/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/020129.mbx C L A S S A C T I O N R E P O R T E R Tuesday, January 29, 2002, Vol. 4, No. 20 Headlines AAMES FINANCIAL: Sued By Employees For Labor Act Violations in CA Court AAMES FINANCIAL: Consumers File Suit For RESPA Violations in CA Court BARNES THORNBURG: Judge Approves Settlement Of Firstmark Pyramid Suit BLOCKBUSTER INC.: Canadian Consumers Sue Over "Exorbitant" Late Fees CALIFORNIA: Disabled Residents File Suit To Live In Community Homes CALIFORNIA: Cities Face Suit Seeking Emergency Shelter For Homeless DAQING LIANYI: Chinese High Court Allows Filing of Securities Suit DIAL CORPORATION: EEOC Sues For Sexual Harassment of Female Workers EQUITABLE LIFE: Former Policyholders Mull Suit Over Lost Policy Value ILLINOIS: Residents To Sue After "Rain Blocker" System Causes Floods MICROSOFT CORPORATION: Judge Allows Parties To Present Revised Pact MILBERG WEISS: Confirms CA Jury Probe over Plaintiff Solicitations NEW YORK: Scott Scott Commences Suit V. Port Jefferson Illegal Scheme SLAVE LABOR: Slave Labor Lawsuit V. Japanese Cement Company Halted SOUTH CAROLINA: Retirees Sue Challenging System's Leave Calculation SOUTH CAROLINA: Federal Retirees Challenge Taxation Policy of Benefits TEXAS: Ranked #46 Out of 50 in Legal Study About Litigation Fairness WIRELESS COMPANIES: 22 Cities File Suit Over Taxing Wireless Phones WISCONSIN: Parties In Supermax Inmates' Suit Agree on Settlement Terms Securities Fraud APPLIED MICRO: Faces Multiple Securities Suits in California Courts CROWN CENTRAL: Stockholders File Suit in VA Relating To Rosemore Merger DIGITAL ISLAND: Chimicles Tikellis Commences Securities Suit in DE FOCUS ENHANCEMENTS: To Settle Securities Fraud Suit in Massachusetts GLOBIX CORPORATION: Hoffman Edelson Lodges Securities Suit in S.D. NY IMCLONE SYSTEMS: Faces Probe From SEC, Justice Department Over Erbitux IMCLONE SYSTEMS: Spector Roseman Commences Securities Suit in S.D. NY KMART CORPORATION: Commencing Probe After Letter Questions Practices MBNA CORPORATION: NY Court Approves $18M Fraud Suit Settlement MCLEOD USA: Cohen Milstein Commences Securities Suit in N.D. California PDI INC.: Milberg Weiss Commences Securities Fraud Suit in New Jersey RHYTHMS NETCONNECTIONS: Wolf Haldenstein Lodges Securities Suit in CO TIDEL TECHNOLOGIES: Will Vigorously Oppose Securities Suit in S.D. TX WORLD GAMING: $1.5M Pact Awaiting Delaware Federal Court's Approval ********* AAMES FINANCIAL: Sued By Employees For Labor Act Violations in CA Court ----------------------------------------------------------------------- Aames Financial Corporation faces a putative class action in the United States District Court of California filed by former and current loan executives employed by the Company alleging violations of certain labor acts. The suit names the Company and subsidiary Aames Funding Corporation as defendants. It alleges that the plaintiffs, during their employment, worked in excess of 8 hours per day or 40 hours per week, but the Company willfully failed to pay overtime in violation of the federal Fair Labor Standards Act and, with respect to loan executives employed in California, in violation of the California Labor Code and Business & Professional Code 17200. The Company denied the allegations in the suit, and asserted various affirmative defenses in September 2001. No trial date has been set. AAMES FINANCIAL: Consumers File Suit For RESPA Violations in CA Court --------------------------------------------------------------------- Aames Financial Corporation faces a class action initially commenced in April 2000 in the Los Angeles County Superior Court against the Company and subsidiary, Aames Home Loan, on behalf of all persons who applied for or obtained loans from the Company during the preceding four years. The suit alleges various state law violations, and their contention that the Company routinely "upcharges" third party fees and under- discloses annual prepayment rates. In September 2001, the plaintiffs amended their complaint to assert claims based upon the payment of a yield-spread premium to their broker. The amended suit contends that such yield spread premium payments constitute kickbacks and/or illegal referrals under Real Estate Settlement Procedures Act (RESPA). The Company has removed the action to the US District Court for the Central District of California and has answered the amended complaint, asserting various affirmative defenses. No trial date has been set. BARNES THORNBURG: Judge Approves Settlement Of Firstmark Pyramid Suit --------------------------------------------------------------------- US District Judge Sarah Evans Barker recently approved the settlement proposed by Indianapolis-based law firm Barnes and Thornburg to settle a class action filed by as many as 2,500 elderly investors who lost money when Firstmark Corporation, a financial services holding company, declared bankruptcy in 1988, Associated Press recently reported. Barnes and Thornburg was the last of 12 of the Company's advisers or principals to offer a settlement over the estimated $57 million in losses that investors suffered. Under the settlement, the law firm will pay nearly $4.6 million to as many as 2,500 elderly investors. The settlement, combined with others reached over the years, brings the total amount of money recovered on behalf of the Company's investors to more than $25 million. The suit alleges that the defendants contributed to an investment scam, when Firstmark allegedly paid earlier investors with money from new investors until the entire operation collapsed. The now-bankrupt company was accused of concealing its financial condition by increasing the margin between the the quantity of notes sold to investors and those redeemed by investors. Investors ultimately are expected to receive about 30 percent of the money they lost, with the rest of the recovered cash going toward attorney fees. One-third of the 2500 elderly investors who lost money died as the case dragged through the courts. "I'm glad it's over," investor Virginia Brouwer, a widow who has led the legal battle, told The Indianapolis Star. "I think we were all beginning to lose our stamina, and this was the best we could do." Judge Barker praised Ms. Brouwer efforts in the case and awarded her $50,000 on top of what other investors would share from the Barnes & Thornburg settlement. In all, the suit recovered about $11.7 million for investors, a third of which will be used to pay attorney fees. Another $14 million has been recovered through bankruptcy proceedings and the settlement of a separate lawsuit. Attorneys for Barnes & Thornburg declined to answer questions about the settlement, but said they stood by a written statement the firm issued in November. The statement said the lawsuit's allegations of fraud and deception have no merit. "However, given the time and expense already expended in the Firstmark case and the prospect that the litigation could continue for another decade, it make sense to bring this to an end," the statement read. Barnes and Thornburg and another defendant, the investment house Raffensperger, Hughes, fought all the way to the US Supreme Court to get Firstmark investors' legal claims dismissed. However, the Court let stand an appeals court ruling in June 2000. The investment house reached a $1.15 million settlement with the investors last June. BLOCKBUSTER INC.: Canadian Consumers Sue Over "Exorbitant" Late Fees -------------------------------------------------------------------- The Canada branch of rental chain Blockbuster, Inc. faces several class actions in Quebec, Ontario and British Columbia, alleging the Company charged exorbitant and unlawful late fees on video and DVD rentals. The suits follow several class actions commenced in the United States over late fees. The US Company has agreed to settle for $450 million these suits involving 40-million American customers, but the settlement has yet to gain a Texas court's final approval. Lawyers filing the Canadian suits say the Company's late fees in Canada are similarly excessive as those mentioned in the US suits. Gordon Kugler, a Montreal lawyer who filed one of the suits, told the National Post Online, "The research we've done shows that for all intents and purposes it's the same fee." Blockbuster Canada's late fees are: (1) $5.74 every day a 24-hour rental is overdue; (2) $1.44 for every day a five-day rental is late and (3) 56> a day when a seven-day rental is overdue Mr. Kugler said he hopes the outcome of the US suits will also translate into a positive outcome for the suits, which label's Blockbuster Canada's late fees "exorbitant" and "abusive" and says they violate various Canadian laws, including Quebec's Consumer Protection Act. A Blockbuster spokesman in Dallas told the National Post Online that the company's late fees and rental policies are "very similar" in Canada and the United States, but dismissed the new actions as unfounded. "We don't believe these claims are of merit and we're going to vigorously defend our company," said Randy Hargrove. No settlement talks are scheduled. The Company has already filed a notice of intent to defend itself in the Ontario class-action motion, but has yet to do so in the Quebec action. CALIFORNIA: Disabled Residents File Suit To Live In Community Homes ------------------------------------------------------------------- The State of California faces a class action filed in the Alameda County Superior Court by a group of developmentally disabled residents, seeking that they be allowed to live in community homes instead of institutions and alleging violations of Americans with Disabilities Act. The suit was filed on behalf of thousands of disabled people who were allegedly "isolated and unhappy in institutions," according to the San Francisco Chronicle. The suit claims that state officials are violating the Americans with Disabilities Act and other laws by keeping the disabled from being part of their communities. The suit also names as defendants: (1) the State Department of Developmental Services, (2) other state agencies and (3) the 21 private, nonprofit agencies, known as regional centers, that contract with the state to provide care for people with disabilities including cerebral palsy, mental retardation, epilepsy and autism State officials told the San Francisco Chronicle that they were reviewing the suit and had no comment. Bob Baldo, Executive Director of Sacramento's Association of Regional Center Agencies, asserted that the regional centers are serving the disabled well. He emphasizes "I think the data does tend to support the idea that people who live in community settings are better off.But overall the regional centers have done a really excellent job in trying to provide resources in an ever- expanding population that we need to serve." However, the plaintiffs believe that the State is not moving fast enough, the San Francisco Chronicle reports. In a news conference at the Oakland Marriott Hotel, Ellen Goldblatt, attorney for Protection and Advocacy Inc. of Oakland, said "Our clients' needs are urgent.California has not moved forward to reverse the trend of unnecessary institutionalization." East Palo Alto lawyer Michael Pyle, another attorney for the plaintiffs, said he wants the suit certified as a class action because he believes that more than 6,000 Californians urgently need community-centered care. "We hope the state will choose to spend money on getting in compliance with the law, rather than spending money on lawyers during years of litigation," Mr. Pyle said. "I look forward to the day that this case is successfully resolved." CALIFORNIA: Cities Face Suit Seeking Emergency Shelter For Homeless ------------------------------------------------------------------- Advocates for the homeless filed a class action against five North County cities in the San Diego Superior Court, alleging that the cities did not provide adequate emergency cold-weather shelters for the homeless, according to a SignOnSanDiego report. The suit names the counties of Carlsbad, San Marcos, Oceanside, Vista, Encinitas and San Diego, and alleges that the counties failed to comply with their own plans for shelters and with state laws that require cities to develop and implement comprehensive housing plans that include emergency shelters. San Diego Attorney Robert Scott Dreher, who has sued cities on behalf of the homeless, filed the suit, asking the Court to: (1) force the cities to implement their general plan housing elements; (2) identify a site for an emergency winter shelter and open one; (3) work cooperatively to address homeless issues in North County; and (4) pay attorney fees The suit states "The County and these five cities have a responsibility under the law to work together toward addressing and remedying this emergency.They've refused to facilitate the opening of a shelter by private agencies or churches." Attorneys for the cities did not issue any comment on the matter, according to SignOnSanDiego, while San Marcos City Attorney Helen Peak said she had not seen Mr. Dreher's lawsuit. DAQING LIANYI: Chinese High Court Allows Filing of Securities Suit ------------------------------------------------------------------ The Harbin Intermediate People's Court in China has accepted the shareholders suit against Shanghai-listed Daqing Lianyi charging the Company with releasing false information. The case is the first of its kind filed since the Supreme People's Court overturned a decision made by courts last September to suspend acceptance of cases involving false information disclosure, according to the China Daily. Company shareholders, Tang Guirong, Ma Ruizhong and Chu Yuming filed the suit against the Company, Shenyin and Wanguo Securities Corporation, Ltd., and a Harbin accounting firm for their roles in the Company's alleged fraudulent actions. Guo Feng, a lawyer with the Beijing-based Zhonglun Law Firm, told China Daily that so far more than 400 shareholders have contacted him, wanting to join in the action against Daqing Lianyi. The Supreme People's Court decision early last week ruled out the possibility of a class action, but instead allowed shareholders to file collective actions in cases involving civil rights violations in the securities market. The China Daily says the court stipulated that only listed companies that have been investigated and punished by the China Securities Regulatory Commission (CSRC) and its branches for fraud in information disclosure can be taken to court. Judge Si Wenjiu, with the Harbin Intermediate People's Court also said other Daqing Lianyi shareholders can contact the Court and enter their names in the action. Mr. Guo expects the hearing for the suit to be conducted on February 12, 2002. He added he is confident about the result of the case, and believed that the victimized shareholders will be compensated. DIAL CORPORATION: EEOC Sues For Sexual Harassment of Female Workers ------------------------------------------------------------------- More than 100 women are prepared to testify about the years-long pattern of sexual harassment in a sweeping lawsuit which the Equal Employment Opportunity Commission filed against the Dial Corporation, The Washington Post reported recently. One of the plaintiffs, Ruby Martinez, a divorced mother of two sons, says, in a recent interview, that she knew she faced rough going at work when she became the first female mechanic at Dial Corporation, a soap factory in suburban Chicago. However, she was not prepared for the hostile reception she received. Almost immediately, she said, her male co-workers reacted angrily. They threatened her, propositioned her, kissed her roughly and even slapped her when she rebuffed their advances, she said. She was subjected to crude practical jokes, including the time a penis, whittled out of pink soap, was placed on her tool box. The message, she recalled, was that the men thought, "If I didn't have that tool, I couldn't be a mechanic." EQUITABLE LIFE: Former Policyholders Mull Suit Over Lost Policy Value --------------------------------------------------------------------- Equitable Life Insurance Company faces a potential class action suit from a group of former policyholders, seeking to regain the money they allegedly lost through deductions the Company made to the value of their policies, according to an Ananova.com report. Around 200 members of the Equitable Late Joiners Action Group (ELJAG) are planning to take the Company to court. ELJAG spokesman Paul Weir says they plan to encourage other former members to join them in bringing a class action against the society. The group, whose members all joined Equitable after September 1998, claim the society knew about its liability to Guaranteed Annuity Rate (GAR) policyholders when it sold them their policies. The former policyholders all left the society at the end of last year to avoid being forced to give up any claims against the Company if the society's compromise scheme was approved by members, Ananova.com reports. An Company spokesman said in a press release, "Our legal advise is that there are no generic GAR related claims.In the interests of continuing members we will defend any court action that we see appropriate." ILLINOIS: Residents To Sue After "Rain Blocker" System Causes Floods -------------------------------------------------------------------- Organizers of Northwest Side residents whose homes flooded during two downpours, said recently they would urge other flood victims to join an existing lawsuit that is seeking thousands of dollars in damages from the City of Chicago for allegedly installing a faulty anti-flooding system, the Chicago Tribune recently reported. Letters will be mailed to about 300 people who have expressed interest in being part of a class-action lawsuit against the city, after their homes flooded during rainstorms on August 2 and August 30 of 2001, when four inches of rain fell on the city in a matter of hours. The City maintains that it had no control over the volume of rain and is not liable under a state statute designed to limit municipal liability. The letter urges residents to contact the law offices of Reinstein & Sherman in Northbrook, which filed a civil lawsuit on September 12 2001, in Cook County Circuit Court on behalf of Ronald Costello, owner of two apartment buildings in north Lakeview that flooded. The lawsuit charges that the "rain blocker" system installed to retard flooding was deficient, and the city should have known it would cause worse flooding. The system uses devices restricting the flow of rainwater into sewer drains to help prevent system overloads. The concept uses city streets to store rainwater during periods of heavy runoff. However, Northwest Side residents contend the system failed, causing rainwater in the street to overflow yards and gush down stairwells or through windows into basements. After a months-long study of the $75 million program last fall, the city removed fewer than 200 of the 210,000 devices from street catch basins, where officials had evidence that they may have contributed to flooding of nearby basements. City attorneys filed a motion in November 2001, to dismiss the lawsuit based on the Tort Immunity Act. Under the Act, the City has to honor a claim only if it has notice of the defect and fails to make timely repairs, said Jennifer Hoyle, a spokeswoman for the City's Law Department. Some legal experts say residents could do an end run around the state statute by claiming that when the rain blocker system caused water to overflow the streets, it used their private property for storm water storage. Using that reasoning, residents could claim the City is liable for the damage, attorney John Hieber said. "It's like if (the City) decided to do something with the street and one of the bulldozers tore up a lawn," said Mr. Hieber, a former assistant US attorney assigned to land condemnation cases, who also worked for the city's corporation counsel. "They would have to repair the lawn." MICROSOFT CORPORATION: Judge Allows Parties To Present Revised Pact ------------------------------------------------------------------- Baltimore Federal Judge J. Frederick Motz stated that he would allow software giant Microsoft Corporation and the group of lawyers that crafted a controversial $1 billion settlement package to bring a revised settlement proposal to the Court. Judge Motz had earlier rejected the settlement to hundreds of private antitrust suits, under which the Company would donate more than $1 billion worth of software, equipment and technology training to the nation's poorest schools. In his ruling, Judge Motz stated the proposal was "critically under-funded" and gave the Company an edge over rival Apple Computer in the market for school computers. The settling lawyers and the Company had pushed the settlement, claiming it was the best way to bridge the "digital divide" between schools. The lawyers who crafted the settlement also said that it was the best way, since plaintiffs in the suits could most likely receive $10 as compensation, if they divided the settlement money among themselves. However, lawyers, educators and rivals like Apple Computer, criticized the settlement, saying it was not enough to punish the Company for overcharging on software and for practicing "anti-competitive" behavior. The settlement also allegedly gave the Company an edge in one of the few sectors where rival Apple Computer still held a traditional edge However, even if Judge Motz rejected the plan, he seemed to accept the proposal's fundamental premise, according to Education Week. Both sides said they would explore the option offered by the judge. Thomas Burt, counsel for the Company, said in a conference call, "The judge's opinion offers a number of different approaches we are thinking about, and we are considering those." MILBERG WEISS: Confirms CA Jury Probe over Plaintiff Solicitations ------------------------------------------------------------------ High-profile law firm Milberg Weiss Bershad Hynes and Lerach confirmed late last week that it is facing a Los Angeles federal grand jury probe regarding the firm's solicitations of plaintiffs in securities class actions. The firm has said it "will cooperate with any government inquiry." An earlier article in the Class Action Reporter stated that the investigation by the US Attorney's office in Los Angeles commenced over claims that it is involved in a scheme to solicit investors and fabricate shareholder plaintiffs in securities suits. The report also revealed that the Attorney's office has issued subpoenas to stockbrokers at major brokerage firms to testify about providing the firm with investor names. In a reflection of the "high stakes" in the case, the firm has retained Washington law firm Williams & Connolly, which represented President Clinton in the Whitewater case and his impeachment trial, and Iran- Contra figure Lt. Col. Oliver North, according to an latimes.com report. The firm has become "a pariah in corporate America", the report continued, by filing hundreds of shareholder suits accusing companies of misleading investors. Presently, it is competing to become lead counsel for shareholders suing failed energy giant Enron Corporation. Its best-known partner, William Lerach, who is based in San Diego, has appeared in court in Houston and on news reports holding what he said were shredded Enron documents. Lerach declined to be interviewed Friday. NEW YORK: Scott Scott Commences Suit V. Port Jefferson Illegal Scheme --------------------------------------------------------------------- Scott & Scott LLC initiated a class action against Port Jefferson County in Long Island and its officials in the United States District Court for the Eastern District of New York for engaging in an "illegal scheme" to fill municipal coffers with an estimated $1.5 million or more in ill-gotten gains. Plaintiff Arthur Heyman was reportedly stopped by an armed constable in Port Jefferson, a seaside village in Suffolk County, Long Island. The constable allegedly gave him a "ticket" for driving an uninspected vehicle, and directed him to appear in the local Municipal Court. Mr. Heyman initially considered contesting the ticket but instead paid a fine, not knowing that the constable had no right to stop him, let alone give him a traffic citation that wasn't worth the paper it was printed on. The suit is filed on behalf of tens of thousands of motorists who endured the same fate while driving through Port Jefferson, and seeks the appointment of a monitor to ensure that Port Jefferson constables stop impersonating police officers. "These so-called officers are untrained, unsupervised and out of control," says Jonathan Scott of th Scott & Scott, attorney for Heyman and other class action plaintiffs. "What's worse is that officials know what they're doing is illegal since two appellate courts already have ruled that Port Jefferson can't create its own police force." Attorney Scott says two Port Jefferson mayors, numerous village trustees and more than 30 constables have infringed on the jurisdiction of the Suffolk County Police Department. He added traffic and law enforcement falls under the watch of county police. The suit alleges that local officials attempted to mislead county officials, as well as motorists, in order to preserve a substantial but illegitimate source of income. Mr. Scott says he's documented at least 25,000 incidents where people have been illegally detained, arrested or ticketed by Port Jefferson constables since January 25, 1996. For more details, contact Jonathan Scott by Phone: 631-271-6448 or Mark Annick by Phone: 800-559-4534 or by Pager: 214-967-2299. SLAVE LABOR: Slave Labor Lawsuit V. Japanese Cement Company Halted ------------------------------------------------------------------ A state appellate court has halted a lawsuit by a Korean-American man who claims he was forced to work for a Japanese cement company during World War II, Associated Press recently reported. The court scheduled an April 30 hearing on whether the lawsuit by Jae Wong Jeong, 79, can proceed. Mr. Jeong, a retired teacher who is now a citizen of the United States, is suing under the state's slave labor law, which was nullified by a federal court decision. He is seeking class action status for his lawsuit, in addition to compensation for his labor and injuries, as well as an apology and a trust to benefit former forced laborers. In 1943, Mr. Jeong was studying economics at a Tokyo university when he was taken to a slave labor camp for refusing to serve in the Japanese army. As a result, he was forced to break limestone for the Onoda Cement Manufacturing Company (Onoda) for more than a year without pay. US District Judge Vaughan Walker in San Francisco ruled in September 2001, that thousands of Filipino, Chinese and Korean prisoners who claimed they were enslaved by Japanese companies, had no legal redress for damages in US courts. Judge Walker grounded his decision in the the peace treaty between the United States and Japan ending World War II which bars compensation to victims of wartime atrocities. That ruling would nullify a 1999 California law allowing victims of World War II slave labor to sue multinational corporations operating in the state. In November 2001, however, a Los Angeles Superior Court Judge Peter D. Lichtman allowed Mr. Jeong's case to move forward, saying he was concerned the federal government was acting in an "uneven manner" by allowing claims made by Holocaust survivors to go forward, while preventing Asian victims from seeking reparations from Japanese companies. Judge Lichtman also noted that the Federal Court erroneously concluded that California's slave labor law intruded on the federal government's authority over foreign affairs. Judge Lichtman pointed out that the California law does not target any particular country, only businesses, and does not implicate any foreign policy between the United States and Japan. He added that while state courts are bound to follow the US Supreme Court decisions on federal questions, decisions in lower federal courts are not binding. Onoda Cement, the defendant in the suit, has appealed to the State's 2nd District Court of Appeal, citing the Federal Court's September decision. SOUTH CAROLINA: Retirees Sue Challenging System's Leave Calculation ------------------------------------------------------------------- The South Retirement System and South Carolina Budget and Control Board faces a class action filed by a group of retired participants in the Systems, challenging the State's retirement policies. The first suit was originally commenced in South Carolina Circuit Court, questioning the retirement system's treatment of annual leave calculation of participants' retirement payments. The Circuit Court determined that the State has been providing retirement benefits to its members in accordance with the law. The plaintiffs then appealed the decision to the State Supreme Court, who reversed the decision in May 2000 and ruled in favor of the plaintiffs. The State has filed a petition for rehearing with the Supreme Court, which was granted. On Rehearing, the Supreme Court reversed its prior decision and ruled in favor of the State. The plaintiffs have asked for an extension of time in which to file a petition for rehearing. The State expects that, should the plaintiffs ultimately prevail in the suit, the current actuarial liability of the State for this new benefit is estimated to be in excess of one billion dollars. SOUTH CAROLINA: Federal Retirees Challenge Taxation Policy of Benefits ---------------------------------------------------------------------- The state of South Carolina faces two class action lawsuits brought in the South Carolina State Court relating to the taxation of retirement benefits. One challenges the taxation of federal retirees' income (Federal Retirees Case), and the other challenges a state statute imposing income taxes upon benefits paid to retired state employees (State Retirees Case) by the South Carolina Retirement Systems. In the Federal Retirees Case, the State filed a motion to dismiss, which was granted by the State Court. The plaintiffs then appealed the decision to the State Supreme Court, which reversed the decision and remanded the case to the State Court to determine the constitutionality of a state statute. The State moved to dismiss the State Retirees Case, which was granted in part and denied in part by the State Court. The decision was appealed to the State Supreme Court which reversed and vacated the state Court's decision, stating that the state retirees should have first filed their claim with the Department of Revenue as an administrative matter. The State Retirees Case is presently pending before the Department of Revenue. While South Carolina is uncertain as to the ultimate outcome of any of the above-described lawsuits, it is vigorously defending its position in each case. In the event of unfavorable outcomes in both suits, the State's liability is not expected to exceed $475 million for retroactive relief with an estimated unfavorable impact on future year's revenues of an additional $47.5 million per year. TEXAS: Ranked #46 Out of 50 in Legal Study About Litigation Fairness -------------------------------------------------------------------- A poll has put Texas close to the bottom of a list ranking states in terms of perceived fairness or reasonableness for their litigation environments, the Austin Business Journal reports. The US Chamber of Commerce-commissioned poll, conducted by research company Harris Interactive, measured the liability systems of all 50 states, based on several criteria, namely: (1) treatment of class action suits, (2) punitive damages, (3) timeliness of summary judgment/dismissal, (4) discovery, (5) scientific and technical evidence, (6) judges' impartiality and competence, and (7) juries' fairness The survey requested senior attorneys at companies with annual revenue of at least $100 million to give letter grades to all 50 states based on the criteria. More than 800 corporate general counsels and senior litigators participated in the suit. According to the Austin Business Journal, 78% of the respondents say a state's litigation environment affects important business decisions, such as where to locate a company. "It should come as no surprise that most businesses take into account a state's liability climate when making decisions," says Thomas Donohue, president and CEO of the U.S. Chamber. "The degree to which a state is willing to protect business owners from money-hungry, class-action lawyers is the degree to which they'll find business eager to work there." Texas ranked No. 46 in the survey, followed only by Mississippi, West Virginia, Alabama, and Louisiana. Topping the list were Delaware, Virginia, Washington, Kansas and Iowa. Frank Hill, an attorney in the Austin office of Thompson & Knight LLP, told the Business Journal that in the past 10 years, the Texas Supreme Court has done a lot, such as limiting class-action suits and boosting levels of scientific proof for personal injury cases, to improve the image of Texas courts. However, he added that there are several venues in Texas "where a large corporate defendant has two strikes against them before they step up to the plate." Mr. Hill gave examples of two major decisions issued by Texas juries: a $10.73 billion verdict against Texaco Inc. in favor of what now is Pennzoil-Quaker State Co., and an asbestos verdict that led to bankruptcy filings for Pittsburgh Corning Corp., Owens Corning and North American Refractories Co. Inc, according to the Austin Business Journal. WIRELESS COMPANIES: 22 Cities File Suit Over Taxing Wireless Phones ------------------------------------------------------------------- A group of 22 municipalities in Missouri, including 15 in St. Louis County, have filed a class action against a group of wireless telephone companies in an attempt to force the companies to turn over gross- receipts taxes. The lawsuit, which had been discussed as a possibility for more than a year, was filed in St. Louis County Circuit Court before Judge Kenneth Romines, the St. Louis Post-Dispatch recently reported. The municipalities are looking include many more Missouri cities. As many as 90 percent of Missouri cities with a population of 1,000 or more might be eligible under their laws to be a part of the lawsuit. No trial date has been set. At issue is whether the wireless, or cellular, companies are to be legally considered telephone companies. Currently, the companies claim that they should not be considered telephone companies. By not being classified in that manner, the companies avoid paying the taxes that most municipalities impose on traditional phone companies. Most municipalities charge a tax on the traditional phone companies, usually between five and seven percent of the total revenue a company receives from subscribers within the municipality, called the gross receipts tax. Similar taxes generally exist for all utilities. Cellular-phone companies have avoided that tax so far in Missouri. As more and more people have obtained cellular phones, municipalities have become worried that one of their tax bases is eroding. University City Attorney John Mulligan, who has served as a point man on the lawsuit, said that according to the Federal Communication Commission, there were more than 1.7 million cellular-phone customers in Missouri with an average monthly bill of $45.27 by the end of 2000. Mr. Mulligan said the main wireless companies named in the lawsuit are: (1) AT&T Wireless, (2) Nextel, (3) Sprint, (4) Verizon Wireless, (5) Voicestream Wireless, and (6) Cingular Wireless Mr. Mulligan also said that the impetus for the lawsuit came from a court case that started in 1999 between Sunset Hills and Southwestern Bell Mobile. In that instance, Sunset Hills enacted an ordinance taxing Southwestern Bell's cellular tower in Sunset Hills. Southwestern Bell refused to pay the tax and said that since it was not a traditional phone company, Sunset Hills did not have the authority to tax it in that manner. Sunset Hills won the opening round of the court case, and in April 2000, the Missouri Supreme Court decided not to review the case, in effect, finalizing the decision of the Court of first instance. Generally speaking, Mr. Mulligan and the municipalities see that case as setting a precedent in Missouri. They say, wireless companies are subject to the same municipal laws as telephone companies. The wireless companies disagree, says David Clevenger, Verizon's executive director for public affairs. If the lawsuit stays with just the original 22 cities, Mr. Mulligan says the cities will be seeking somewhere in the neighborhood of $30 to $40 million. That would cover the past five years of estimated gross- receipt taxes, the farthest back the cities legally can go, plus interest. Mr. Mulligan, however, does not expect a decision any time soon, saying that if the case went to trial, negotiations are taking place between the two parties, it probably would take a minimum of one or two years, not including the appeals process. "It's fair to say this could be in the courts for years," he said. Currently, the area cities involved in the lawsuit are: (i) Chesterfield, (ii) Ellisville, (iii) Ferguson, (iv) Florissant, (v) Jennings, (vi) Kirkwood, (vii) Manchester, (viii) Maplewood, (ix) Maryland Heights, (x) Northwoods, (xi) University City, (xii) Vinita Park, (xiii) Warson Woods, (xiv) Wellston and (xv) Winchester Outside of St. Louis County, Blue Springs, Cape Girardeau, Dexter, Gladstone, O'Fallon, St. Joseph and Independence are involved. WISCONSIN: Parties In Supermax Inmates' Suit Agree on Settlement Terms ---------------------------------------------------------------------- Lawyers for the State and inmates at Wisconsin's Supermax prison recently put together a new agreement on improving living conditions there, minus some provisions Governor Scott McCallum refused to approve, the Associated Press recently reported. The new agreement to settle the inmates' class action still requires the state to change the prison's name and bars Department of Corrections officials from referring to the inmates housed there as the "worst of the worst." Those provisions were also part of a tentative agreement the State and inmates reached earlier this month. However, the Governor refused to approve the deal last week, saying prisoners' attorneys made demands that were a "slap in the face." Those demands, he said, included TVs in every cell, sleep masks to shield inmates from the constant lighting in cells and a service to bus visitors to see inmates at the prison in southwest Wisconsin. The Governor said in a statement he would support the new agreement because it did not include those provisions. Governor spokesman Tim Roby said the deal-breaker for the Governor was the bus service, which would cost $60,000 a year. "In tough times, he wanted the flexibility to be able to make reductions that are in the best interest of the Department rather than dictated by a judge or an agreement," Mr. Roby said. Attorney Ed Garvey, who represents the inmates, said he was still baffled by the Governor's opposition to the original deal. He said inmate attorneys requested things such as the sleeping masks for inmates, but never demanded them and made it clear to the State the requests were not necessary for both sides to reach an agreement. "I think he (the Governor) was misinformed about the earlier agreement." The settlement needs to be approved by inmates, Governor McCallum and US District Judge Barbara Crabb to end the lawsuit. Other provisions of the new agreement are: (1) Requirements to build an outdoor recreation area for inmates; (2) At least five hours a week of exercise for inmates outside of their cells; and (3) Access to religious materials Attorney Garvey said the inmates will have 30 days to review the new Agreement, while Judge Crabb has scheduled a March 8 hearing to review the agreement. The $47 million, 509-bed prison in Boscobel opened in 1999 to house the State's most unruly, violent prisoners. The inmates spend 23 hours a day in their cells and exercise in tall, stark concrete chambers with fenced windows near the ceiling. Securities Fraud APPLIED MICRO: Faces Multiple Securities Suits in California Courts ------------------------------------------------------------------- Applied Micro Circuits Corporation has asked the United States District Court for the Southern District of California to dismiss several securities class actions commenced in April 2001 against the Company, its Chief Executive Officer, Chief Financial Officer and certain other officers and directors, alleging violations of federal securities laws. The suits identically allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 Act and Rule 10b-5 promulgated Thereunder. In general, the complaints allege that the Company and the individual defendants misrepresented the Company's financial prospects for the fourth quarter of fiscal 2001 to inflate the value of the Company's stock. The suits have been consolidated into a single proceeding, and an amended consolidated complaint will likely be filed in the fourth fiscal quarter of fiscal 2002. The Company intends to file several motions seeking a dismissal of the suits on various grounds. A briefing and hearing schedule has been set for these motions, which the Company expects will be heard and decided in the first or second quarter of fiscal 2003. In May 2001, certain individuals filed derivative actions against the directors and certain executive officers in the California state courts. These state court derivative complaints allege: (1) overstatement of the financial prospects of the Company, (2) mismanagement, (3) inflation of stock value, and (4) sale of stock at inflated prices for personal gain during the period from November 7, 2000 until February 5, 2001. The three state court derivative actions have been consolidated and assigned to the San Diego Superior Court and a consolidated derivative complaint was filed in December 2001. The Company has filed several motions seeking a dismissal of the state action on various grounds. In the alternative, the Company is also seeking to stay the state action pending resolution of the federal action. A hearing and decision on the Company's motions is expected to occur in the fourth quarter of fiscal 2002. No discovery has been conducted in either the federal action or the state action. The Company believes that the allegations in these actions are without merit and intends to defend the actions vigorously. The Company cannot predict the likely outcome of these actions, and an adverse result in either action could have a materially adverse effect on the Company. CROWN CENTRAL: Stockholders File Suit in VA Relating To Rosemore Merger ----------------------------------------------------------------------- Crown Central Petroleum Corporation faces a class action pending in the United States District Court for the Eastern District of Virginia, Alexandria Division alleging violations of federal securities acts relating to its freeze-out merger with Rosemore, Inc. Company stockholders James J. Hayes and Thomas filed the suit, on behalf of other stockholders, against the Company, its directors, Rosemore, Inc., and Credit Suisse First Boston Corporation (CSFB). The suit asserts claims arising under Sections 14(a) and 20(a) of the Exchange Act, 15 U.S.C. Sections 78n(a) and 78t(a), and Rule 14a-9 promulgated by the Securities & Exchange Commission, 17 C.F.R. Section 240.14a-9 and breaches of fiduciary duty by the Company's directors arising under state law. The suit alleges that the defendants caused the Company to enter into a freeze-out merger with Rosemore, Inc. pursuant to which Rosemore acquired Company stock owned by public stockholders at an unfair price. Pursuant to a merger agreement dated December 17, 2001 between the two Companies, a proxy statement dated January 31, 2001 was issued by Crown which violated Section 14(a) of the Exchange Act, 15 USC Section 78n(a) and Rule 14a-9, 17 CFR Section 240.14a-9, because it contained misrepresentations of material facts and omissions of material facts. The suit further alleges that the directors of the Company breached their fiduciary duties under state law, and that CSFB assisted and abetted the Company's directors in a breach of their fiduciary obligations to its public stockholders. The complaint also alleges that Rosemore, Inc., and Henry A. Rosenberg, Jr., were controlling persons of the Company, and, as such, are liable for the damages incurred by the class. The proxy statement was mailed to the Company stockholders of record on January 17, 2001, which was the record date for a special meeting of Crown stockholders to be held on March 7, 2001, at which the shareholder vote on the merger was taken. The plaintiffs, James J. Hayes and Thomas Boots, brought this action as a class action pursuant to Rule 23(a) and Rule 23(b)(3) of the Federal Rules of Civil Procedure on behalf of all persons or entities who were Company stockholders or beneficial owners of common stock on January 17, 2001, the persons or entities who were the recipients of the proxy statement. For more information, contact Mark Schirmer of Straus & Boies LLP by Phone: 1-205-324-3800 by Fax: 1-205-324-3996 or Edward M. Selfe of Bradley Arant Rose & White LLP by Phone: 1-205-521-8280 or by Fax: 205-521-8800. DIGITAL ISLAND: Chimicles Tikellis Commences Securities Suit in DE ------------------------------------------------------------------ Chimicles & Tikellis LLP initiated a securities class action in the United States District Court for the District of Delaware on behalf of holders of Digital Island, Inc. (NASDQ: ISLD) common stock between May 14, 2001 and August 30, 2001, inclusive, against the Company and: (1) Cable & Wireless PLC, (2) Dali Acquisition Corporation, (3) Ruan F. Ernst, CEO and (4) the members of the Company's board of directors during the class period The suit alleges that defendants violated sections 14(a), 14(e), 14(d)(7) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14d-10 promulgated thereunder, by failing to disclose material information to those Company shareholders who had received an offer to purchase from defendant Cable & Wireless in May and June 2001, and to those Company shareholders who received a proxy statement in connection with the merger between the Company and Cable & Wireless, which was consummated on August 30, 2001. In particular, defendants failed to disclose important contracts between the Company and Bloomberg, LLP, and Digital Island and Major League Baseball's Internet media. Those contracts were not disclosed either in the offer to purchase or the proxy statement. Defendants also violated the all-holders provision of the Williams Act by giving additional consideration to the Company's directors and officers, who were also shareholders, in excess of that given to other Company shareholders as an inducement to support Cable & Wireless' offer to purchase. For more information, contact Pamela Tikellis or Robert J. Kriner by Mail: One Rodney Square, Wilmington, DE 19899 by Phone: (302) 656-2500 or visit the firm's Website: http://www.chimicles.com. FOCUS ENHANCEMENTS: To Settle Securities Fraud Suit in Massachusetts -------------------------------------------------------------------- Focus Enhancements, Inc. has agreed to settle for an undisclosed amount the securities class action pending against it and one of its directors in United States District Court for the District of Massachusetts, on behalf of shareholders who purchased the Company's shares during the July 17, 1997 to February 19, 1999 period. The suit, initially filed in November 1999 and amended several times, alleges violations of federal securities laws and seeks unspecified monetary damages. The Company has moved to dismiss the suit. The Court granted certain portions of the Company's motion to dismiss and denied other portions, allowing the case to go forward into pretrial discovery as to certain matters. Parties in the suit reached a settlement in December 2001, subject to the preparation of a settlement stipulation, which is mutually satisfactory to all parties, and Court approval, after notice to shareholders and a hearing. The settlement will be funded entirely with proceeds from the Defendants' insurance carrier. The Company, however, stated in a disclosure to the Securities and Exchange Commission that there are no assurances that the parties will eventually reach a settlement acceptable to all sides. GLOBIX CORPORATION: Hoffman Edelson Lodges Securities Suit in S.D. NY --------------------------------------------------------------------- Hoffman & Edelson LLC initiated a securities class action on behalf of those persons who purchased or otherwise acquired the common stock of Globix Corporation (Nasdaq:GBIX) during the period of November 16, 2000 through and including December 27, 2001, in the United States District Court for the Southern District of New York against the Company and: (1) Marc Bell, (2) Peter Herzig and (3) Brian Reach 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, among other things, issuing false and misleading statements regarding the Company's financial condition as well as its present and future business prospects. As alleged in the suit, in November 2000, in an effort to stabilize the price of the Company's stock and to assuage investor concerns over the company continuing as a going concern, defendants set forth the Company's business plan which stated that it would be fully funded to fiscal 2003 and thereafter cash flow positive. This sentiment was echoed in the Company's annual report filed on Form 10-K with the Securities Exchange Commission and thereafter in Company press releases and conference calls. Despite such assurances, on December 27, 2001, defendants announced that management had been secretly negotiating with its bond holders and preferred stock holders to effectuate a prepackaged bankruptcy that would result in a near total dilution of the existing common stockholders' interest in the Company. 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. IMCLONE SYSTEMS: Faces Probe From SEC, Justice Department Over Erbitux ---------------------------------------------------------------------- ImClone Systems, Inc. (Nasdaq: IMCL) faces two other inquiries from securities regulators and the Justice Department relating to possible federal securities violations relating to misleading statements the Company allegedly made to investors about its highly touted colon cancer drug Erbitux. The House of Representatives Energy and Commerce Committee is currently investigating allegations ImClone hid negative information about its research, according to Reuters report. The Company's troubles started when its stock dropped from a high of $73.83 to $55.25 by the end of December 2001, after it revealed that the US Food and Drug Administration had rejected their "Fast-Track" application for approval of IMC-C225, its blockbuster drug used for the treatment of colorectal cancer and also known as Erbitux. The Company had earlier represented to investors that it was confident Erbitux would be approved by February and had touted the positive effects that the drug's approval could have on its financial position. The Company's troubles were exacerbated when on January 4, 2002, The Cancer Letter reported that it had obtained a copy of the FDA's letter to the Company dated December 28, 2001. According to that FDA letter, the FDA had repeatedly warned the Company and the individual defendants about the problems with ImClone's clinical trials. This disclosure resulted in a further drop in share price to $35.83 per share. Angry investors filed multiple class actions in the United States District Court for the Southern District of New York, alleging violations Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, because of the Company's misleading statements. The suits also alleged certain of the Company's officers benefited from the fraud during the class period by selling or filing to sell approximately 2.3 million shares of stock for gross proceeds of approximately $160 million. According to a Reuters report, the Company disclosed the federal agencies' requests for information but did not say what information the authorities wanted. A company official would not comment. The Company also revealed in a disclosure to the Securities and Exchange Commission, that a recently appointed board member, Peter Peterson, had left the Board of Directors citing "time constraints." The Company says it will cooperate fully with the two agencies. "Things will get worse for ImClone before they get better. The more (investigating) parties you get involved, the more bad news and more headlines we'll see," Prudential Securities analyst Tim Anderson told Reuters, referring to the addition of the SEC and Justice Department in the ImClone probe. In a conference call Thursday with investors, officials of Bristol-Myers, who signed a deal with the Company to earn a right to market Erbitux, said they were considering unspecified actions to protect its shareholders. Tim Anderson added that Bristol-Myers, having already invested $1.2 billion in its ImClone partnership, will not walk away from the deal unless the Erbitux trial data is shown to be fraudulent. He asserts, "If Bristol-Myers walks away, they basically get nothing for their investment. And if they abandon Erbitux and the drug is eventually approved, they would look doubly bad. So they'll just stick it out and try to help ImClone get the drug approved." Bristol-Myers could not be immediately reached for comment on ImClone's disclosure regarding the inquiries, according to a Reuters report. IMCLONE SYSTEMS: Spector Roseman Commences Securities Suit in S.D. NY --------------------------------------------------------------------- Spector, Roseman & Kodroff, PC lodged a securities class action suit against ImClone Systems, Inc. (Nasdaq: IMCL) and certain Company insiders on behalf of shareholders who purchased ImClone securities between June 28, 2001 and January 4, 2002, inclusive, in the United States District Court for the Southern District of New York. 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. Throughout the class period, defendants made many statements touting the progress of its "Fast-Track" application to the US Food and Drug Administration (FDA) for approval of IMC-C225 (commonly known as Erbitux), its potentially blockbuster drug used for the treatment of colorectal cancer, and the substantial revenues the Company would achieve once the drug was approved by the FDA. As alleged in the Complaint, these statements were materially false and misleading because, among other things: (1) defendants failed to comply with the FDA's requirements for filing the "Fast-Track" application for approval of Erbitux; (2) defendants knew, or should have known, that their deficient application would be rejected and would thus negatively impact the Company's future earnings; and (3) defendants knew, or should have known, of the potentially serious flaws in their prior test results and testing procedures, which would prevent or delay Erbitux's approval by the FDA. The suit further alleges that high-ranking Company insiders, including the Chairman of the Board, CEO and COO, sold almost $150 million worth of their own Company holdings during the class period. On December 28, 2001, the Company disclosed that the FDA had refused to accept its flawed application for approval of Erbitux. The basis for the FDA's rejection was not fully known until January 4, 2002, when a third party newsletter revealed that the FDA had serious concerns about the Company's prior test results. These disclosures drove down the Company's stock from a class period high of $73.83 per share on December 5, 2001 to $50 per share after the December 28 revelation to $35.83 at the close of trading on January 7, 2002, the next trading day after the January 4, 2002 revelations. For more information, contact Robert M. Roseman by Phone: 888-844-5862 by E-mail: classaction@srk-law.com or visit the firm's Website: www.srk-law.com. KMART CORPORATION: Commencing Probe After Letter Questions Practices -------------------------------------------------------------------- Discount retail giant Kmart Corporation commenced an investigation on its accounting practices after receiving an anonymous letter claiming to be from employees that expressed concern over unspecified accounting matters, according to an Associated Press report. The Company, which filed for bankruptcy protection last week, has contacted the Securities and Exchange Commission about the letter and its own investigation and is cooperating with the regulatory agency. The letter was allegedly addressed to the SEC, the Company's auditors and board of directors. In a news release, the Company stated "The letter has been referred to the audit committee of the board of directors, which promptly engaged outside counsel and accounting consultants to conduct an independent investigation." According to Associated Press, the disclosure comes amid heightened sensitivity about accounting issues in the wake of the collapse of the energy trader Enron Corporation amid questionable accounting practices. An SEC spokesman said Friday that the agency had no immediate comment on the matter. MBNA CORPORATION: NY Court Approves $18M Fraud Suit Settlement -------------------------------------------------------------- The Supreme Court of New York, County of New York granted preliminary approval to an estimated $18 million settlement proposed by MBNA Corporation and MBNA America Bank, NA to settle a class action commenced in October 1998 by plaintiff Gerald D. Broder. The suit alleges that the defendants' advertising of its cash promotional annual percentage rate program was fraudulent and deceptive, and seeks unspecified damages including actual, treble and punitive damages and attorneys' fees for an alleged breach of contract, common law fraud and violation of New York consumer protection statutes. MCLEOD USA: Cohen Milstein Commences Securities Suit in N.D. California ----------------------------------------------------------------------- Cohen Milstein Hausfeld & Toll, PLLC initiated a securities class action in the United States District Court for the Northern District of Iowa, on behalf of those persons who purchased or otherwise acquired the common stock of McLeodUSA (NASDAQ:MCLD) during the period of January 30, 2001 through and including December 3, 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: (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 Corporation; (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, the Company purchased Intelispan for $40 million in stock. For more details, contact Andrew N. Friedman or Katrina Jurgill by Mail: 1100 New York Avenue, NW West Tower, Suite 500 Washington, DC 20005 by Phone: 888/240-0775 or 202/408-4600 by E-mail: afriedman@cmht.com or kjurgill@cmht.com visit the firm's Website: http://www.cmht.com PDI INC.: Milberg Weiss Commences Securities Fraud Suit in New Jersey --------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of PDI Inc. (NASDAQ: PDII) between May 22, 2001 and November 12, 2001 inclusive in the United States District Court for the District of New Jersey against the Company and: (1) Charles C. Saldarini, CEO and Co-Chairman and (2) Bernard C. Boyle, CFO. The suit charges that defendants violated 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 May 22, 2001 and November 12, 2001. For example, as alleged in the complaint, on May 22, 2001 the Company held a conference call regarding a previously announced agreement with Novartis AG, under which the Company would market and sell Novartis' Lotensin and Lotrel, two hypertension medications. During the conference call, defendants represented that they expect the Novartis contract to add $0.25 per share to the Company's fourth quarter of 2001 results. That statement was, according to the complaint, materially false and misleading because defendants knew, or were reckless in not knowing, that the Company's marketing program would not be fully underway until well into the fourth quarter and that therefore, the agreement could not contribute materially to its fourth quarter of 2001 performance. In addition, according to the suit, the Company materially misled the investing public to the true impact that the introduction of generic competition for Ceftin, a drug which the Company was distributing under contract with GlaxoSmithKline PLC (Glaxo), would have on its business. In particular, the suit alleges that defendants represented, in an August 2001 conference call, that the Company expected Ceftin to contribute $0.30-$0.40 earnings per share to the fourth quarter of 2001, even if a generic form of Ceftin was introduced during that time. According to the complaint, the statements were materially false and misleading because defendants knew, or were reckless in not knowing, that Ceftin could not contribute $0.30 per share to fourth quarter 2001 earnings. On November 12, 2001, the Company issued a press release announcing a net loss of $17.3 million, or $1.24 for the third quarter of 2001, including a $24 million charge as reserves for expenses associated with the Ceftin contract, which the Company announced would be terminated shortly. In addition, the Company announced that the Lotensin program will be completed late in the fourth quarter and would not contribute materially to PDI's 2001 earnings. On November 13, 2001, defendants held a conference call revealing that Ceftin would not contribute any profit to the fourth quarter of 2001. In reaction to the news, the price of PDI common stock plummeted from a $29 per share close on November 12, 2001 to close at $18.35 per share, a drop of 35%. For more details, contact Steven G. Schulman or Samuel H. Rudman by Mail: One Pennsylvania Plaza, 49th fl. New York, NY, 10119-0165 by Phone: (800) 320-5081 by E-mail: pdicase@milbergNY.com or visit the firm's Website: http://www.milberg.com RHYTHMS NETCONNECTIONS: Wolf Haldenstein Lodges Securities Suit in CO --------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP initiated a securities class action in the United States District Court for the District of Colorado, on behalf of purchasers of Rhythms NetConnections Inc. (formerly Nasdaq: RTHM; now OTC: RTHMQ) between January 6, 2000 and April 2, 2001, inclusive against certain officers and directors of the Company. The Company has filed for bankruptcy protection and is therefore not named as a defendant. The suit alleges that defendants violated the federal securities laws by issuing materially false and misleading statements during the class period. Specifically, the complaint alleges that throughout the class period, the Company portrayed itself as a fast-growing and expanding provider of DSL services and repeatedly represented that it could continue to expand its broadband network throughout the United States and reassured investors that it was financially able to continue this expansion. As alleged in the Complaint, defendants' statements issued throughout the class period were materially false and misleading when made as they failed to disclose the following adverse facts which were then known to defendants or recklessly disregarded by them: (1) that the Company lacked the financial resources necessary to execute its business plan of a full national network expansion; (2) that the Company's efforts to scale back its expansion plans were not meeting with success as the Company was unable to generate the necessary financing; (3) that the Company was not well-funded or well-positioned to continue its growth, as the Company's expenses, including its ongoing debt payment obligations, were far outpacing its revenues and rapidly depleting the Company's cash reserves; (4) that the Company did not have adequate cash reserves and was not sufficiently "stable" and "financially strong" that it would be able to fund its operational needs into the first quarter of 2002, as defendants repeatedly promised investors - defendants were not even able to keep the Company running though 2001, as it had earlier guaranteed; and (5) that without the influx of additional capital, the Company would be forced to seek bankruptcy protection, which would render the Company's common stock worthless. While in possession of these undisclosed facts about the Company and its business, defendants and other insiders collectively sold 600,000 shares of their common stock for gross proceeds in excess of $16 million. For further information, contact Fred Taylor Isquith, Gustavo Bruckner, 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.All e-mail correspondence should make reference to Rhythms. TIDEL TECHNOLOGIES: Will Vigorously Oppose Securities Suit in S.D. TX --------------------------------------------------------------------- Tidel Technologies, Inc. vehemently denies the allegations in several securities suits pending in the United States District Court for the Southern District of Texas, on behalf of purchasers of the Company's common stock from April 6, 2000 to February 8, 2001. The suits allege violations of Sections 10 and 20 of the Securities Exchange Act of 1934 and names as defendants, the Company and: (1) James T. Rash, Chief Executive Officer, Chief Financial Officer and Chairman of Board of Directors; (2) Mark K. Levenick, Chief Operating Officer and Director; (3) James L. Britton III, Director; and (4) Jerrell G. Clay, Director The suits charge the defendants with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that during the class period, the Company falsely touted its sales of automated teller machines, or ATMs, at a "record" pace. These materially false and misleading statements allowed the Company to begin trading on the Nasdaq national trading system, which would have been impossible without the Company's false and misleading statements and the consequent artificial inflation of the Company's stock price. When the Company finally disclosed that its largest customer's orders would be at "substantially reduced levels for the quarter ending March 31, 200l," Company stock price declined precipitously. The lawsuit alleges that the Company knew during the time period but did not disclose that its largest customer was in the process of switching to a competitor and reducing orders. These cases have not yet been consolidated, nor has the court appointed a lead plaintiff. In a disclosure to the Securities and Exchange Commission, the Company stated its intent to defend itself vigorously. WORLD GAMING: $1.5M Pact Awaiting Delaware Federal Court's Approval ------------------------------------------------------------------- The United States District Court for the District of Delaware has yet to approve the settlement to the consolidated securities class action against World Gaming PLC and some of its directors and officers for federal securities violations. The consolidated suit sprang from ten class actions commenced between October 15, 1999 and December 9, 1999, alleging that material misrepresentations regarding the nature and inherent risks of the Company's business were knowingly made in filings to the United States Securities and Exchange Commission, press releases and other public statements. In June 2001, the parties signed a memorandum of understanding (MOU) containing the essential terms of a settlement between the Company and the plaintiffs. Under the MOU, the class will receive 1,050,000 shares of the Company's American Depositary Receipts with a minimum value of $1,050,000. If in the 10 trading days preceding the effective date of the settlement the weighted mean trading price (as calculated by a formula in the MOU) of the shares of the Company's ADRs is less than $1.00 per share, the class will receive additional shares so that the value of the settlement shares equals $1,050,000. Additionally, the Company will pay certain administrative expenses, up to $50,000, and certain expenses incurred by plaintiffs' co-lead counsel, up to $50,000. For the settlement to proceed, the parties must draft a mutually acceptable stipulation of settlement to be filed with the court. The Court must give preliminary approval to the terms of the settlement. Notice must also be sent to the class members advising them of the terms of the settlement and of their right to opt out or object to it. In addition, the settlement is conditioned on the issuance of the ordinary shares of the Company underlying the settlement shares. The Company has the right under the MOU to withdraw from the settlement in the event that members of the class holding more than 3% of the outstanding shares of ADRs of the Company outstanding as of the date the settlement is filed determine to opt out of the settlement. ********* 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. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re- mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *