/raid1/www/Hosts/bankrupt/CAR_Public/020208.mbx
C L A S S A C T I O N R E P O R T E R
Friday, February 8, 2002, Vol. 4, No. 28
Headlines
CANADA: Montreal Residents Consider Suit Over Dorval Airport Noise
COLORADO: Denver Residents File Suit Over Photo Radar Ticketing System
FLORIDA: Black Residents Sue For Representation in City Commission
FORD MOTOR: Orders Recall of Defective 2002 Ranger Pickup Trucks
HEALTH PLANS: AAHP Commends Hearing On "Class Action Fairness Act"
HONEYWELL CONSUMER: Recalls 450,000 Heaters Due to Fire, Burn Hazards
INDIAN FUNDS: Dep't Unsure When Trust Fund System Will Be Back Online
MICHIGAN: Two Detroit City Employees Resign After Tax Forms Debacle
NEW YORK: Armenian Lawyer Files Suit For Heirs of Genocide Victims
PLANNED PARENTHOOD: Sued For Medical Malpractice, Genocide in St. Louis
PRUDENTIAL INSURANCE: Miami Suit Seeking $400,000 Damages Goes To Jury
SAVINGS BANK: Supreme Court Accepts Key Arguments in Summary Judgment
US BANCORP: Former Employee Files Suit For Sex Discrimination in MN
*Enron Corporation Insiders' Defense Hinges On SEC Trading Rules
Securities Fraud
ARTHUR ANDERSEN: Memphis Lawyer Sues To Recover $17T Enron Investment
BIOPURE CORPORATION: Pomerantz Haudek Lodges Securities Suit in MA
DIGITAL ISLAND: Much Shelist Probes For Possible Securities Violations
ELAN CORPORATION: Schiffrin Barroway Lodges Securities Suit in S.D. CA
ELAN CORPORATION: Kaplan Fox Commences Securities Fraud Suit in S.D. NY
ELAN CORPORATION: Scott Scott Commences Securities Suit in S.D. CA
ELAN CORPORATION: Schiffrin Barroway Files Securities Suit in S.D. NY
ELAN CORPORATION: Cohen Milstein Commences Securities Suit in S.D. NY
ELAN CORPORATION: Berger Montague Initiates Securities Suit in S.D. NY
ELAN CORPORATION: Wolf Popper Commences Securities Suit in S.D. NY
ENRON CORPORATION: Court To Hear Motions Re Automatic Stay, Insurance
GLOBAL CROSSING: Faces Suit For Securities Violations in Rochester, NY
GLOBIX CORPORATION: Much Shelist Probes Possible Securities Violations
HANOVER COMPRESSOR: Wolf Haldenstein Lodges Securities Suit in S.D. TX
HOMESTORE.COM: Berman DeValerio Commences Securities Suit in C.D. CA
HOMESTORE.COM: Much Shelist Probes For Possible Securities Violations
INFONET SERVICES: Much Shelist Probes Possible Securities Violations
MCLEOD USA: Cohen Milstein Initiates Securities Fraud Suit in N.D. Iowa
PNC FINANCIAL: Stays Mum on Multiple Securities Fraud Suits in W.D. PA
PNC FINANCIAL: Kirby McInerney Commences Securities Suit in W.D. PA
REGENERATION TECHNOLOGIES: LeBlanc Waddell Files Securities Suit in FL
SUPREMA SPECIALTIES: Berman DeValerio Initiates Securities Suit in NJ
TYCO INTERNATIONAL: Lovell Stewart Commences Securities Suit in S.D. NY
*********
CANADA: Montreal Residents Consider Suit Over Dorval Airport Noise
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Some Montreal residents are considering a class action over the noise
pollution caused by late night and early morning flights at the Dorval
airport, CBC Montreal reports. The suit will name as defendants Air
Canada and Aeroports de Montreal, the body that runs the airport.
The residents have formed a group called Citizens for a Quality of Life
to file the suit, which will seek $1,000 per year since the year 2000
for Montreal residents affected by take-offs and landings between 11
o'clock at night and 7 o'clock in the morning.
Resident Thomasine Mawhood told CBC Montreal that the noise is very
loud. She stated, "It'll wake you out of a sound sleep.it's a
terrifying noise, actually, and most unpleasant.Not something you want
to wake up to." She asserts ADM's own rules allow only regional jets
or Dash 8 aircraft to use the airport during the late night and early
morning hours. However, Air Canada is operating bigger jets, such as
Boeing 737 and Airbus 320 aircraft, which make more noise.
She added that neither the airline, nor ADM will respect the rules and
that's why the issue is now heading to court, "We're in this for as
long as it takes to make ADM abide by its own laws." Ms. Mawhood and
other residents are not only seeking damages, they also want the court
to order ADM and Air Canada to obey the rules.
COLORADO: Denver Residents File Suit Over Photo Radar Ticketing System
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Two Denver residents filed a class action against the City and the
operators of a photo radar program implemented by the City to enforce
speed limits, after Denver County Court Judge Mary Celeste declared the
program illegal.
Dean Blanken and Thomas Godwin filed the suit, asserting that everyone
who paid fines after getting photo radar tickets since the program
began in 1998 should get their money back. Lockheed Martin IMS and ACS
State and Local Solutions, the program operators, are also named as
defendants. They estimate that more than 160,000 people could
participate in the suit.
Last month, Judge Celeste invalidated four photo radar tickets, saying
the program violated city law by delegating police powers to private
photo-radar contractors, and violated state law because the City paid
the contractors based on the number of tickets issued. According to
Denver Rocky Mountain News, Denver officials suspended the photo radar
program for restructuring to make it legal, after foreseeing a likely
deluge of such rulings in the future.
The suit states, "The photo radar program under which Lockheed, ACS and
the City have earned millions of dollars is illegal and in violation of
(state law)." The suit further stated that the City netted about
$3,049,000 on photo radar in 2000 after paying the private operators
about $3 million.
According to the Rocky Mountain News, City officials could not be
reached for comment Tuesday on the lawsuit. Staffers in the City
attorney's office said lawyers who could comment were away at meetings,
and Andrew Hudson, spokesman for Mayor Wellington Webb, did not return
a call.
FLORIDA: Black Residents Sue For Representation in City Commission
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Commissioners of Hallendale Beach, Florida have decided to vigorously
oppose the class action filed against the City over complaints that the
City's black residents lack representation on the City Commission.
US Representative Alcee Hastings, D-Miramar, filed the suit, stating
the current system "dilutes, minimizes and cancels out the voting
strength of African Americans." The City's black residents have long
complained about the situation. The last time a black person sat on
the commission was thirty years ago, according to the Miami Herald.
Commissioner Anthony Musto told the Herald that residents should have
discussed the issue with the City before taking legal action. He
states, "It is unfortunate that Joe or Jane chose to litigate before
coming to the commission and trying to talk things out with us.Today's
society is all about suing. If there is a problem they should have let
us know."
One Commissioner, Joy Cooper said she saw the suit coming, "This has
been a constant issue in our city for years, an east-versus-west issue
and I've told everyone that a suit was coming.We have disenfranchised a
lot of people." She urged her colleagues to try to resolve the matter
outside of the courts, and suggested holding an executive session
Tuesday to reach an agreement before everyone was "hauled into court."
Attorney for the plaintiffs, Mikel Jordan told the Herald, "They're not
looking to for ways to discuss anything.They just want to slap blacks
in the face."
However, City attorney Mark Goldstein believes the City will prevail in
the suit, telling the Herald, "They can only win if they show a history
of a white majority block consistently defeating a minority
candidate.But there has only been one black candidate who ran between
1982 and 2001. How can you say there is a history of a white majority
block defeating a minority candidate if there is no candidate?"
The Voting Rights Act does not quantify the number of black candidates
who must run for office. To sue under the Voting Rights Act, a three-
prong test must be met:
(1) the suit must involve a protected class, blacks, women,
Hispanics;
(2) the minority must live in a geographically compacted area; and
(3) the group must be politically cohesive.
FORD MOTOR: Orders Recall of Defective 2002 Ranger Pickup Trucks
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Embattled Ford Motor Co., which has been plagued by various automobile
products' design problems, has once more issued a "stop sale, stop
demonstrating and delivery" order for its 2002 Ranger pickup trucks,
ConsumerAffairs.com reports.
The order was issued after the Company discovered problems in the
truck's differential casing, which can be fixed only by replacing the
entire rear axle assembly.
Some 800 trucks currently on dealer lots and another 374 that have
already been sold are affected by the recall. The affected trucks have
manual transmissions and the new FX4 design package, which is intended
to give the vehicles a rugged, off-road look.
Ford has been plagued with quality and safety problems, including
premature failure of its popular 3.8-liter V6 engine, disastrous
rollover problems affecting the Explorer and a number of flawed new-
product launches.
HEALTH PLANS: AAHP Commends Hearing On "Class Action Fairness Act"
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The American Association of Health Plans (AAHP) lauded the House
Judiciary Committee for convening a hearing on "the Class Action
Fairness Act," a bipartisan legislation that would put the interests of
consumers ahead of plaintiffs' attorneys. The rise of runaway
litigation, including class action lawsuit abuse, has allegedly
threatened access to affordable quality health care for working
families and small businesses.
AAHP President & CEO, Karen Ignani, states "A bipartisan consensus is
clearly emerging among American consumers, businesses, and leading
editorial pages: stop the class-action litigation binge. With health
care costs rising from coast to coast and runway lawsuits a big reason
why, Chairman Sensenbrenner is to be commended for calling today's
hearing to look for bipartisan, common-sense solutions to a crisis that
ultimately hurts consumers."
AAHP strongly supports bipartisan efforts to reform the class action
system. As Congress and the Administration continue to discuss
proposals to curb excessive litigation, AAHP urged lawmakers to take
steps to reform class actions to reflect their original intent,
including:
(1) prohibiting the use of RICO class actions in the health
benefits area;
(2) restricting ERISA class actions to a class of individuals
covered by a single employer-sponsored employee benefit plan;
and
(3) allowing the transfer of class actions from state courts to
federal courts.
The American Association of Health Plans (AAHP) represents more than
1,000 health maintenance organizations (HMOs), preferred provider
organizations (PPOs), and other similar health plans that provide
health care coverage.
HONEYWELL CONSUMER: Recalls 450,000 Heaters Due to Fire, Burn Hazards
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Honeywell Consumer Products Inc. agreed Thursday to voluntarily recall
450,000 movable baseboard heaters due to potential fire and burn
hazards, reports CNN.
According to the news channel, there have been 53 reports of short-
circuiting and two cases of fire damage caused by the defective
heaters. Consumers are being urged to stop using them and unplug them
immediately.
The model being recalled is HZ-514HCP. The heaters are about 40 inches
long, 8 inches tall and 4 inches wide. The name Honeywell can be found
on the front of the heater.
Other ways to determine whether the heater is the recalled model is
that there is a six-digit date code beginning with 97 on the back or
bottom of the heater, a date code beginning with 8 or 9 stamped on the
flat metal prong of the electrical cord's plug or a date code beginning
with 00 stamped on the flat metal prong of the cord's plug and "TYPE I"
or nothing stamped on the bottom of the heater.
The heaters were sold nationwide from October 1997 through January 2001
for between $30 and $50, according to CNN.
For more information, contact Honeywell Consumer Products Inc., of
Southborough, Massachusetts, by Phone: 800-311-4204 or log on to its
Website: www.honeywell.com to find out how to obtain a replacement
heater.
INDIAN FUNDS: Dep't Unsure When Trust Fund System Will Be Back Online
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The Interior Department cannot determine yet when the computer system
that takes charge of providing oil and gas royalty payments to Indian
communities will finally be up and running again, according to a
Reuters report.
Federal Judge J. Royce Lamberth ordered the systems shut down last year
after he discovered that hackers could easily access the accounting
system that pays royalties to 300,000 American Indians for the use of
their land through the Internet.
Last year, thousands of Native American tribal members filed a class
action against the Interior Department and Secretary Gale Norton,
claiming mismanagement of the fund caused it to lose at least $10
billion. The Department has since been unable to account for the
missing funds and an exasperated Judge Lamberth held Ms. Norton in
contempt.
The shutdown caused the Department to miss between $10 million and $12
million in oil and gas royalties since December, prompting many
American Indians to write angry letters to the Court.
Interior Department officials said at a congressional hearing that they
were working long hours to bring their computers back online, but had
no idea when a court-appointed investigator would give them the green
light, according to Reuters. Secretary Norton said 90% of the
Department is still cut off from the Internet, "Our systems are
interconnected, and anything connected to the trust data.has to be shut
down."
Assistant Secretary Neal McCaleb said the Department has beefed up
security of the payment system and submitted it to the court
investigator for approval. However, he added he had no idea if it
would pass muster with the court appointed monitor, "He may come back
with some questions," McCaleb told Reuters.
The delay has created considerable hardship for Indians who depend on
the royalty payments, said New Mexico Democrat Tom Udall, whose
district encompasses many Indian communities.
MICHIGAN: Two Detroit City Employees Resign After Tax Forms Debacle
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Two Detroit City employees responsible for printing Social Security
numbers on the outside of Detroit tax forms have resigned, following a
class action filed against the City in Wayne County Circuit Court for
negligence, ClickonDetroit's Local 4 reported.
At least 400,000 tax forms with the Social Security numbers written on
their exterior were mailed, leaving many taxpayers to worry about
identity theft. Detroit City Mayor Kwame Kilpatrick has apologized for
the debacle, saying the City was responsible for revealing the numbers
on the outside of the forms.
Plaintiffs' lawyer Elizabeth Thomson said that many have stepped
forward expressing interest in joining the suit.
NEW YORK: Armenian Lawyer Files Suit For Heirs of Genocide Victims
------------------------------------------------------------------
New York Life Insurance Company faces a class action filed by a US-
based Armenian lawyer for Armenians who bought life insurance policies
from the Company before 1915.
Vardges Yerghian filed the suit seeking unpaid life insurance benefits
for heirs of the Armenians who bought the policies and lived in the
Ottoman Empire during the period prior to the Armenian Genocide that
began in 1915.
In a forum of Armenian lawyers, Mr. Yeghian said that due to his firm's
consistent work, the lists of Armenians in the Ottoman Empire who had
bought New York Life's insurance policies have been compiled.
According to the AZG Armenian daily, Mr. Yeghian's firm and the Company
will have to decide the amount of insurance benefits, to be paid to
genocide victims' heirs.
Mr. Yeghian's work was highly praised by Armenian lawyers with respect
to confirmation of the fact of genocide as well. Armenian ambassador to
OSCE and Central Europe Jivan Talibian was quoted by Noyan Tapan news
agency as saying that "despite successful settlement of juridical
questions, it is not enough to solve political problems." However,
according to him, this will allow in future to refer to territorial
issues.
PLANNED PARENTHOOD: Sued For Medical Malpractice, Genocide in St. Louis
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The Planned Parenthood Federation of America and St. Louis faces a
class action filed in the US District Court in St. Louis, alleging
medical malpractice, wrongful death, civil rights violations, mass
fraud, and genocide by specifically targeting minority women for
abortions.
The suit contends that Planned Parenthood has systematically committed
fraud by failing to inform women or outright lying to them about the
risks, both physical and emotional, associated with having an abortion.
Further, the suit also says that Planned Parenthood has, since the
organization's inception, been engaged in genocide through the
systematic targeting of low-income and minority women for abortions.
The suit reads, "Defendant has a long history, even dating back to its
origin and founding, of intentionally targeting and encouraging lower
income persons and those of minority races and ethnic groups, to have
abortions, sterilization, and to use contraception, in order to lower
the populations of said groups."
The suit further alleges that "Due to said efforts and intents of
Defendant to lower the populations of lower income and minority groups,
the populations of the African American, Hispanic, and American Indian
peoples have declined sharply over the past three decades. Such acts on
the part of Defendant reflect an intent on its part to commit genocide
against the plaintiff and other African Americans, persons of lower
socioeconomic status, and other minority groups, and to deprive them of
their fundamental right to bear children, in violation of 42 USC 981."
The primary plaintiff in this case is Nicole Smith, an African American
resident of Alorton, Illinois, who was 27 years old with three children
at the time the events, which gave rise to this complaint, took place.
On October 1, 1999, Ms. Smith went to the Planned Parenthood clinic in
St. Louis, unsure whether or not she wanted to have an abortion.
According to Ms. Smith, the counselor proceeded to encourage and even
pressure her into having an abortion, despite the fact that she was in
the second trimester of her pregnancy. When she asked about the health
risks related to the abortion, the counselor said she did not know of
any such risks and never mentioned any potential emotional harm from
having an abortion.
The abortion required a physician with Planned Parenthood to place
Laminaria, a chemical suppository that causes dilation, into Ms.
Smith's cervix so that the abortion procedure could be done the
following morning. When this procedure was done, Ms. Smith was then
told to go home and return the next morning to complete the abortion.
Approximately 4 to 5 hours after the Laminaria were placed inside her,
Ms. Smith had a change of heart and decided not to go through with the
abortion. She then called the clinic to ask that the Laminaria be
removed.
According to Smith, the staff member at the clinic refused her request
and told her to wait until the morning. Knowing that she would be
completely dilated by morning and fearing that she would lose her
child, Ms. Smith went to the emergency room at Belleville Memorial
Hospital in Belleville, Illinois, and had the Laminaria removed that
night.
During the initial exam, it was noticed that fluid was leaking from her
vagina, so she was admitted to the hospital and given intravenous
medication. A sonogram was administered to her on October 5, revealing
that the child had died in utero. Smith was devastated emotionally from
the loss of her child and felt extremely guilty for even beginning the
abortion procedure in the first place.
Shortly after her discharge from the hospital on October 11, and
subsequent to the death of her child, Ms. Smith called the Planned
Parenthood clinic to notify them of her illness, her hospital stay, and
the death of her child, but the clinic received her complaint with
"arrogance and rudeness."
Planned Parenthood's parent Association, The New Zealand Family
planning Association (NZFPA) believes that the suit may have direct
repercussions on the NZFPA. Suits by complainants unhappy and hurt by
the methods of the Family Planning Association in New Zealand could
follow as a result.
PRUDENTIAL INSURANCE: Miami Suit Seeking $400,000 Damages Goes To Jury
----------------------------------------------------------------------
A suit filed in Miami by four policyholders who rejected a $4 billion
national class action settlement offered by Prudential Insurance Co.
went to the jury late Thursday, reports ConsumerAffairs.com
Under consideration by the jury is a demand for at least $101,000 in
compensatory damages for each of the plaintiff and punitive damages to
punish the company for what their attorney called "the largest fraud
ever perpetrated on the American public."
The suit accuses the Company of cheating policyholders of more than $15
billion by deceptively "churning" life insurance sales in the 1980s and
1990s. "Churning" refers to talking policyholders into exchanging an
existing insurance policy for one that offers less coverage or higher
premiums or both, the report says.
Accordingly, majority of the policyholders allegedly caught in the scam
were elderly and say they were falsely led to believe that the new
policies included nursing home coverage. In all, as many as 1.7
million customers were duped, the report says.
The Company, which has already paid more than $200 million in fines and
regulatory fees aside from the $4 billion settlement, maintains it has
more than restituted for its misdeeds.
The lawyer for the policyholders, however, claims the Company did all
it could to discourage affected customers from filing claims under the
class-action settlement by issuing a 40-page notice and a 20-page claim
form.
SAVINGS BANK: Supreme Court Accepts Key Arguments in Summary Judgment
---------------------------------------------------------------------
Plaintiffs in the class action against Savings Bank Life Insurance of
Massachusetts experienced a setback, when the Supreme Judicial Court
affirmed a state court's decision accepting two of the Company's key
defense arguments in "summary judgment" or without a trial.
The suit focuses on the amount of money the Company keeps in its
"safety fund," which is set aside to cover future contingencies other
than policy claims. State law allows insurers to keep safety funds no
larger than 12% of the total they keep on hand for claims.
Lawyer Jason Adkins has been vocal in his four-year campaign against
the Company, saying that it has kept between 16% and 19% of its
reserves in a safety fund since 1992, the year it converted from a
mutual company to a stock company. The $57 million excess, he claims,
rightfully belongs to the Company's policyholders, according to the
Boston Globe. The Company countered Mr. Adkin's accusations by saying
that he ignored the deductions the Company is entitled to take before
performing the 12% percent calculation.
The Supreme Court decision agreed with the insurer on two of the major
deductions, a ruling the Company has welcomed. Company general counsel
Peter Lyons told the Boston Globe, "This decision gets us 70 percent to
80 percent of where we want to be.This is a 17-page judgment written in
pretty strong language, and there's nothing in there to give Jason any
comfort."
Mr. Adkins says he will continue the fight, even though the ruling
greatly limited the amount of money in dispute. According to the
Boston Globe, Mr. Adkins will ask the Supreme Judicial Court to
reconsider its decision, and, regardless of the Court's decision, will
press on at the trial court level. He says "The Court misconstrued the
statute, and we think there's a good chance they will revisit the issue
when we present that information.There are still many issues that need
to be adjudicated."
Specifically, the State Supreme Court ruled that the Company can deduct
the present value of future payments it is required to make to
policyholders as part of the 1992 switch to stock ownership, as well as
the percentage of the safety fund technically owned by the Company's
stockholders, and not its policyholders.
US BANCORP: Former Employee Files Suit For Sex Discrimination in MN
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Investment firm US Bancorp Piper Jaffray faces a gender bias class
action filed by Kathleen Fisler, a former managing director and broker
for the firm, claiming that male brokers received preferential
opportunities when it came to accounts, promotions and general
treatment, according to a startribune.com report.
The suit, filed in the US District Court in Minneapolis, asserts that
female brokers are subject to higher standards than male brokers and
given less access to potentially lucrative accounts, receiving less
compensation as a result.
Ms. Fisler, 53, worked at the Company from 1977 to 1989, left the firm
then returned in 1997 to work as Managing Director. She later left in
November 2000 "because the work environment became intolerable," the
suit contends.
The suit states that only 14.6% of the firm's brokers are women, while
women account for an overwhelming percentage of the support staff. The
suit also said only 13 percent of the women who are in positions that
make them eligible for managing director actually get the title,
compared with 30 percent of the men in that level who are named
managing directors, according to startribune.com.
The suit is the third gender bias suit filed against the Company. One
was filed in California two years ago while another was filed in
Milwaukee last fall.
In a prepared statement, the Company denies the allegations and notes
that Ms. Fisler did not use an internal process to raise her complaints
and allow the situation to be investigated according to Company
policies against discrimination. US Bancorp states, "The Company
recruits women brokers and is committed to providing equal employment
opportunities."
*Enron Corporation Insiders' Defense Hinges On SEC Trading Rules
-----------------------------------------------------------------
"They were insiders; they traded."
Whether the 29 Enron Corporation officers and directors are guilty of
illegal insider trading is something the courts will have to decide as
they examine the law on this subject. Dan Feldstein of the Houston
Chronicle, some lawyers and legal scholars have set forth, relatively
briefly given the complexity of the issue, what questions will be
asked, what is the relevant law and its various interpretations, which
will be used to answer those questions.
When a stock plummets after a company revises financial information
previously made public, shareholders who lose money are certain to file
civil lawsuits seeking damages. The liability of the corporate
insiders depends on whether they were both aware of the damaging
information and bought or sold stock before such information was
disclosed to the public.
In this case for example, several pension funds, a group of some 430
former Enron employees and Amalgamated Bank of New York have filed
class actions against Company insiders but not against the Company
itself. The officers and directors made hundreds of millions of
dollars by selling the Company's stock from 1999 through 2001.
Amalgamated Bank lost millions when the stock crashed. Its lawsuit
says that Enron Chairman, Kenneth Lay, sold stock worth more than $100
million, while he and other insiders knew that Enron's accounting
practices were a sham designed to boost stock prices. However, many of
the insiders may be able to rely on a defense that only has been
available for the last year.
The Securities and Exchange Commission (SEC), which writes the rules on
insider trading, says an insider may not make a trade "on the basis of
material, nonpublic information." What, exactly, does this prohibition
mean?
Three US Circuit Courts have issued differing interpretations of the
expression "on the basis of." These range from a ruling that says the
phrase means simply having the information, to one that says it means
actually using the information such as a state of affairs (and/or a
state of mind), which is much harder to prove. The SEC itself has
clarified the phrase to mean if the insider was "aware" of the
information, but that definition of the phrase has yet to be tested in
the courts.
There is also the question of whether information is both "material"
and "non public." Enron's aggressive accounting practices, most
prominently relating to the hundreds of off-book partnerships that
effectively hid huge losses, is "material" and therefore must be
"considered important" if it were known by a reasonable shareholder.
That's bad news for insiders, according to Shirli Weiss, a partner and
head of securities litigation at Gray Cary, a California-based law firm
that generally defends insiders. The plunge of the stock price from
$82 last January to less than a dollar is, on its face, possible proof
that the information was important. Said Ms. Weiss, "The fact that
that the public has reacted so adversely to the information about the
off-book partnerships," testifies to the information's materiality.
As for whether the information was public, said University of Texas law
professor, Henry Hu, the question is whether the outside world really
understood the potential liability of those partnerships. If not, then
the information was probably nonpublic.
It must be considered, too, whether the insiders were "aware" of the
SEC's meaning for "on the basis of." Will executives and board members
claim they had no idea to what extent Enron would be affected by the
alleged "questionable practices"?
Attorneys representing Enron, Mr. Lay and accounting firm Arthur
Andersen have characterized the Amalgamated Bank lawsuit as outrageous
and noted that Company executives were largely making use of a new,
SEC-authorized procedure to divest themselves of stock, called program
trading.
As a major portion of their compensation is in the form of stock
awarded by their companies, corporate executives must regularly sell
some of this stock to generate income and to diversify their investment
portfolios. However, this procedure leaves them vulnerable to these
kinds of lawsuits. So, in late 2000, the SEC set up a program trading
rule. Under this rule, an insider is permitted to set up a pre-
programmed plan to sell a certain amount of shares every day, week or
month, or perhaps when certain predetermined price milestones are met.
Mr. Lay's attorney has said that many of the insider trades were simply
programmed trades. Public records show Mr. Lay usually sold identical
amounts of stock nearly every trading day since the new rule was
enacted.
According to the SEC, if the sales were set up before the executive had
inside information that might affect the stock price, he has an
"affirmative defense" against the charge of insider trading. Such a
selling program can be set up through special instructions to a broker
and cannot be altered after it is set in motion. In an investigation,
the broker might be compelled to produce those instructions, legal
experts said.
Roger Greenberg, Houston co-counsel for the San Diego law firm
representing Amalgamated Bank, said he would provide evidence that
Company insiders knew about questionable deals long before an Enron
executive wrote a damning internal memo in August 2001. In that memo,
Sherron Watkins, Vice President for Corporate Development, warned Mr.
Lay that Enron was headed for catastrophe because of questionable
accounting practices involving off-the-books companies.
Examining when the executives had knowledge of the questionable
accounting practices may provide the key to executive liability,
despite the program trading rule, if it can be shown that the
executives had negative information about Enron before they set up
their respective program sales.
Insider-trader lawsuits are almost always settled, Ms. Weiss said. A
recent case involving Waste Management of Houston was settled for $220
million, which was used to compensate stockholders for overstated
earnings. Officers and Board Members generally have insurance against
personal liability in such lawsuits, but they could be held responsible
in cases of proven fraud. The US Department of Justice is investigating
that possibility.
The plaintiffs have filed their civil lawsuits, but the SEC is
independently investigating the issue, and if it finds executives
and board members were making improper use of inside information, it
could ask a Washington, DC court to fine executives and board
members up to three times the profits reaped from the sales.
Securities Fraud
ARTHUR ANDERSEN: Memphis Lawyer Sues To Recover $17T Enron Investment
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Memphis lawyer Joseph Barton commenced a class action against Big Five
accounting firm Arthur Anderson in Tennessee's General Sessions Court,
for its role in the collapse of energy trader Enron Corporation, the
Memphis Business Journal reports.
Mr. Barton filed the suit seeking $17,762 to recover his family's lost
investment in the Company after its stock plummeted to US$ 12.94 from
over US$40 in August. He adds, "About 3% of the portfolio went up in
smoke. As tragedies go, it was pretty modest.I was much more worried
about IBM. But 17 grand of my kids' money? Yeah, you get hacked."
Mr. Barton said he filed suit separately from the class action suits
because those he expects those suits will win more for the lawyers than
the shareholders who saw over $80 billion in equity vanish since the
Company's $83, 52-week high on January 24. The Memphis Business
Journal reports this is the first suit against the Company in Memphis.
Although Mr. Barton says he's moving toward a settlement, Arthur
Andersen's local lawyer, Eugene Podesta of Baker, Donelson, Bearman &
Caldwell PC, says it's too early to say, "It's very early on and there
has not been any serious discussion along those lines.Right now, my
marching orders are to defend."
BIOPURE CORPORATION: Pomerantz Haudek Lodges Securities Suit in MA
------------------------------------------------------------------
Pomerantz Haudek Block Grossman & Gross LLP filed a securities class
action lawsuit against Biopure Corporation (Nasdaq:BPUR) on behalf of
all purchasers of the Company's common stock during the period between
May 8, 2001 and December 6, 2001, inclusive, in the United States
District Court for the District of Massachusetts.
The suit alleges that the Company, a developer, manufacturer and
marketer of a new class of pharmaceuticals it calls "oxygen
therapeutics," and its Chairman and Chief Executive Officer, violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by
issuing materially false and misleading statements concerning the
likely timing of the Company's filing with the US Food and Drug
Administration (FDA) of its Biologic License Application (BLA) to
market Hemopure, its experimental blood substitute for patients
undergoing elective surgery. In particular, defendants led investors
to believe that the BLA was on track to be filed by year-end 2001.
As alleged in the suit, these statements were materially false and
misleading because, by the commencement of the class period, defendants
knew, or recklessly ignored, the fact that the data collected from the
Hemopure trial completed in August 2000 was significantly deficient and
failed to demonstrate that the trial had been conducted in an "adequate
and well-controlled" manner. As such, plaintiff asserts that the data
lacked reliability, thereby making any application unlikely to be
accepted for filing, much less approved, by the FDA. It is further
alleged that defendants also knew that the FDA would not allow a BLA to
be filed where the data lacked "prima facie" reliability.
On December 6, 2001, the Company announced that it would not file the
Hemopure application until mid-2002, contrary to repeated prior
assertions that the BLA would be filed in 2001. The Company blamed the
delay on "additional facility and process validation requirements" for
its Cambridge, Massachusetts manufacturing plant. Plaintiff asserts
that this was merely a pretext for the delay, which in fact was
occasioned by the data deficiencies that had arisen during the clinical
trial.
As a result of the postponement, the price of Company stock fell to
less than $15 per share, well below the $20 plateau above which the
stock traded throughout most of the class period.
For more information, contact Andrew G. Tolan by Phone: (888) 476-6529,
(888) 4-POMLAW by E-mail: agtolan@pomlaw.com or visit the firm's
Website: http://www.pomlaw.com
DIGITAL ISLAND: Much Shelist Probes For Possible Securities Violations
----------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein PC is investigating
whether Digital Island, Inc. (Nasdaq: ISLD) violated federal securities
laws by failing to disclose material information to purchasers of its
common stock from May 14,2001 to August 30,2001
The firm is also investigating Cable & Wireless P.L.C., Dali
Acquisition Corp., Ruan F. Ernst, CEO of Digital Island, and the
members of the Digital Island Board of Directors on behalf of:
(1) Company shareholders who received an offer to purchase from
Cable & Wireless in May and June 2001; and
(2) 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.
Specifically, the proposed defendants failed to disclose important
contracts between the Company and Bloomberg, LLP, and the Company and
Major League Baseball's Internet media. Those contracts were not
disclosed either in the offer to purchase or the proxy statement.
The firm is also investigating whether the proposed defendants violated
the all-holders provision of the Williams Act by giving additional
consideration to directors and officers of the Company, 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 Carol V. Gilden, Jean K. Janes or Michael
E. Moskovitz by Phone: 1-800-470-6824 or E-mail: cgilden@muchlaw.com,
jjanes@muchlaw.com or mmoskovitz@muchlaw.com. E-mail should refer to
Digital Island.
ELAN CORPORATION: Schiffrin Barroway Lodges Securities Suit in S.D. CA
----------------------------------------------------------------------
Schiffrin & Barroway, LLP commenced a securities class action in the
United States District Court for the Southern District of California on
behalf of all purchasers of the common stock of Elan Corporation, PLC
(NYSE: ELN) from January 2, 2001 through January 29, 2002, inclusive.
The suit charges the Company and certain of its officers and directors
with violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint
alleges, among other things, that defendants issued a series of
materially false and misleading statements regarding the Company's
financial condition.
The suit alleges that as part of their effort to boost the price of
Company securities, defendants materially overstated the Company's
revenues by creating entities that were essentially controlled by the
Company for research and development.
The Company immediately took back its investment in the form of a
license fee, which it recorded as revenue. In some instances the joint
ventures had no money left for the development of drugs and the Company
ended up lending money to the entity.
After the market closed on January 29, 2002, The Wall Street Journal
described the Company's accounting as a "charade" and quoted a former
SEC accountant as stating that it is like "taking money out of one
pocket and putting it in another." On this news the price of the
Company's securities dropped from $35.20 to $29.25.
For more information, contact Marc A. Topaz or Stuart L. Berman by
Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone:
1-888-299-7706 (toll free) or 1-610-667-7706 or by E-mail:
info@sbclasslaw.com
ELAN CORPORATION: Kaplan Fox Commences Securities Fraud Suit in S.D. NY
-----------------------------------------------------------------------
Kaplan Fox and Kilsheimer LLP initiated a securities class action in
the United States District Court for the Southern District of New York
against Elan Corporation PLC (NYSE: ELN) and certain of the Company's
officers and directors, on behalf of all purchasers of the Company's
American Depository Shares (ADSs) between April 23, 2001 and January
30, 2002, inclusive.
The suit alleges that the Company and certain of its officers and
directors violated Sections 10 (b) and 20 (a) of the Securities
Exchange Act of 1934. Specifically, it is alleged that the Company
improperly reported revenues and earnings from entities in which it had
joint ventures and/or invested in.
In a Wall Street Journal article published on January 30, 2002
questioning the propriety of the Company's accounting practices, former
SEC Chief Accountant, Lynn Turner reportedly characterized certain of
the types of accounting practices utilized by the Company referred to
in the article as a "charade." It is alleged that as a result of
Defendants' improper accounting practices during the class period, the
price of Company ADSs traded at artificially inflated prices.
For more information, contact Frederic S. Fox, Joel B. Strauss or
Shelly Thompson by Mail: 805 Third Avenue, 22nd Floor New York, NY
10022 by Phone: (800) 290-1952 or (212) 687-1980 by Fax: (212) 687-7714
or by E-mail: mail@kaplanfox.com
ELAN CORPORATION: Scott Scott Commences Securities Suit in S.D. CA
------------------------------------------------------------------
Scott + Scott LLC initiated a securities class action in the United
States District Court for the Southern District of California on behalf
of purchasers of Elan Corporation, PLC (NYSE: ELN) publicly traded
securities during the period between April 23, 2001 and January 29,
2002.
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, defendants reported favorable
financial results for the Company. They did this while concealing
expenses through joint ventures, recognizing income from companies in
which the Company had invested (round-trip revenue) and concealing
material related-party transactions. As a result, Company stock traded
as high as $65.
The Wall Street Journal on January 30, 2001, published an article on
the Company's accounting entitled, "Research Partnerships Give Irish
Drug Maker Rosy Financial Glow." The article quoted Lynn Turner, a
former chief accountant for the SEC, "What's the real substance?. I'm
taking money out of one pocket and putting it in another. That is a
charade." The article went on to describe several transactions in which
the Company had recognized revenue where it had funded the entire
purchase price. On this news, Company stock dropped to as low as
$22.40, before closing at $29.25 on volume of 37.1 million shares.
For more information, contact David R. Scott or James E. Miller by
Phoen: 800/404-7770 by E-mail: drscott@scott-scott.com or
jmiller@scott-scott.com or visit the firm's Website:
http://www.scott-scott.com
ELAN CORPORATION: Schiffrin Barroway Files Securities Suit in S.D. NY
---------------------------------------------------------------------
Schiffrin & Barroway, LLP commenced a securities class action in the
United States District Court for the Southern District of New York (not
the Southern District of California, as earlier reported) on behalf of
all purchasers of the common stock of Elan Corporation PLC (NYSE: ELN)
from January 2, 2001 through January 29, 2002, inclusive.
The suit charges the Company and certain of its officers and directors
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,
among other things, that defendants issued a series of materially false
and misleading statements regarding the Company's financial condition.
The suit alleges that as part of their effort to boost the price of
Company securities, defendants materially overstated the Company's
revenues by creating entities that were essentially controlled by the
Company for research and development. The Company immediately took
back its investment in the form of a license fee, which it recorded as
revenue. In some instances the joint ventures had no money left for the
development of drugs and the Company ended up lending money to the
entity.
After the market closed on January 29, 2002, The Wall Street Journal
described the Company's accounting as a "charade" and quoted a former
SEC accountant as stating that it is like "taking money out of one
pocket and putting it in another." On this news the price of the
Company's securities dropped from $35.20 to $29.25.
For more information, contact Marc A. Topaz or Stuart L. Berman by
Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone:
1-888-299-7706 (toll free) or 1-610-667-7706 or by E-mail:
info@sbclasslaw.com
ELAN CORPORATION: Cohen Milstein Commences Securities Suit in S.D. NY
---------------------------------------------------------------------
Cohen, Milstein, Hausfeld & Toll, PLLC lodged a securities class action
in the United States District Court for the Southern District of New
York against Elan Corporation PLC (NYSE:ELN) and certain of its
officers and directors. The suit is brought on behalf of all persons or
entities who purchased the Company's American Depository Shares (ADSs)
between April 23, 2001 and January 30, 2002, inclusive.
The suit alleges that the Company and certain of its officers and
directors violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934. Specifically, it is alleged that the Company improperly
reported revenues and earnings from entities in which the Company had
joint ventures and/or invested in.
In an article published in The Wall Street Journal on January 30, 2002,
which questioned the propriety of the Company's accounting practices,
former SEC Chief Accountant Lynn Turner reportedly characterized
certain of these practices as a "charade."
The complaint alleges that as a result of the defendants' improper
accounting practices during the class period, the price of Company ADSs
traded at artificially inflated prices.
For more information, contact Mark S. Willis or Robert Smits by Phone:
888/240-0775 or 202/408-4600 by E-mail: mwillis@cmht.com or
rsmits@cmht.com or visit the firm's Web site: http://www.cmht.com
ELAN CORPORATION: Berger Montague Initiates Securities Suit in S.D. NY
----------------------------------------------------------------------
Berger & Montague, PC commenced a securities class action against Elan
Corporation, PLC (NYSE: ELN) and certain of its principal officers and
directors in the United States District Court for the Southern District
of New York on behalf of all persons or entities who purchased the
Company's American Depository Receipts (ADRs) between April 23, 2001
and February 4, 2002, inclusive.
The suit alleges that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of l934. More specifically, the suit
alleges that defendants issued materially false and misleading
financial statements and failed to disclose material information during
the class period, causing the Company's ADRs to trade at artificially
inflated prices, thereby damaging investors who purchased them.
On January 30, 2002, The Wall Street Journal reported on the Company's
manipulative accounting practices. The article detailed instances of
the Company creating revenue out of thin air by establishing an
Company-controlled entity for research and development purposes,
funding the entity through a multi-million dollar "investment" and then
immediately taking back the "investment" in the form of a "licensing
fee," which it then recorded as revenue. The Wall Street Journal
quoted the SEC's former chief accountant, who described the practice as
a "charade" akin to "taking money out of one pocket and putting it into
another." On January 30, 2002, following the release of The Wall Street
Journal report, the Company's ADR price fell nearly 17%.
On February 4, 2002, the Company announced its financial results for
the year ended December 31, 2001. In its press release the Company
disclosed, among other things, that "in the light of current market
concerns relating to off- balance sheet arrangements through QSPE
[Qualified Special Purpose Entities] structures, Elan has two QSPEs
which it has not consolidated in its financial results as presented
under US generally accepted accounting principles." Following the
release of the Company's announcement, the Company's ADRs lost over 50%
of their remaining value, dropping to $14.84 from a close of $29.95 the
previous trading day, on volume of over 54,000,000 shares.
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 Web site:
http://www.bergermontague.com
ELAN CORPORATION: Wolf Popper Commences Securities Suit in S.D. NY
------------------------------------------------------------------
Wolf Popper LLP initiated a securities class action against Elan
Corporation PLC (NYSE: ELN) and certain of its senior officers for
violations of the federal securities laws in the United States District
Court for the Southern District of New York. The suit was brought on
behalf of all persons who purchased Company ADRs on the open market
during the period beginning on January 29, 2001 through February 4,
2002, inclusive.
The suit alleges in this action that during the class period, the
Company misrepresented its financial results and prospects for growth
and profitability by:
(1) recognizing as recurring product revenue the non-recurring
sale of approximately $238 million of product lines;
(2) recognizing $256 million as licensing revenue on moneys paid
by joint ventures formed by the Company, in which it provided
the investment capital for the payment of the license revenue
(round-trips); and
(3) failing to recognize approximately $136 million in operating
expenses that were incurred by controlled entities as required
by the "equity" method of accounting.
The true facts were first disclosed to investors on January 30, 2002 in
a lead article in The Wall Street Journal identifying the joint
ventures formed by the Company during 2001 that were utilized by
defendants to inflate its operating results.
The Wall Street Journal also revealed that the Company was inflating
its reported recurring product revenues by including non-recurring
sales of product lines. The Company subsequently acknowledged the
impact of its accounting manipulations on its reported 2001 financial
results in a press release and analysts' conference call on February 4,
2002.
In reliance on the truth and accuracy of defendants' public statements,
Company ADRs traded as high as $65.00 per ADR during the class period.
When the true facts were revealed, the ADRs plummeted to approximately
$15 per ADR.
For more details, contact Robert C. Finkel by Mail: 845 Third Avenue
New York, NY 10022-6689 by Phone: 212-451-9620 or 877-370-7703 by Fax:
212-486-2093 or 877-370-7704 by E-Mail: IRRep@wolfpopper.com or visit
the firm's Website: http://www.wolfpopper.com
ENRON CORPORATION: Court To Hear Motions Re Automatic Stay, Insurance
---------------------------------------------------------------------
The US Bankruptcy Court for the Southern District of New York will hold
hearings regarding a motion to lift the "automatic stay" that has
protected Enron from lawsuits since it filed for bankruptcy on December
2, 2001. An attempt to block Enron from tapping into an $85 million
fiduciary liability insurance policy earmarked to compensate workers
will also be considered.
Hearings on the motions filed by the Gottesdiener Law Firm to recover
financial losses suffered by participants in Enron Corporation's 401(k)
plan will commence February 13 and 20, 2002.
The legal maneuver would allow workers to proceed in their efforts to
establish that Enron violated federal pension laws in its handling of
its 401(k) Plan, and share in whatever proceeds may be available after
secured creditors' claims are satisfied in the bankruptcy.
Eli Gottesdiener, head of the law firm, asserts "We're gratified that
Judge Gonzalez has granted us a hearing and look forward to giving
voice to the Enron worker's concerns."
For more information, contact Eli Gottesdiener by Phone: 202/243-1000
or Jamie Diaferia of Infinite Public Relations by Phone: 212/787-4588
or visit the Web site: http://www.enronsuit.com
GLOBAL CROSSING: Faces Suit For Securities Violations in Rochester, NY
----------------------------------------------------------------------
Pennsylvania law firm Chamberlain, D'Amanda, Oppenheimer & Greenfield
commenced a class action against Global Crossing Ltd. in Rochester, New
York, accusing certain Company directors of cashing in on Company stock
while pumping its revenues with questionable accounting tricks.
Unlike similar actions in California District Court, the suit would not
be stayed pending the outcome of the Company's Chapter 11 bankruptcy,
Matthew Fusco, partner for the firm told the Rochester Business
Journal. The suit alleges that the Company used deceptive practices to
artificially boost revenues, including booking 20 years worth of
bandwidth-lease payments in a single year.
Company founder and co-chairman Gary Winnick allegedly sold 10 million
shares of stock worth more than $123 million in 2001. Director Joseph
Clayton sold 50,000 shares worth $770,000 during the same time frame,
the suit states. In March of 2001, the Global Crossing stock traded in
the $60 range, according to the Business Journal
The Company later announced that third quarter revenues would miss
projections by $400 million in the fall of 2001. This caused the
Company's share price to plummet. The Company later filed a Chapter 11
petition last month after its share price had fallen to less than $1.
The suit is filed on behalf of anyone who purchased Company stock
between April 28, 1999, and Oct. 1, 2001, a period that would include
former Frontier Corporation employees whose 401(k) Frontier stock
converted to the Company's stock after its 1999 acquisition of
Frontier.
Chamberlain, D'Amanda, Oppenheimer and Greenfield is local counsel for
Schiffrin and Barroway LLP, who has commenced a suit against the
Company in California.
GLOBIX CORPORATION: Much Shelist Probes Possible Securities Violations
----------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
whether Globix Corporation violated federal securities laws regarding
its December 27, 2001 shocking announcement that the Company would be
effectuating a pre-packaged bankruptcy. The firm is including in its
investigation officers Marc Bell, Peter Herzig and Brian Reach, on
behalf of shareholders of the Company from November 16,2000 to December
27,2001.
Before that announcement, on November 16, 2000, in an effort to
stabilize the price of Company stock and to assuage investor concerns
over the Company's continuing as going concern, the proposed defendants
set forth the Company's business plan, which stated that the Company
would be fully funded to fiscal 2003 and thereafter have cash flow
positive.
This sentiment was repeated in the Company's annual report filed on
Form 10-K with the Securities and Exchange Commission and numerous
times thereafter in the Company's press releases and conference calls.
Nonetheless, on December 27, 2001, the Company announced that
management had been secretly negotiating with its bondholders and
preferred stockholders to effectuate a pre-packaged bankruptcy that
would result in a near total dilution of the existing common
stockholders' interest in the Company.
For more information, contact Carol V. Gilden, Jean K. Janes or Michael
E. Moskovitz by Phone: 1-800-470-6824 or by E-mail:
cgilden@muchlaw.com, jjanes@muchlaw.com or mmoskovitz@muchlaw.com. E-
mail should refer to Globix.
HANOVER COMPRESSOR: Wolf Haldenstein Lodges Securities Suit in S.D. TX
----------------------------------------------------------------------
Wolf Haldenstein Adler Freeman & Herz LLP commenced a securities class
action lawsuit in the United States District Court for the Southern
District of Texas, Houston Division, on behalf of purchasers of the
publicly traded securities of Hanover Compressor Company (NYSE: HC)
between November 8, 2000 and January 28, 2002, inclusive, against the
Company and certain of its officers and directors.
The suit alleges that defendants violated the federal securities laws
by issuing false and misleading statements throughout the class period,
concerning the Company's operating performance that had the effect of
artificially inflating the market price of its securities.
The Company's true state of fiscal affairs was in fact substantially
different than reported to the markets. Specifically, the true facts,
which were known by the defendants during the class period but
concealed from the public, were:
(1) the $16 million in revenue and $2.6 million in net income
recognized in the 3rd and 4th quarter associated with the
Hampton Roads fabrication project should not have been
recognized as it did not reflect the percentage of the
project's completion;
(2) the Company's "former majority partner" in the Hampton Roads
project was actually replaced on March 19, 2001, not July
2001;
(3) defendants "paid off" the investor in Hampton Roads the sum of
$1 million in exchange for the investor's signature on the
sham transaction documents on or before Sept. 30, 2000, in
order for the Company to use the same to inflate the Company's
revenue and earnings as early as 3rd quarter 2000;
(4) defendants issued a "side letter" to the Hampton Roads
investor offering to loan up to $40 million to the joint
venture in order to induce the investor to enter into the
agreement by Sept. 30, 2000;
(5) in winter 2000, defendants actually knew that the Hampton
Roads project completion date had been pushed out to 2003 or
2004, not 2001;
(6) the registration statement omits the Hampton Roads project and
incorporates the Company's false and misleading 3rd and 4th
quarter 2000 financial results;
(7) the Company's financial statements for 1st to 3rd quarter 2001
were false in that the revenue and EPS were overstated and
they failed to disclose the impact of the dubious Hampton
Roads project. Moreover, these statements (in addition to the
registration statement/prospectus) concealed the fact that the
investor in the transaction advised defendants in February
2001 that it sought to back out of the venture;
(8) on Feb. 6, 2001, the investor in Hampton Roads demanded a
refund of his $4 million. Further, in a secret "behind-the-
scenes" type transaction, the Company refused to refund the
money directly to the investor. Instead, defendants forwarded
the money to a company related to the investor so that the
transaction would go uncovered; and
(9) defendants arranged for the "related company" to issue a
Promissory Note to the Company in the amount of $4 million
(the same amount as the refund) which it agreed in an oral
"side agreement" not to insist upon payment.
For more information, contact Fred Taylor Isquith, Gregory M. Nespole,
Michael Miske, George Peters or Derek Behnke by Mail: 270 Madison
Avenue, New York, New York 10016 by Phone: (800) 575-0735 by E-mail:
classmember@whafh.com or visit the firm's Website:
http://www.whafh.com.All E-mail correspondence should make reference
to Hanover Compressor.
HOMESTORE.COM: Berman DeValerio Commences Securities Suit in C.D. CA
--------------------------------------------------------------------
Berman DeValerio Pease Tabacco Burt and Pucillo initiated a securities
class action against Homestore.com, Inc. (Nasdaq:HOMS), claiming the
company misled the public about its financial results. The suit was
filed in the US District Court for the Central District of California,
and seeks damages for violations of federal securities laws on behalf
of purchasers of Company stock from May 4, 2000 through December 21,
2001.
The suit accuses the Company, an online provider of home and real
estate information, products and services, of improperly recording
revenue and artificially inflating its financial results. According to
the suit, the Company reported record earnings growth during the class
period due largely to strong sales of advertising on its websites.
However, the suit says the Company and three individual defendants
relied on accounting tricks to beef up its revenue, not bona fide
sales. Rather than receiving cash for ad space, the Company would buy a
product or service from companies that placed ads on its website. Such
barter transactions should not have been entered as direct revenue
under generally accepted accounting principles, the lawsuit claims.
The first whiff of trouble came on December 21, 2001, when the Company
admitted that an independent investigator was examining its accounting
practices and that a restatement of earnings was forthcoming. Less than
two weeks later, the complaint said, the Company announced the
preliminary results of the inquiry, that the Company had overstated
online advertising revenues by between $54 million and $95 million over
the first three quarters of 2001.
After the December 21 announcement, Nasdaq halted trading of Company
stock at $3.60. When trading resumed on January 7, Company stock fell
to a low of $1.24 before closing at $2.46, down 32% from its last close
and far below the class period high of $54.62. Not everyone saw his
paper earnings evaporate, though. According to the suit, the
individual defendants named in the suit reaped nearly $34 million from
insider sales before the truth emerged.
For more information, contact Patrick T. Egan or Jennifer Abrams by
Mail: One Liberty Square, 425 California Street, San Francisco CA 94104
by Phone: (800) 516-9926 or (415) 433-3200 by E-mail: law@bermanesq.com
or visit the firm's Website: http://www.bermanesq.com
HOMESTORE.COM: Much Shelist Probes For Possible Securities Violations
---------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
Homestore.com, Inc. (Nasdaq: HOMS) for possible securities violations
for the period starting June 20, 2000 to December 21, 2001. The
Company allegedly issued a series of materially false and misleading
statements regarding its financial results for part of 2000 and the
first three quarters of 2001.
Beginning on December 21, 2001, the Company issued a series of press
releases admitting accounting improprieties:
(1) December 21, 2001 - the Company admitted that its past
accounting for its prior results was inaccurate, and that it
would have to restate certain of its financial statements;
(2) January 2, 2002 - the Company admitted that its 2001 revenue
had been overstated by as much as $95 million, and further
stated that an internal investigation revealed that between
$54 million and $95 million of barter transactions during
the first three quarters of 2001 were booked incorrectly as
advertising transactions. The restatement could amount to as
much as 27 percent of the Company's revenue during the first
three quarters of 2001. The Company and certain of its
officers and directors also admitted that, "additional
material restatements" may follow, including restatements of
financial results for 2000; and
(3) January 16, 2002 - the Company announced, "additional
disciplinary actions related to the previously announced
internal accounting inquiry. The company has terminated, or
accepted resignations from seven employees, including three
who had previously been placed on administrative leave. The
company may take additional disciplinary measures before the
inquiry is complete;"
During the class period, Company stock traded as high of $55 per share,
but it closed on December 21, 2001 at $3.60 per share. After the
Company admitted its accounting inaccuracies on December 21, 2001, its
stock was halted. When trading resumed on January 7, the stock fell to
an intra-day low of $1.24 per share.
For more information, contact Carol V. Gilden, Jean K. Janes or Michael
E. Moskovitz by Phone: 1-800-470-6824, or by E-mail:
cgilden@muchlaw.com, jjanes@muchlaw.com or mmoskovitz@muchlaw.com. E-
mail should refer to the Company.
INFONET SERVICES: Much Shelist Probes Possible Securities Violations
--------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
whether Infonet Services Corporation (NYSE: IN) and certain of its
officers and directors violated federal securities laws during the
period starting December 16, 1999 through July 31, 2001.
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. On August
31, 2001, Company shares closed at $3.55.
During the class period, the Company misrepresented and concealed the
following facts about the true status of its AT&T-Unisource
Communications Services N.V. (AUCS) business:
(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)
would cause massive disruptions 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 it 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 firm believes that certain of the Company's officers and directors
knew that disclosure of these problems with its AUCS business would
have devastated the Company's chances of going public, which allowed
the Company to raise $1.1 billion in its December 16, 1999 IPO.
Further, the firm believes that the Company's top executives were
determined to conceal the news of the problems associated with its AUCS
business.
For more information, contact Carol V. Gilden, Jean K. Janes or Michael
E. Moskovitz by Phone: 1-800-470-6824 or by E-mail:
cgilden@muchlaw.com, jjanes@muchlaw.com or mmoskovitz@muchlaw.com. E-
mail should refer to Infonet Services.
MCLEOD USA: Cohen Milstein Initiates Securities Fraud Suit in N.D. Iowa
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Cohen Milstein Hausfeld & Toll, PLLC commenced a securities class acton
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 during the class period.
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, the Company purchased Intelispan for $40 million in
Company 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 or by E-mail:
afriedman@cmht.com or kjurgill@cmht.com
PNC FINANCIAL: Stays Mum on Multiple Securities Fraud Suits in W.D. PA
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PNC Financial Services, Inc. declined to comment on the multiple
securities class actions pending against the Company in the United
States District Court for the Western District of Pennsylvania, on
behalf of purchasers of the Company's stock from May 15, 2001 and
January 28, 2002, inclusive.
The suit alleges that the Company, one of the largest diversified
financial services and banking institutions in the United States, three
of its senior officials, and Ernst & Young, an accounting firm which
provided the Company with auditing and consultant work throughout the
Class Period, violated Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 by issuing materially false and misleading
statements to the market concerning its earnings prospects, results and
reductions in loans, which mislead investors and concealed the
Company's true financial condition.
Company spokesman Brian Goerke told the Pittsburgh Business Times,
"We're not going to comment on these class action suits."
PNC FINANCIAL: Kirby McInerney Commences Securities Suit in W.D. PA
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Kirby McInerney & Squire, LLP initiated a securities class action in
the United States District Court for the Western District of
Pennsylvania on behalf of all purchasers of PNC Financial Services
Group, Inc. (NYSE:PNC) during the period from July 19, 2001 and January
29, 2002.
The suit charges the Company and certain officers with violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
violations, as the complaint alleges, stem from the issuance of false
and misleading financial statements and financial results during the
class period. The issuance of such results, the complaint alleges, had
the effect of artificially-inflating the price of Company shares during
the class period, thereby damaging investors who purchased during this
period.
On January 29, 2002, the Company announced that it would restate its
second and third quarter financial results, and revise its recently-
announced fourth quarter results, in order to correct - at the request
of the Federal Reserve - certain accounting procedures it had used in
connection with off-balance sheet transactions. The Federal Reserve
concluded that the Company's use of such accounting mechanisms had
improperly presented to the investing public its true financial
results.
The Company's ensuing restatement and revision resulted, in toto, in
the disappearance of $155 million in previously announced 2001
earnings. Net income for 2001, after the restatement and revision, is
estimated to be $412 million, or $1.38 a share (as compared with its
previous report of 2001 earnings of $567 million, or $1.91 a diluted
share). When this restatement was disclosed, Company shares fell $5.79,
or nearly 10%, to close at $56.08 per share.
For more information, contact Ira M. Press, Mark Strauss or Orie Braun
by Mail: 830 Third Avenue, 10th Floor New York, New York 10022 by
Phone: (212) 317-2300 or (888) 529-4787 or by E-Mail: obraun@kmslaw.com
REGENERATION TECHNOLOGIES: LeBlanc Waddell Files Securities Suit in FL
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LeBlanc & Waddell, LLC initiated a securities class action against
Regeneration Technologies, Inc. (Nasdaq:RTIX) for alleged violations of
the federal securities laws for investors who purchased stock during
the period July 25, 2001 through January 31, 2002.
The suit is pending in the United States District Court for the
Northern District of Florida, Gainesville Division and charges that the
Company issued materially false and misleading financial statements
which caused its stock price to be artificially inflated.
For more information, contact Roger LeBlanc or Chad A. Dudley by Mail:
5353 Essen Lane, Suite 420, Baton Rouge, LA 70809 by Phone:
(800) 988-3514 or by E-mail: cdudley@lw-law.net or
rogerleblanc@lw-law.net
SUPREMA SPECIALTIES: Berman DeValerio Initiates Securities Suit in NJ
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Berman DeValerio Pease Tabacco Burt and Pucillo commenced a securities
class action that accuses Suprema Specialties, Inc. (Nasdaq: CHEZ) of
misleading the public about its financial results. The suit is pending
in the US District Court for New Jersey on behalf of all investors who
bought Company stock from August 8, 2001 through December 21, 2001.
The suit names the Company and six top officers and directors as
defendants, saying they inflated the Company's stock price during the
class period by issuing false and misleading statements about its
finances.
According to the suit, the deception began in August 2001 when the
Company announced "record" results for the fourth quarter and year-end
of 2001. In September 2001, the company filed statements with the US
Securities and Exchange Commission saying it was issuing 3.5 million
shares of stock to the public. The suit says that two of the
individual defendants reaped more than $4.6 million from sales of their
shares at that time.
In November 2001, the Company again trumpeted its results for the first
quarter of 2002. However, just one month later, the plaintiff says,
news of the deception was revealed. In a December 24, 2001 statement,
the Company announced the resignation of its chief financial officer
and controller and said it had begun an investigation into its past
financial results. Nasdaq halted trading in Company shares the same
day.
For more information, contact Chauncey D. Steele IV or Michael G. Lange
by Mail: One Liberty Square, Boston, MA 02109 by Phone: (800) 516-9926
by E-mail: law@bermanesq.com or visit the firm's Website:
http://www.bermanesq.com
TYCO INTERNATIONAL: Lovell Stewart Commences Securities Suit in S.D. NY
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Lovell & Stewart, LLP filed a securities class action on behalf of all
persons who purchased or otherwise acquired the common stock of Tyco
International Ltd. (NYSE: TYC), between February 1, 2000 through
February 1, 2002, inclusive. The suit is pending 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 a series of material misrepresentations to the
market during the class period, thereby artificially inflating the
price of the Company's common stock.
The complaint alleges that the Company's representations were rendered
false and misleading by defendants' failure to disclose:
(1) that the Company would achieve its earnings targets only
through undisclosed acquisitions;
(2) that the individual defendants sold in excess of $100,000,000
of their individual stock holdings to the company; and
(3) that the Company's management procedures were to make large
payments to insiders, including a $20,000,000 payment to one
director and his charity for furthering the interests of the
Company.
The complaint further alleges that external rule changes required the
Company to cease its allegedly aggressive revenue recognition practices
and recognize the revenues from its security contracts only as the
monies thereunder were received.
Throughout the class period, defendants were allegedly aware that the
adverse financial effect of the rule change by the Securities and
Exchange Commission would be approximately $1,000,000,000. However,
defendants allegedly failed to disclose this adverse financial effect
until partial disclosure was made in October 2001.
As defendants belatedly announced portions of the foregoing material
facts between October 2001 and January 2002, Company stock fell
allegedly by more than 40 plus percent.
For more information, contact Christopher Lovell or Ian T. Stoll by
Phone: 212/608-1900 or by E-mail: sklovell@aol.com
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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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