/raid1/www/Hosts/bankrupt/CAR_Public/020122.mbx
C L A S S A C T I O N R E P O R T E R
Tuesday, January 22, 2002, Vol. 4, No. 15
Headlines
ACCLAIM ENTERTAINMENT: CO Court's Dismissal Decision Still Pending
CREDIT CARDS: Appeals Court Upholds Certification of Retailers' Suit
CREDIT CARDS: Faces Two Suits Over "Unlawful" Currency Conversion Fee
CREDIT CARD: Companies Face Several Suits Over "Illegal" Conversion Fee
FLORIDA: Judge Certifies Homeowners' Suit V. Canker Eradication Program
SEARS ROEBUCK: Kaplan Fox Files Suit For Labor And Wage Act Violations
SERVICE CORPORATION: Court To Supervise Operations, Preserve Evidence
UNION ACCEPTANCE: Faces Discrimination Suit For Race-Based Premiums
Securities Fraud
ACLN LTD.: Goodkind Labaton Commences Securities Suit in S.D. New York
CENTRA SOFTWARE: Denies Allegations In Securities Suit In N.D. CA
DAL-TILE INTERNATIONAL: Sued For Agreeing To Mohawk Industries Merger
CORNING INC.: Hoffman Edelson Lodges Securities Suit in W.D. New York
ENRON CORPORATION: TX Court To Appoint Lead Plaintiff in States' Suit
ENRON CORPORATION: Gottesdiener Firm Reveals "Town Hall" Transcript
HOMESTORE.COM: Gold Bennett Lodges Securities Suit in C.D. California
IMCLONE SYSTEMS: Goodkind Labaton Initiates Securities Suit in S.D. NY
IMCLONE SYSTEMS: Marc Henzel Commences Securities Suit in S.D. New York
IMCLONE SYSTEMS: Rabin Peckel Commences Securities Suit in S.D. NY
INFONET SERVICES: Labels C.D. CA Securities Fraud Suit "Without Merit"
INFONET SERVICES: Schiffrin Barroway Files Securities Suit in C.D. CA
INFONET SERVICES: Cauley Geller Commences Securities Suit in C.D. CA
MCLEOD USA: Weiss Yourman Commences Securities Fraud Suit in N.D. Iowa
MCLEOD USA: Schiffrin Barroway Initiates Securities Suit in N.D. Iowa
MCLEOD USA: Bernstein Liebhard Commences Securities Suit in N.D. Iowa
SECURITY CAPITAL: Settles Seven Securities Suits Pending in Tennessee
SUPREMA SPECIALTIES: Berger Montague Files Securities Fraud Suit in NJ
VAN WAGONER: Finkelstein Thompson Initiates Securities Suit in E.D. WI
XO COMMUNICATIONS: Securities Fraud Suits Will Spark "Vigorous" Defense
*********
ACCLAIM ENTERTAINMENT: CO Court's Dismissal Decision Still Pending
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Acclaim Entertainment, Inc. filed a motion to dismiss the class action
pending in the US District Court for the District of Colorado against
the Company, and other companies in the entertainment industry, on
behalf of all persons killed or injured by the shootings which occurred
at Columbine High School on April 20, 1999.
The Company is a named defendant in the action along with more than ten
other publishers of computer and video games. The suit alleges that the
video game defendants negligently caused injury to the plaintiffs as a
result of their distribution of unidentified "violent" video games,
which allegedly induced two minors to kill a teacher related to the
plaintiff and to kill or harm their high school classmates.
The Company filed a motion to dismiss this action on July 9, 2001. It
said it intends to defend this action vigorously.
CREDIT CARDS: Appeals Court Upholds Certification of Retailers' Suit
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The Second Circuit Court of Appeals upheld a New York federal court's
decision granting class certification to a consolidated suit brought by
several US merchants against credit card giants Mastercard
International and Visa USA, Inc. alleging violations of federal
antitrust laws.
A number of US merchants, including Wal-Mart Stores, Inc., Sears
Roebuck and Co., Inc., The Limited, Inc. and Safeway, Inc., commenced
the suits in October 1996, challenging certain aspects of the payment
card industry in the United States District Court for the Eastern
District of New York.
The suit challenges MasterCard's "Honor All Cards| rule (and a similar
Visa rule), which ensures universal acceptance for consumers by
requiring merchants who accept MasterCard cards to accept for payment
every validly presented MasterCard card. The suit claims that both
Companies unlawfully tied acceptance of debit cards to acceptance of
credit cards. In essence, the merchants desire the ability to reject
off-line, signature-based debit transactions such as MasterCard card
transactions, in favor of other payment forms, including on-line, PIN-
based debit transactions such as Maestro or regional ATM network
transactions which generally impose lower transaction costs for
merchants.
The suit also claims that both Companies have conspired to monopolize
what they characterize as the point-of-sale debit card market, thereby
suppressing the growth of regional networks such as ATM payment
systems. Plaintiffs allege that the plaintiff class has been forced
to pay unlawfully high prices for debit and credit card transactions as
a result of the alleged tying arrangement and monopolization practices.
There are related consumer class actions pending in two state courts
that have been stayed pending developments in this matter.
In February 2000, the District Court granted the plaintiffs' motion
for class certification. Both Companies subsequently appealed the
decision to the Second Circuit Court of Appeals. In October 2001, a
three-judge panel affirmed the lower court decision by a two-to-one
majority.
Both Companies intend to file a petition for a writ of certiorari to
the US Supreme Court by early March 2002. Motions seeking summary
judgment have been filed by both sides and fully briefed in the
district court. No argument date for summary judgment and no trial date
has been set.
CREDIT CARDS: Faces Two Suits Over "Unlawful" Currency Conversion Fee
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MasterCard International, Inc., together with Visa USA, Inc. and Visa
International Corporation, are defendants in two lawsuits that allege
that they wrongfully imposed an asserted one percent currency
conversion "fee" on every credit card transaction by US MasterCard and
Visa cardholders involving the purchase of goods or services.
The first of these suits was commenced in February 2000, in the
Superior Court of California, on behalf of the general public. The
second action was commenced in January 2001 in the Supreme Court of the
State of New York.
Both suits claim that the alleged "fee" is "unlawful" and grossly
exceeds any costs the defendants might incur in connection with
currency conversions relating to credit card purchase transactions made
in foreign countries and is not properly disclosed to cardholders.
The plaintiffs seek to prevent defendants from continuing to engage
in, use or employ the alleged practice of charging and collecting the
asserted one percent currency conversion "fee" and from charging any
type of purported currency conversion "fee" without providing a clear,
obvious and comprehensive notice that a fee will be charged. The
plaintiffs also request an order:
(1) requiring defendants to fund a corrective advertising
campaign; and
(2) awarding restitution of the monies allegedly wrongfully
acquired by imposing the purported currency conversion "fee."
The suits assert that, during the four-year period that preceded the
respective lawsuits, MasterCard collected approximately $200 million as
a result of allegedly imposing the "fee", an allegation which
MasterCard denies.
CREDIT CARD: Companies Face Several Suits Over "Illegal" Conversion Fee
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Major credit card companies face a rash of class actions in various
federal courts alleging violations of federal antitrust laws and the
Truth-In-Lending act over the implementation of the asserted one
percent currency conversion "fee." The suits name as defendants:
(1) MasterCard International, Inc.,
(2) Visa USA, Inc.,
(3) Visa International Corporation,
(4) Citibank (South Dakota), NA,
(5) Citibank (Nevada), NA,
(6) Chase Manhattan Bank USA, NA and
(7) Bank of America, NA (USA), and
(8) Diners Club
Seven of the purported class actions were brought in the United States
District Court for the Eastern District of Pennsylvania in 2001. Five
other purported class actions were brought in the United States
District Court for the Northern District of California. Another five
purported class actions were brought in the United States District
Court for the Southern District of New York.
The plaintiffs seek treble damages for an alleged conspiracy to fix and
maintain prices in violation of the Sherman Antitrust Act. The
complaints allege that the Company's system of dual governance inhibits
competition between them and provides each with the ability and
incentive to collude and fix the asserted currency conversion "fee" in
violation of antitrust laws.
Pursuant to motions to the Judicial Panel on Multidistrict Litigation
and subsequent notices of tag-along rights, these actions were
centralized in the United States District Court for the Southern
District of New York (Pauley, J.) for coordinated or consolidated
pretrial proceedings. Judge Pauley has directed the plaintiffs to file
a consolidated amended complaint.
In its filing with the Securities and Exchange Commission, Mastercard
denied the allegations but said that it is not currently possible to
estimate the impact that the ultimate resolution of theses matters will
have on its results of operations or financial position.
FLORIDA: Judge Certifies Homeowners' Suit V. Canker Eradication Program
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Judge J. Leonard Fleet certified as a class action a Florida
homeowners' suit, challenging the State's citrus canker eradication
program that has destroyed some 333,000 healthy trees in the Miami
Area, according to an Associated Press report.
Judge Fleet certified the lawsuit, which was filed after the State cut
down trees to stop the spread of "canker," a bacteria that causes brown
blemishes on fruit and can cause it to drop prematurely from trees.
The ruling allows about 100,000 homeowners from the Broward and Miami-
Dade counties to join the suit. Robert Gilbert, attorney for the
plaintiffs told Associated Press that homeowners who had healthy trees
cut down are now part of the suit. He says, "This is a very big step
in the journey.These homeowners' rights were violated when the state
destroyed their trees and refused to pay the compensation equal to
replacement."
Attorneys for the State Department of Agriculture said they will appeal
Judge Fleet's ruling. State attorney Wesley Parsons also told
Associated Press that the state ".is simply trying to remove a
nuisance.These trees may look healthy, but they need to be removed now
before the disease spreads."
SEARS ROEBUCK: Kaplan Fox Files Suit For Labor And Wage Act Violations
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Kaplan Fox and Kilsheimer LLP initiated a securities class action
against Sears & Roebuck and Co. (NYSE:S) in the United States District
Court for the District of New Jersey, on behalf of all current Sears
Product Repair Service Associates nationwide, alleging violations of
the Federal Fair Labor Standards Act and the Wage and Hour Law of the
State of New Jersey.
Specifically, the suit alleges that the Company illegally requires its
Product Repair Service Associates to commence work without compensation
well before the beginning and after the end of their scheduled shifts.
Before the start of the paid workday, the company requires employees to
log onto computers, and load, store and transport repair parts and
equipment to various locations for its benefit. After the end of the
paid workday, the Company requires its Product Repair Service
Associates to keep and transmit to it, payments they have received from
customers. In addition, after the end of the workday, employees are
required to store and transport repair parts and equipment. The Company
allegedly began the illegal practices as part of a nationwide change in
policy starting in November 2001.
For more information, contact Frederic Fox, Laurence D. King or Linda
Fong by Mail: 805 Third Avenue, 22nd Floor New York NY 10022 or 601
Montgomery Street, San Francisco CA 94111 by Phone: 212-687-1980 or
415-772-4700 or by E-mail: mail@kaplanfox.com
SERVICE CORPORATION: Court To Supervise Operations, Preserve Evidence
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Service Corporation, International, the owner of the two Menorah
Gardens cemeteries in Florida accused of grave desecrations, agreed to
let a federal court supervise their operations to preserve evidence for
a class action suit, according to an Associated Press report.
The suit was commenced last month against the Menorah Gardens
cemeteries in Palm Beach and Broward counties, accusing the cemeteries
of dumping remains to make space for more graves and placing bodies in
the woods. The suit alleges bodies were buried in the wrong plots, and
burial vaults were opened and desecrated.
Earlier, a forensic expert had identified a piece of bone found in the
woods behind the Palm Beach cemetery as human bone. Earlier the
Company contended the bones belonged to animals. The Company has
denied claims that it may have cleaned up the wooded area and destroyed
evidence.
Company attorney, Barry Davidson told Associated Press, "We had no
trouble agreeing that the evidence should be preserved." Company
officials met with state regulators earlier this month and promised to
re-map the cemeteries, freeze sales in some areas and contact all
family members of people buried there.
UNION ACCEPTANCE: Faces Discrimination Suit For Race-Based Premiums
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Union Acceptance Corporation faces two federal lawsuits in the US
District Court in Indianapolis, accusing the Company of racial
discrimination in evaluating applications for loans on cars, the
Associated Press reported.
The suits, filed on behalf of thousands of Hispanic and African-
American customers, accused the auto loan company of charging overly
high interests for the two minorities. According to Associated Press,
the Company allegedly evaluated customers' credit histories and other
risk-related factors and then set risk-related interest rates at which
it would buy the loans.
Last year, the Company financed $1.6 billion in car loans, with many
loans originating from states with large minority populations, such as
California, the lawsuits noted. The suit further alleges that the
Company secretly encouraged dealers to set the interest rates even
higher.
One lawsuit states, "This finance charge markup system, through which
the dealer receives a kickback of profits from the artificially high
rate of interest, is a predatory pricing scheme which has resulted and
continues to result in unlawful racial discrimination against
Hispanics," according to an Associated Press report.
The Company has not released an official statement on the suits, but in
a report submitted to federal authorities, the Company asserts that
dealers uniformly set interest rates an average of 0.9 percent higher
than its risk-related rate.
Securities Fraud
ACLN LTD.: Goodkind Labaton Commences Securities Suit in S.D. New York
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Goodkind Labaton Rudoff & Sucharow LLP initiated a securities class
action in the United States District Court for the Southern District of
New York on behalf of all persons and entities who acquired the common
stock of ACLN Ltd. (NYSE:ASW) during the period of June 29, 2000 to
December 20, 2001 inclusive against the Company and chairman Joseph
Bisschops.
The suit charges defendants with violations of Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 and Rule 10b(5) promulgated
thereunder. The suit alleges that during the class period, the
defendants issued a series of material misrepresentations to the market
in press releases and SEC filings thereby artificially inflating the
price of the Company's securities.
Specifically, the complaint charges that the Company omitted to inform
investors that it was paying millions of dollars to another company
owned and controlled by Mr. Bisschops. In addition the complaint
charges that defendants misrepresented the Company's selling, general
and administrative expenses.
On December 20, 2001, TheStreet.com published an article detailing the
allegedly false and misleading statements made by the defendants in its
public disclosures. Following publication of the article, the price of
Company shares fell 64%.
For more information, contact Emily Komlossy or Henry Young by Phone:
212-907-0700 by E-mail: ekomlossy@glrslaw.com or hyoung@glrslaw.com or
visit the firm's Website: http://www.glrslaw.com
CENTRA SOFTWARE: Denies Allegations In Securities Suit In N.D. CA
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Centra Software, Inc. will mount a vigorous defense to a securities
class action pending in the United States District Court for the
Northern District of California against the Company, subsidiary
SmartForce USA, and certain of its former and current officers and
directors, alleging violations of the federal securities laws.
The suit alleges violations of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder. The suit alleges that
the Company misrepresented or omitted to state material facts regarding
its business, financial condition and prospects in order to
artificially inflate and maintain the price of our American Depositary
Shares (ADSs), and misrepresented or omitted to state material facts in
its registration statement and prospectus issued in connection with its
merger with Forefront, which also is alleged to have artificially
inflated the price of the Company's ADSs.
The Company believes that this action is without merit. It also states
that an adverse resolution of this matter could significantly and
negatively impact its financial position and results of operations.
DAL-TILE INTERNATIONAL: Sued For Agreeing To Mohawk Industries Merger
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Dal-tile International, Inc. faces a securities class action filed by
its stockholders in the 162nd Judicial District Court, Dallas County
Texas relating to its merger with Mohawk Industries, Inc.
The suit names as defendants, the Company and:
(1) Martin C. Murrer,
(2) John F. Fiedler,
(3) Norman E. Wells, Jr.,
(4) Jacques R. Sardas,
(5) Charles J. Pilliod, Jr.,
(6) Douglas D. Danforth and
(7) Vincent A. Mai
The suit alleges that the defendants breached their fiduciary duties by
agreeing to the merger, and seeks injunctive relief and costs and
disbursements of the action, including attorneys' and experts' fees.
In a filing with the Securities and Exchange Commission, the Company
labels the action "without merit" and vows to vigorously oppose the
litigation.
CORNING INC.: Hoffman Edelson Lodges Securities Suit in W.D. New York
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Hoffman & Edelson, LLC initiated a securities class action on behalf of
purchasers of the common stock or zero coupon convertible debentures of
Corning, Inc. (Nasdaq:GLW) pursuant to a prospectus dated November 3,
2000 in the United States District Court, Western District of New York
against the Company and:
(1) Roger A. Ackerman,
(2) Katherine A. Asbeck and
(3) James B. Flaws
The suit alleges that defendants violated Sections 11, 12(a)(2) and 15
of the Securities Act of 1933 by issuing a 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:
(i) it stated that demand for the Company's products was robust;
(ii) 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
(iii) 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 further details, contact Jerold B. Hoffman by Mail: 45 W. Court
Street, Doylestown, PA 18901 by Phone: 877-537-6532 (toll free) by Fax:
215-230-8735 or by E-mail: jhoffman@hofedlaw.com.
ENRON CORPORATION: TX Court To Appoint Lead Plaintiff in States' Suit
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Several states are joining a class action against energy giant Enron
Corporation, after its collapse wiped out several retirement funds of
public employees such as teachers, firefighters and other public
employees.
A spokesman for Georgia Attorney General, Thurbert Baker said the US
District Court in Houston has yet to decide who will lead the suit.
The Court will choose between Georgia, Ohio, Washington as well as
agencies overseeing pension funds in Florida and New York City, and the
University Pension Fund in California. Other states are weighing
possible legal alternatives to pursue the Company's accounting firm
Arthur Andersen LLP.
Most of the states similarly assert that despite the losses, their
funds remain financially stable. Losses in each state usually
accounted for under 10% of the pension fund value. Still, the states
are intent of pursuing a class action against the Company. "We owe it
to these public servants to get back as much of their money as we
possibly can," Ohio Attorney General Betty Montgomery told Associated
Press.
The Company has not commented on the suit. According to an Associated
Press report, Arthur Andersen said that it retained the Company as a
client, because "it appeared that we had the appropriate people and
processes in place to serve Enron and manage our engagement risks."
ENRON CORPORATION: Gottesdiener Firm Reveals "Town Hall" Transcript
-------------------------------------------------------------------
The Gottesdiener Law Firm released a 10-page transcript of an
electronic town hall meeting Enron Corporation Chairman and CEO Kenneth
Lay held with its employees on September 26, 2001, saying it was "the
clearest evidence yet that Mr. Lay broke faith with his employees."
Eli Gottesdiener filed suit in November against Enron Corporation, top
Enron officials, Arthur Andersen and other defendants in Federal Court
in Houston to recover some $1 billion in the Company employees'
retirement savings.
The meeting was held via the Company intranet on September 26, 2001.
The date is important, Mr. Gottesdiener explained, because it was more
than a month after Enron Vice President Sherron S. Watkins warned Lay
in mid-August, in writing and then in person, that questionable
accounting practices could bring about the Company's downfall and that
she was "incredibly nervous that we will implode in a wave of
accounting scandals."
The transcript of the September 26, 2001 meeting with employees reveals
that Mr. Lay did not disclose that anyone had any concerns about the
Company's finances or financial reporting. To the contrary, the
transcript shows Mr. Lay repeatedly urging employees to view the
stock's then-current $27-a-share purchase price as "an incredible
bargain," "an incredibly cheap stock," and a "great opportunity." The
Company is now in bankruptcy and its stock is selling for less than $1
a share.
In addition, although in the meeting Mr. Lay claimed that "(t)he third
quarter is looking great," "(w)e will hit our numbers," and "(w)e are
continuing to have strong growth in our businesses," just two weeks
later, on October 16, 2001, the Company announced a stunning $618
million third quarter loss, its first in many years, that caught the
financial markets by surprise.
The transcript also reveals an employee, one of Gottesdiener's clients,
specifically questioning Mr. Lay about the Company's use of "special
purpose vehicles," i.e., the offshore, off-balance sheet partnerships
which would later figure prominently in the Company's collapse. This
employee also specifically questioned the Company's use of Arthur
Andersen for these "SPV" transactions in light of SEC fines Andersen
had been forced to pay for its handling of similar matters for Waste
Management, Inc. The employee asked Mr. Lay "to reassure us we have no
such problems here at Enron."
Mr. Lay did so, saying "I can assure you that I or the Board of
Directors would not approve the use of any SPVs or other types of
financial vehicles unless we were convinced both by all of our internal
officers as well as our external auditor and counsel that they were
legal and totally appropriate." He also made additional reference to
"approval" both "internally and externally."
Mr. Gottesdiener points out, however, that Ms. Watkins was an "internal
officer" who, along with some other officers, did not believe the
Company's use of the SPV's was legal or appropriate and specifically
told Lay so just a few weeks earlier. Additionally, Mr. Gottesdiener
noted, Mr. Lay's reference to approval by outside counsel was also
arguably misleading because the limited review he authorized Houston
firm Vinson & Elkins to conduct into Ms. Watkins' contentions was not
complete until October 15th. The same was true, Mr. Gottesdiener
added, with respect to Arthur Andersen which was reportedly taking
another look at the SPV's in the wake of Ms. Watkins' allegations.
"Knowing what he knew about Enron's phony accounting and hidden
losses," Mr. Gottesdiener asks, "how could Mr. Lay in good conscience
repeatedly tell employees, who had their life savings tied up in Enron
stock, that everything was on the up-and-up and that they should buy
even more Enron stock?"
Referring to a recent story reporting that Mr. Lay had sold millions of
dollars of his own stock after receiving Ms. Watkins' warnings, Mr.
Gottesdiener said, "Mr. Lay clearly has a lot of explaining to do."
For more information, contact Eli Gottesdiener by Phone: 202-243-1000
or 202-246-9590 (mobile) or Jamie Diaferia by Phone: 212-787-4588 or
visit the Website: http://www.enronsuit.com
HOMESTORE.COM: Gold Bennett Lodges Securities Suit in C.D. California
---------------------------------------------------------------------
Gold Bennett Cera & Sidener LLP 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 July 20, 2000 through December 21, 2001,
inclusive against the Company and certain of its current or former
officers and directors.
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. Defendants
allegedly misrepresented the Company's revenues and financial in order
to artificially inflate the price of Company stock. Among other things,
the complaint alleges that the Company violated generally accepted
accounting principles (GAAP) and Securities and Exchange Commission
(SEC) rules by improperly recognizing revenues on certain improper
"barter" transactions. These transactions are alleged to have enabled
defendants to materially overstate the Company's reported revenues and
assets.
On December 21, 2001, following the close of the market, the Company
partially admitted that its prior accounting was inaccurate. On January
2, 2002, defendants admitted that the Company's reported 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 the Company's financial results for fiscal year 2000.
On Jan. 7, 2002, the Company filed an 8-K with the SEC which revealed a
significant management shake-up in light of the Company's accounting
scandal, including the resignation of defendant Stuart Wolff, the
Company's former CEO and Chairman.
For further details, contact Wendy Giblin by Mail: 595 Market Street,
Suite 2300, San Francisco, California 94105 by Phone: 800-778-1822 or
415-777-2230 by Fax: 415-777-5189 by E-mail: Homestore@gbcsf.com or
visit the firm's Website: http://www.gbcsf.com
IMCLONE SYSTEMS: Goodkind Labaton Initiates Securities Suit in S.D. NY
----------------------------------------------------------------------
Goodkind Labaton Rudoff & Sucharow LLP commenced a securities class
action in the United States District Court for the Southern District of
New York on behalf of all open market purchasers of the common stock of
ImClone Systems Inc. during the period of November 1, 2001 and January
7, 2002 inclusive, against the Company and executives Dr. Harlan Waksal
and Samuel D. Waksal.
The suit charges the defendants with violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10(b)-5 promulgated thereunder
and Section 20(a) of the Exchange Act of 1934. The Company is
purportedly a biotechnology company focused on developing drugs to
treat cancer.
This action involves false and misleading statements concerning the
completeness and status of an application for approval of a new drug
called Erbitux, which was submitted by ImClone to the Food and Drug
Administration (FDA). The suit alleges that during the class period,
defendants falsely represented that they had assembled and presented to
the FDA the necessary information to allow the FDA to accept the
Company's application for Erbitux. In fact, at the beginning of the
class period, the defendants filed a materially deficient application.
In December 2001, the ImClone announced that the FDA would not accept
the company's application for Erbitux. In response to the FDA's
rejection of the application, the Company misleadingly downplayed the
severity of the problem by issuing additional false and misleading
statements.
Following the FDA's rejection of the Company's application for Erbitux,
and as news of the rejection was disseminated to the market, the
company's share price plummeted below $36 per share on January 7, 2002.
The Company's shares traded as high as $75 during the class period and
the decline of the share price represented a huge financial loss to
investors.
For more information, contact Jonathon M. Plasse, or Peter H. Rachman
By Mail: 100 Park Avenue, 12th Floor New York, New York 10017-5563 by
Phone: 212-907-0700 by E-mail: jplasse@glrslaw.com or
prachman@glrslaw.com or visit the firm's Website:
http://www.glrslaw.com.
IMCLONE SYSTEMS: Marc Henzel Commences Securities Suit in S.D. New York
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The Law Offices of Marc S. Henzel initiated a securities class action
in the United States District Court for the Southern District of New
York against ImClone Systems, Inc. (Nasdaq: IMCL) and two of its
principal officers, on behalf of all purchasers of the Company's common
stock during the period from May 12, 2001 through January 7, 2002.
The suit alleges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making false
and misleading statements regarding the Company's lead cancer drug,
ERBITUX or IMC-C225 and the prospects for near-term approval of that
drug for the treatment of colorectal cancer by the US Food and Drug
Administration (FDA).
Among other things:
(1) defendants repeatedly represented that ERBITUX was a
blockbuster drug that would become "one of the important new
drugs in the history of oncology;"
(2) defendants told investors that ERBITUX would "be on the market
next year" for the treatment of colorectal cancer, and that
they were confident that the drug would be evaluated at the
February 2002 meeting of the FDA Advisory Committee, stating:
"We believe we'll be before the FDA Oncology Drug Advisory
Committee in February and the drug should be approved shortly
thereafter;"
(3) defendants represented that the results of the Company's
clinical trial of ERBITUX in the treatment of patients with
colorectal cancer produced results that exceeded FDA
requirements.
The suit alleges that these statements were materially false and
misleading because, among other things:
(i) contrary to directives to the Company by the FDA, the trial
was not designed to demonstrate that ERBITUX was responsible
for the reported results;
(ii) the clinical trial on which the application was based was
seriously flawed by the protocol violations, and was not
"adequate and well controlled;" and
(iii) the safety database for the trial was incomplete and contained
inconsistencies and discrepancies.
As such, defendants knew or should have known that the FDA would refuse
to file the Company's defective application, which would have a
disastrous effect on the price of the Company's stock.
The suit further alleges that defendants made these false and
misleading statements, in part, in order to convince Bristol-Myers
Squibb Co. to purchase $1 billion of Company stock, of which
approximately $150 million was tendered by Company insiders and to
persuade Bristol-Myers to make an additional $1 billion cash investment
in the Company.
On December 28, 2001, the Company shocked the market by issuing a press
release that disclosed that the FDA had rejected its filing of a
Biologics License Application for ERBITUX. Company shares plummeted
$11.15, or 20%, to $44.10. On January 4, 2002, a publication known as
The Cancer Letter reported that the FDA repeatedly informed ImClone
about the problems with the clinical trials before and during the class
period. After these additional facts were disclosed, the price of the
Company's stock fell further to open on January 7, 2002 at $34.96 per
share.
On January 9, 2002, the Company issued a press release that admitted
that ImClone "may need to conduct new trials of.ERBITUX, potentially
delaying the treatment's launch by months."
For more information, 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.
IMCLONE SYSTEMS: Rabin Peckel Commences Securities Suit in S.D. NY
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Rabin and Peckel LLP initiated a securities class action complaint in
the United States District Court for the Southern District of New York,
on behalf of all persons or entities who purchased ImClone Systems,
Inc. common stock (Nasdaq: IMCL) between May 12, 2001 and January 4,
2002, both dates inclusive against the Company and executives Samuel D.
Waksal, and Harlan W. Waksal.
The suit alleges that defendants violated section 10(b) of the
Securities Exchange Act of 1934 by issuing a series of false and
misleading statements about the efficacy of the Company's new
"blockbuster" drug for the treatment of cancer, Erbitux.
In particular, the complaint alleges that ImClone misled investors as
to the progress of Erbitux's application for FDA approval, representing
that all necessary information to allow the FDA to accept the Company's
application for the drug had been assembled and presented to the FDA.
On December 28, 2001, the Company announced that the FDA would not
accept its application for Erbitux. The suit alleges that as a result
of these false and misleading statements the price of the Company's
common stock was artificially inflated throughout the class period.
For further details, contact Eric Belfi or Maurice Pesso by Mail: 275
Madison Avenue, New York, NY 10016 by Phone: 800-497-8076 or 212-682-
1818 by Fax: 212-682-1892 or by E-mail: email@rabinlaw.com.
INFONET SERVICES: Labels C.D. CA Securities Fraud Suit "Without Merit"
----------------------------------------------------------------------
Infonet Services, Inc. faces securities class actions pending in the
United States District Court, Central District of California, filed on
behalf of purchasers of the Company's securities during the period from
December 16, 1999 through July 31, 2001.
The suit charges the Company and CEO Jose Collazo of failing to
disclose material business problems with its AUCS channel and of
disseminating false and misleading statements regarding:
(1) the demand for and market acceptance of the Company's
products;
(2) the strength of the Company's technologies; and
(3) the Company's competitiveness and trends in our business
The suits assert claims violations of Section 11 of the Securities
Exchange Act of 1933, violations of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The suits
also assert a count against Mr. Collazo for violation of Section
20(a) of the Securities Exchange Act of 1934.
The Company believes that it has meritorious defenses to the suit, but
it is unable at this time, however, to predict the outcome of the
litigation. Infonet is confident that the suit could have a material
adverse effect on its business, financial condition or results of
operations.
INFONET SERVICES: Schiffrin Barroway Files Securities Suit in C.D. CA
---------------------------------------------------------------------
Schiffrin & Barroway, LLP commenced a securities class action in the
United States District Court for the Central District of California on
behalf of all purchasers of the common stock of Infonet Services
Corporation (NYSE: IN) from December 16, 1999 through July 31, 2001,
inclusive.
The suit charges the Company and certain of its officers and directors
with issuing false and misleading statements concerning it business and
financial condition. The suit alleges that during the class period, the
Company saw its stock price soar from its IPO price of $21 per share to
as high as $32.93 per share as the Company misrepresented the true
status of its AT&T-Unisource Communications Services N.V. business,
concealing the fact that:
(1) the Company would be required to migrate the customer before
offering new services, which required, among other things,
reconnecting each customer to a new platform, a time-
consuming, complicated and expensive process;
(2) the complexity of migration (from company "X" to Infonet)
caused massive disruption to the Company's ability to "upsell"
its new products; and
(3) the Company's AUCS business required massive upgrades, both in
its financial data and billing systems, preventing the Company
from billing its customers on a monthly basis and delaying the
recognition of material revenue for 1-1/2 years until the
upgrades could be completed.
The individual defendants knew that disclosure of these problems with
its AUCS business would devastate Infonet's chances of going public
which allowed it to raise $1.1 billion in its December 16, 1999 IPO.
The Company's top executives were determined to conceal the news of the
problems associated with its AUCS business.
As a result of the defendants' false statements/omissions, Company
stock traded at inflated levels during the class period, increasing to
as high as $32.93 on March 3, 2000. Company shares began to fall as
defendants partially revealed the status of the Company's AUCS
business, tumbling to $3.55 on August 1, 2001.
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:
888-299-7706 (toll free) or 610-667-7706 or by E-mail:
info@sbclasslaw.com
INFONET SERVICES: Cauley Geller Commences Securities Suit in C.D. CA
--------------------------------------------------------------------
Cauley Geller Bowman & Coates LLP initiated a securities class action
in the United States District Court for the Central District of
California on behalf of purchasers of Infonet Services Corporation
(NYSE: IN) publicly traded securities during the period between
December 16, 1999 and July 31, 2001, inclusive, including those who
purchased their shares pursuant to the December 16, 1999 Initial Public
Offering (IPO).
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. The suit
alleges that during the class period, the company saw its stock price
soar from its IPO price of $21 per share to as high as $32.93 per share
as Infonet misrepresented the true status of its AT&T-Unisource
Communications Services N.V. (AUCS) business, concealing the fact that:
(1) the Company would be required to migrate the customer before
offering new services, which required, among other things,
reconnecting each customer to a new platform, a time-
consuming, complicated and expensive process;
(2) the complexity of migration (from company "X" to Infonet)
caused massive disruption to the Company's ability to "upsell"
its new products; and
(3) the Company's AUCS business required massive upgrades, both in
its financial data and billing systems, preventing the Company
from billing its customers on a monthly basis and delaying the
recognition of material revenue for 1-1/2 years until the
upgrades could be completed.
The suit alleges that the individual defendants knew that disclosure of
these problems with its AUCS business would devastate the Company's
chances of going public which allowed it to raise $1.1 billion in its
December 16, 1999 IPO. According to the complaint, the Company's top
executives were determined to conceal the news of the problems
associated with its AUCS business.
As a result of the defendants' false statements/omissions, Infonet
stock traded at inflated levels during the class period, increasing to
as high as $32.93 on March 3, 2000. Company shares began to fall as
defendants partially revealed the status of its AUCS business, tumbling
to $3.55 on August 1, 2001.
For more information, contact Jackie Addison, Sue Null or Shelly
Nicholson by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone:
888-551-9944 or by E-mail: info@classlawyer.com
MCLEOD USA: Weiss Yourman Commences Securities Fraud Suit in N.D. Iowa
----------------------------------------------------------------------
Weiss and Yourman initiated a securities class action against
McLeodUSA, Inc. (NASDAQ:MCLD) and certain of its officers and directors
in the United States District Court for the Northern District of Iowa
on behalf of investors who purchased the Company's securities between
January 30, 2001 and December 3, 2001, or received Company shares
following its acquisition of Intelispan.
The suit charges the defendants with violations of the Securities Act
of 1933 and the Securities Exchange Act of 1934. The complaint alleges
that defendants issued a series of materially false and misleading
statements that artificially inflated the stock.
For more information, contact Mark D. Smilow, David C. Katz or James E.
Tullman by Mail: The French Building, 551 Fifth Avenue, Suite 1600, New
York NY 10176 by Phone: 888-593-4771 or 212-682-3025 or by E-mail:
info@wynyc.com
MCLEOD USA: Schiffrin Barroway Initiates Securities Suit in N.D. Iowa
---------------------------------------------------------------------
Schiffrin & Barroway LLP commenced a securities class action in the
United States District Court for the Northern District of Iowa on
behalf of all purchasers of the common stock of McLeodUSA, Inc.
(Nasdaq: MCLD) from January 30, 2001 through December 3, 2001,
inclusive.
The suit charges that defendants violated Sections 11, 12(a)(2) and 15
of the Securities Act of 1933, Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,
by issuing a series of materially false and misleading statements to
the market between January 30, 2001 and December 3, 2001.
The suit alleges that the Company issued a series of materially false
and misleading statements regarding its business, operations and
financial statements that failed to disclose:
(1) that the Company was failing to timely and properly recognize
hundreds of millions of dollars in impairment losses in
connection with certain acquisitions, such as Splitrock
Services, Inc. and Caprock Communications Corp.;
(2) that the Company did not have the funds necessary to complete
its National network and that it would soon have to abandon
its plans to finish the network; and
(3) that the Company was unable to service its substantial debt
and lacked the financial flexibility necessary to avoid a
restructuring.
During the class period, prior to the disclosure of the true facts
about the Company, McLeodUSA purchased Intelispan for $40 million in
Company stock.
For more information, contact Marc A. Topaz or Stuart L. Berman by
Phone: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by
Phone: 888-299-7706 (toll free) or 610-667-7706 or by E-mail:
info@sbclasslaw.com
MCLEOD USA: Bernstein Liebhard Commences Securities Suit in N.D. Iowa
---------------------------------------------------------------------
Bernstein Liebhard and Lifshitz LLP initiated a securities class action
lawsuit on behalf of all persons who acquired McLeodUSA, Inc. (NASDAQ:
MCLD) securities between January 30, 2001 and December 3, 2001,
inclusive in the United States District Court for the Northern District
of Iowa, against the Company and:
(1) Clark McLeod, Chairman and Co-CEO,
(2) Steve Gray, President and Co-CEO and
(3) Chris Davis, Chief Operating and Financial Officer since
August 1, 2001
The suit charges that defendants violated Sections 11, 12(a)(2) and 15
of the Securities Act of 1933, Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,
by issuing a series of materially false and misleading statements to
the market between January 30, 2001 and December 3, 2001.
The suit alleges that the Company issued a series of materially false
and misleading statements regarding its business, operations and
financial statements that failed to disclose:
(i) that the Company was failing to timely and properly recognize
hundreds of millions of dollars in impairment losses in
connection with certain acquisitions, such as Splitrock
Services, Inc. and Caprock Communications Corp.;
(ii) that the Company did not have the funds necessary to complete
its National network and that it would soon have to abandon
its plans to finish the network; and
(iii) that the Company was unable to service its substantial debt
and lacked the financial flexibility necessary to avoid a
restructuring.
During the class period, prior to the disclosure of the true facts
about the Company, McLeodUSA purchased Intelispan for $40 million in
Company stock.
For more information, contact Ms. Linda Flood, Director of Shareholder
Relations by Mail: 10 East 40th Street, New York, New York 10016 by
Phone: 800-217-1522 or 212-779-1414 or by E-mail: MCLD@bernlieb.com or
visit the firm's Website: http://www.bernlieb.com
SECURITY CAPITAL: Settles Seven Securities Suits Pending in Tennessee
---------------------------------------------------------------------
Security Capital Group Incorporated (NYSE: SCZ) and Storage USA, Inc.
(NYSE: SUS) reached an agreement in principle to settle the seven
putative class action lawsuits commenced in November 2001 in the
Chancery Court of Shelby County, Tennessee by shareholders of Storage
USA against each of its directors and the Company. The suit was filed
in connection with the Company's announced acquisition of Storage USA.
As a condition to the settlement, Security Capital agreed to increase
the amount per share that the shareholders of Storage USA would receive
in the transaction from $42.00 to $42.50. Holders of units of limited
partnership in Storage USA's operating partnership, SUSA Partnership,
LP, would also be entitled to receive the increased consideration in
the transaction with respect to each unit held by them, if they do not
elect to continue as limited partners of the operating partnership.
The settlement is subject to a number of conditions, including court
approval and consummation of the acquisition by Security Capital.
However, regardless of whether court approval of the settlement shall
have been obtained prior to the consummation of the acquisition, the
increased price to be paid by the Company will apply if the acquisition
is consummated.
Other than the increase in the per-share consideration to be received
by Storage USA shareholders and the operating partnership's limited
partners in the transaction with the Company, the other terms of the
agreement governing that transaction remain unchanged, including
Storage USA's right to seek alternative superior transactions during a
solicitation period ending on January 19, 2002.
For more information, contact Frances W. Josephic of Security Capital
Group Incorporated by Phone: 800-988-4304 or visit the firm's Website:
http://www.securitycapital.com
SUPREMA SPECIALTIES: Berger Montague Files Securities Fraud Suit in NJ
----------------------------------------------------------------------
Berger & Montague PC commenced a securities class action against
Suprema Specialties, Inc. (Nasdaq: CHEZ) and its principal officers and
directors in the United States District Court for the District of New
Jersey on behalf of all purchasers of Company securities during the
period from August 15, 2001 through and including December 21, 2001,
inclusive.
The suit charges defendants with violations of Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. Additionally, the suit alleges a violation of Section 11 of
the Securities Act of 1933, stating that throughout the class period
defendants knowingly or recklessly disseminated materially false and
misleading statements regarding the Company's financial condition.
In December 2001 Suprema announced the resignation of defendant
Venechanos, its Chief Financial Officer and disclosed that it had
launched an investigation into its prior reported financial results. In
response to this report the Nasdaq halted trading of the Company's
stock.
These statements, among others, are alleged to have been materially
deceptive:
(1) August 15, 2001, press release announcing the Company's 2001
year end financial results;
(2) 2001 Form 10-K filed with the SEC on September 28, 2001;
(3) the Company's registration statement filed with the SEC on
November 6, 2001 for the public offering of over 4 million
shares of stock at $12.75 of which 500,000 shares were sold
by, among others, Company insiders Mr. Cocchiola and Mr.
Venechanos;
(4) the Company's Form 10-Q for its first quarter ended September
30, 2001.
In each of its SEC filing, the Company assured the public that its
financials were in conformity with generally accepted accounting
principles (GAAP). The complaint alleges that the Company's financial
statements were not in conformity with GAAP and that defendants'
misrepresentations caused the price of the Company's common stock to be
artificially inflated throughout the class period.
For more information, contact Sherrie R. Savett, Douglas M. Risen, or
Kimberly A. Walker by Mail: 1622 Locust Street, Philadelphia, PA 19103
by Phone: 888-891-2289 or 215-875-3000 by Fax: 215-875-5715 by E-mail:
InvestorProtect@bm.net or visit the firm's Website: http://www.bm.net
VAN WAGONER: Finkelstein Thompson Initiates Securities Suit in E.D. WI
----------------------------------------------------------------------
Finkelstein Thompson & Loughran lodged a securities class action in the
United States District Court for the Eastern District of Wisconsin on
behalf of purchasers of the securities of Van Wagoner Technology
(Nasdaq: VWTKX), Mid-Cap Growth (Nasdaq: VWMCX), Post Venture (Nasdaq:
VWPVX), and the Micro-Cap Growth (Nasdaq: VWMCX) Funds (The Funds).
The suit alleges that the Funds issued false and misleading statements
concerning their net asset value (NAV) and performance, in violation of
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The suit
further states that the Funds issued false and misleading statements to
the public about Ernst & Young, LLP failing to follow generally
accepted accounting practices and generally accepted auditing standards
by specifically approving the changes in net assets utilized by the
Funds between the end of 1999 and the end of 2000.
These statements were materially false and misleading because:
(1) the NAV of the Funds were materially overstated as the Funds
had overvalued a material portion of its holdings of certain
private placement investments;
(2) the Funds' performance was materially overstated as those
figures were based on its NAV, which figures were materially
overstated; and
(3) the risk of investing in the Funds were materially understated
as it had failed to disclose the true risk attendant to its
portfolio securities and specifically the private placement
investments.
Accordingly, defendants' statements about the risks associated with
investing in the Funds were not meaningful because they failed to
advise investors that they were materially overstating their NAV.
For more information, contact Andrew J. Morganti by Phone: 202-337-8000
by E-mail: ajm@ftllaw.com or visit the firm's Website:
http://www.ftllaw.com
XO COMMUNICATIONS: Securities Fraud Suits Will Spark "Vigorous" Defense
-----------------------------------------------------------------------
XO Communications, Inc. labeled "without merit" the class actions filed
in the Federal Court in the Eastern District of Virginia and in New
York State courts, alleging violations of federal securities laws.
The suits alleges the Company and several of its officers 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 its
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. The state court actions, and some of
the federal actions, also allege that the defendants breached certain
fiduciary duties in connection with the proposed investments by
Forstmann Little and TELMEX.
The Company intends to vigorously contest these suits.
*********
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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