Quarter 2001 results, it also slashed its revenue
projections for 2002 from $563 million to $375-$425 million as a result
of a material decline in its business with its main "roundtrip"
partner.
On this news the Company's shares plummeted by more than 50% the
following trading day. Then, on December 21, 2001 (after the close of
the market), the Company partially admitted that its past accounting
for its prior results was inaccurate. On this news the Company's shares
were halted and have not traded since. Then, on January 2, 2002,
defendants admitted that the Company's revenue for 2001 had been
overstated by as much as $95 million. The defendants also admitted that
"additional material restatements" may follow.
For more details, contact Stephen G. Levy by Mail: One Stamford Plaza,
263 Tresser Blvd., 9th Floor, Stamford, CT 06901 by Phone: 866-338-3674
(toll free) or 203-564-1920 or by E-mail: LLNYCT@aol.com
HOMESTORE.COM: Wechsler Harwood Commences Securities Suit in C.D. CA
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Wechsler Harwood Halebian & Feffer LLP initiated a securities class
action in the United States District Court for the Central District of
California on behalf of purchasers of Homestore.com, Inc. (Nasdaq:
HOMS) common stock during the period between May 3, 2000 and December
21, 2001.
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. In May 2000,
the Company issued a release of its positive 1st Quarter 2000 results.
The suit alleges that as part of their effort to boost the price of
Company stock, defendants misrepresented the Company's true prospects
in an effort to conceal its improper acts until they were able to sell
at least $16 million of their own stock.
In order to overstate revenues and assets in 1st, 2nd, 3rd and 4th
Quarter 2000 and 1st, 2nd and 3rd Quarter 2001, Homestore.com allegedly
violated generally accepted accounting principles and SEC rules by
engaging in improper "roundtrip" transactions. These transactions had
the effect of dramatically overstating revenues and assets. This came
to an end (though unbeknownst to the public) in the Company's 3rd
Quarter 2001 as the Company's main roundtrip partner stopped doing
these transactions with the Company.
Following the release of the Company's 3rd Quarter 2001 results, the
Company also slashed its revenue projections for 2002 from $563 million
to $375-$425 million as a result of a material decline in its business
with its main "roundtrip" partner. On this news the Company's shares
plummeted by more than 50% the following trading day from $4.98 to
close at $2.28. Then, on December 21, 2001 (after the close of the
market), the Company partially admitted that its past accounting for
its prior results was inaccurate. On this news the Company's shares
were halted and have not traded since. Then, on January 2, 2002,
defendants admitted that the Company's revenue for 2001 had been
overstated by as much as $95 million. The defendants also admitted that
additional material restatements "may follow," including a restatement
of financial results for fiscal year 2000.
For more information, contact Patricia Guiteau by Mail: 488 Madison
Avenue 8th Floor New York, New York 10022 by Phone: 877-935-7400 (Toll
Free) or by E-mail: pguiteau@whhf.com
LOGON AMERICA: Schiffrin Barroway Commences Securities Suit In RI
-----------------------------------------------------------------
Schiffrin & Barroway, LLP initiated a securities class action in the
United States District Court for the District of Rhode Island on behalf
of all purchasers of the common stock of Log On America, Inc. (OTC
Bulletin Board: LOAX.OB) from April 22, 1999 through November 20, 2000,
inclusive
The suit charges the Company and certain of its officers and directors
with issuing false and misleading statements concerning the Company's
business and financial condition. Specifically, throughout the class
period, defendants repeatedly issued statements indicating that, among
other things, the company was on track to achieve the goals of its
business plan and that it was successfully growing its service
offerings and customer base through its numerous acquisitions.
The complaint alleges that these statements were materially false and
misleading because among other things, they failed to disclose or
misrepresented:
(1) that the revenues the Company was generating from its customer
base, which was predominantly consumer-focused, were not
sufficient to offset the extensive capital costs that the
Company was incurring in order to build out its network and
provision its products;
(2) that the Company's "growth-by-acquisition" strategy was not
meeting with success as the Company had acquired a collection
of disparate businesses which it was unable to effectively
integrate into its existing businesses;
(3) that the Company was experiencing weakening demand for its
products and services and was attempting to transition into
different markets in order to reinvigorate its sales growth;
and
(4) that as a result of the foregoing adverse factors, the Company
would not be profitable in the near-term, if at all, and would
have to completely restructure its operations and slash costs.
For more information, contact Marc A. Topaz or Stuart L. Berman by
Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone:
1-888-299-7706 (toll free) or 1-610-667-7706 or by E-mail:
info@sbclasslaw.com
XO COMMUNICATIONS: Marc Henzel Commences Securities Suit in E.D. VA
-------------------------------------------------------------------
The Law Office of Marc S. Henzel initiated a securities class action in
the United States District Court for the Eastern District of Virginia
on behalf of purchasers of the common stock of XO Communications, Inc.
(Nasdaq: XOXO) during the period of April 4, 2001 through and including
November 29, 2001.
The suit alleges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10-b(5) by issuing false
and misleading statements regarding the Company's financial condition
as well as its present and future business prospects. In particular,
the suit alleges that defendants misled the investing public concerning
the ability of the Company to survive until it would be cash flow
positive.
Throughout the class period, defendants stated that the Company would
be able to survive at least into the middle of 2003 without the need
for further financing. However, on November 29, 2001, defendants
announced a transaction where the shareholders' equity was destroyed in
exchange for an investment of $800 million. Trading in the Company's
stock was quickly halted.
For further details, contact Marc S. Henzel by Mail: 273 Montgomery
Ave, Suite 202 Bala Cynwyd, PA 19004-2808 by Phone: 888-643-6735 or
610-660-8000 by Fax: 610-660-8080 by E-mail: Mhenzel182@aol.com or
visit the firm's Website: http://members.aol.com/mhenzel182.
XO COMMUNICATIONS: Cauley Geller Lodges Securities Suit in E.D. VA
------------------------------------------------------------------
Cauley Geller Bowman & Coates, LLP initiated a securities class action
in the United States District Court for the Eastern District of
Virginia on behalf of investors of XO Communications, Inc. (OTC
Bulletin Board: XOXO) (formerly Nasdaq: XOXO) common stock who on
behalf of all persons who owned Company stock as of November 29, 2001
and all persons who purchased the Company's equity securities from
April 2, 2001 through November 29, 2001, excluding officers, directors
and Company insiders.
According to the investors, Company insider Forstmann Little & Co.,
through its representative on the Company's Board of Directors, Sandra
J. Horbach, entered into a transaction with the Company and Telefonos
de Mexico S.A. de C.V. that will transfer control of the Company to
Forstmann Little at the expense of its common stockholders. Common
stockholders have been told that their entire equity stake in the
Company will be wiped out by this transaction.
Daniel F. Akerson, the Chairman of the Board and Chief Executive
Officer, who is a former general partner of Forstmann Little, is named
as a defendant in the action along with Forstmann Little and the other
directors of the Company. The suit asserts claims for breach of
fiduciary duty by Forstmann Little, and for violations of the federal
securities law by certain Company directors.
According to the allegations of the complaint, Mr. Akerson and other
management personnel were quoted over the last year as stating that the
Company had over a billion dollars in cash available and was funded
well into 2002 and 2003. Shareholders who purchased the common stock or
continued to hold their common stock in light of these representations
were understandably quite surprised when the Company announced a rush
transaction in which common stockholders' equity stake in the Company
would be "restructured" out of existence, as indicated in the
complaint.
For more information, contact Jackie Addison, Sue Null or Shelly
Nicholson by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone:
1-888-551-9944 by E-mail: info@classlawyer.com or visit the firm's
Website: http://www.classlawyer.com
XO COMMUNICATIONS: Wolf Haldenstein Lodges Securities Suit in E.D. VA
---------------------------------------------------------------------
Wolf Haldenstein Adler Freeman & Herz LLP initiated a securities class
action in the United States District Court for the Eastern District of
Virginia, on behalf of purchasers of XO Communications, Inc. (NASDAQ:
XOXO) securities between April 4, 2001 and November 29, 2001,
inclusive, against defendants the Company and:
(1) Daniel F. Akerson, Chief Executive Officer and Chairman of the
Board of Directors,
(2) Nathaniel A. Davis, President, Chief Operating Officer, and a
Director, and
(3) Craig O. McCaw, founder of the Company, controlling
shareholder and a Director
The suit alleges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10-b(5) by issuing false
and misleading statements regarding the Company's financial condition
as well as its present and future business prospects. In particular,
the suit alleges that defendants misled the investing public concerning
the ability of the Company to survive until it would be cash flow
positive.
Throughout the class period, defendants stated that the Company would
be able to survive at least into the middle of 2003 without the need
for further financing. However, on November 29, 2001, defendants
announced a transaction where the shareholders' equity was destroyed in
exchange for an investment of $800 million. Trading in the Company's
stock was quickly halted.
For further information, contact Fred Taylor Isquith, Gregory M.
Nespole, Michael Miske, George Peters or Derek Behnke by Mail: 270
Madison Avenue, New York, New York 10016 by Phone: 800-575-0735 by E-
mail: classmember@whafh.com or visit the firm's Website:
http://www.whafh.com. E-mail should refer to XO Communications.
XO COMMUNICATIONS: Wechsler Harwood Lodges Securities Suit in E.D. VA
---------------------------------------------------------------------
Wechsler Harwood Halebian & Feffer LLP filed a securities class action
in the United States District Court for the Eastern District of
Virginia, on behalf of purchasers of XO Communications, Inc.
(Nasdaq:XOXO) common stock between April 4, 2001 and November 29, 2001,
inclusive against:
(1) Daniel F. Akerson, Chief Executive Officer and Chairman of the
Board of Directors,
(2) Nathaniel A. Davis, President, Chief Operating Officer and
Director, and
(3) Craig O. McCaw, the Company's founder, controlling
shareholder, and Director
The suit charges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and SEC Rule 10b-5 by, among other
things, issuing false and misleading statements regarding the Company's
financial condition as well as its present and future business
operations. In particular, the Complaint alleges that defendants misled
the investing public concerning the Company's ability to finance its
business operations until it becomes cash-flow positive.
Throughout the class period, defendants stated that the Company had
sufficient cash to survive at least into mid 2003 without the need for
further financing. These statements were false, and on November 29,
2001, defendants announced a transaction where the shareholders' equity
was destroyed in exchange for a cash infusion of $800 million. Trading
in the Company's stock was immediately halted.
For more information, contact Craig Lowther by Mail: 488 Madison Avenue
8th Floor, New York, New York 10022 by Phone: 877-935-7400 (Toll Free)
Craig Lowther clowther@whhf.com
XOMA LTD.: January Lead Plaintiff Deadline Set In Securities Suit
-----------------------------------------------------------------
The lead plaintiff deadline in the securities class action pending
against XOMA Ltd. (Nasdaq:XOMA) in the US District Court for the
Northern District of California is set for January 14, the law firm of
Berman DeValerio Pease Tabacco Burt & Pucillo announced in a press
statement.
The lawsuit seeks damages for violations of federal securities laws on
behalf of all investors who bought the Company's stock between May 24,
2001 and October 4, 2001, including those persons who purchased shares
in or traceable to its June 26 offering of 3 million shares.
The suit alleges that the Berkeley-based biopharmaceuticals
manufacturer issued false and misleading statements about its plans to
file a Food and Drug Administration (FDA) application for Xanelim, a
psoriasis drug the Company was co-developing with Genentech Inc. For
investors in the Company, successful development of Xanelim was
pivotal. In 20 years, the company has never turned a profit or brought
a drug to market.
Filing the application, known as a Biologics Licensing Application
(BLA), was an important step in gaining FDA approval for the drug. The
Company repeatedly said it planned to file the BLA with the agency by
the end of 2001 or the first quarter of 2002. That timetable would
have put the Company and Genentech in a close race with Biogen, Inc. to
be the first manufacturer to market an effective treatment for
psoriasis and gain a significant advantage in a market that is expected
to reach $2 billion by the year 2005.
In fact, the Company and Genentech were nearly a year behind Biogen.
When the Company told investors it planned to file its BLA by the end
of 2001, XOMA knew, but failed to disclose, that a change in its
manufacturing process would necessarily delay filing until after that
date. On October 4, 2001, the Company admitted that it would not file
the BLA until the summer of 2002 at the earliest. The next day the
price of the Company's stock fell as low as $6.40 from a closing price
of $9.76 per share a day earlier.
For more information, contact Steven D. Morris or Michael G. Lange by
Mail: One Liberty Square, Boston MA 02109 or by Phone: 800-516-9926 or
contact Jennifer Abrams by Mail: 425 California Street, Suite 2025 San
Francisco, CA 94104 by Phone: 415- 433-3200 by E-mail:
law@bermanesq.com or visit the firm's Website:
http://www.bermanesq.com.
* Market Downturn Causes 92% Increase in Securities Suits in 2001
-----------------------------------------------------------------
The pronounced market downturn has proven to be a boon for securities
litigators as securities class actions nearly doubled in 2001 as law
firms sought compensation for millions of investors who saw their
fortunes drop. Ending in mid-December 2001, 415 such lawsuits were
filed, up 92% from 216 in 2000, according to the Securities Class
Action Clearinghouse at Stanford Law School.
Contributing to the increase was a "new wrinkle" in 2001, the Austin
American-Statesman reported. Following an investigation by the
Securities and Exchange Commission into questionable securities
underwriters' practices regarding how they allocated shares of new
public offerings to big investors, plaintiffs' attorneys blanketed the
financial landscape with class action filings. These lawsuits accuse
underwriters of agreeing to sell stock to some favored investors at the
offering price, a deal unavailable to the average shareholder, in
exchange for their commitment to also buy some stock on the open market
at pre-arranged prices. The practice, known in Wall Street as
"laddering" drove the stock higher as other investors interpreted it to
mean that Wall Street perceived higher value in the newly issued stock,
thereby creating an impressive early run-up. The suits also alleged
that the investors were required to kick back some profits to the
underwriters in the form of secret commissions.
The Stanford Clearinghouse states that out of the 415 securities suits
filed this year, 135 lawsuits filed in 2001 are based on IPO-allocation
claims, and another 114 have some IPO connection, 60% of the total
lawsuits filed. Only 166 lawsuits have no IPO allegations.
Steven Toll, partner at Cohen Milstein Hausfeld and Toll, a law firm
specializing in securities suits, said "Several law firms basically
sued every company that went public between 1998 and 2000 and their
underwriters.But that is more the result of an unusually active IPO
market than any long-term change in strategy."
He added "What you have is a unique situation with the SEC
investigating alleged improper allocation schemes. Underwriters don't
get sued very often. The issuers aren't really the targets here." Mr.
Toll's firm is suing some underwriters on behalf of the companies that
went public rather than on behalf of the investors who bought the
stock.
Curbing Frivolous Securities Suits
In 1995, Congress passed the Private Securities Litigation Reform Act
to cut down on investor cases, but it has had little affect on the
number of investor lawsuits filed, the Austin American-Statesman
recently reported.
"Early on, it looked like that was happening," said Alan Bromberg, a
professor of securities law at Southern Methodist University's Dedman
School of Law. "But now they seem to be creeping up. I'm not sure the
courts are more receptive, though. The general attitude is still
pretty negative on class actions. The lawyers are getting more
creative and diligent, but there doesn't seem to be great new sweep in
class victories."
He added he was not convinced most suits will succeed. "I'm not sure
there's a whole lot of substance in them. A lot depends on what the
SEC concludes. They haven't fared well in the courts yet. We haven't
seen the courts saying, `We'll let you go to trial or even let you go
to discovery.'"
Lawyers are watching closely as federal courts across the country
interpret the 1995 federal law aimed at defining rules and setting
standards for class actions. After the Ninth U.S. Circuit Court of
Appeals in San Francisco set a tough precedent for investor plaintiffs
in class actions, many eyes turned to the Fifth Circuit Court of
Appeals in New Orleans, which oversees Texas. The court came in with
two decisions in 2001, which set standards as to:
(1) when a company's misstatements constitute market fraud; and
(2) what qualifies an investor to lead a class action.
"It was a pretty balanced, middle-of-the-road view," said Paul
Bessette, a partner who heads the securities-litigation practice in the
Austin, Texas office of Brobeck Phleger & Harrison, a San Francisco-
based firm, whose specialties include defending companies in securities
litigation. "They haven't taken the Ninth Circuit's view, which is
very strict."
The Fifth Circuit, however, did set ground rules about company
statements and stock prices in the 1998 case of Nathenson v. Zonagen
Inc., filed in Federal District Court in Houston. If the stock price
did not move after a company spoke, then the company cannot be sued
later for fraud on the market even if those statements were incorrect,
the Court ruled.
The Fifth Circuit also took a tough stand on investor lawsuits in
Berger v. Compaq Computer Corporation, also a 1998 case. The Court
overturned a class certification because of questions about whether an
investor chosen to represent a class of plaintiffs was able and willing
to take an active role to "control and direct the suit" and protect the
interests of the class. Compaq had challenged the qualifications of
the lead plaintiffs who could not describe in depositions why they were
suing or what Compaq executives had done that was wrong.
The Compaq case is one of a series of recent rulings that legal experts
say indicates a greater skepticism toward securities class actions.
"You put those (rulings) together, and the Fifth Circuit is coming
around to the number of these cases being filed and realizing the
reform act and class certification are meant to be gatekeepers designed
to weed out the weak cases," said Mr. Bessette.
*********
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., Trenton, New Jersey, and
Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima
Antonio and Lyndsey Resnick, Editors.
Copyright 2002. All rights reserved. ISSN 1525-2272.
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