/raid1/www/Hosts/bankrupt/CAR_Public/020405.mbx
C L A S S A C T I O N R E P O R T E R
Friday, April 5, 2002, Vol. 4, No. 67
Headlines
CONNECTICUT: Teens Challenge Detention Center's Strip-Search Policy
CREDIT CARDS: Ask High Court To Review Antitrust Suit Certification
FLORIDA: Firefighters Mull Filing Suit Over Denial of Hepatitis Tests
GILBERT EXPRESS: Agrees To Settle Truckers Suit Over Agreement Forms
INSURANCE COMPANIES: Insurance Salesmen Sue To Recover Benefits, Wages
INDIANAPOLIS POWER: Employees File 401(k) Suit Due To AES Stock Losses
LAKEWOOD ENGINEERING: Recalls 107T Electric Heaters For Shock Hazard
NEW MEXICO: Ramah Lawyer Charges Detox Center With Illegal Detention
PNM RESOURCES: Plaintiffs in Kansas Gas Royalty Suit Drop Allegations
PACER LOGISTICS: Subsidiaries Prevail in Wage Fraud Suit In California
RENT-A-CENTER INC.: Finalizes Settlements Of Three Gender Bias Suits
VENTAS INC.: KY Court Dismisses Suit Over 1998 Spin-off From Vencor
WCI COMMUNITIES: FL Federal Court Refuses To Certify Homeowners Suit
Securities Fraud
ADELPHIA COMMUNICATIONS: Berger Montague Files Securities Suit in PA
ADELPHIA COMMUNICATIONS: Berman DeValerio Files Securities Suit in PA
ADELPHIA COMMUNICATIONS: Faruqi Faruqi Lodges Securities Suit in PA
ADELPHIA COMMUNICATIONS: Wolf Haldenstein Lodges Securities Suit in PA
ADELPHIA COMMUNICATIONS: Brian Felgoise Launches Securities Suit in PA
ADELPHIA COMMUNICATIONS: Spector Roseman Lodges Securities Suit in PA
APRIA HEALTHCARE: Agrees To Settle For US$43M Securities Suit in CA
AT CROSS: Shareholders Files Over Pen Computing Group Business in RI
CARESCIENCE INC.: To Mount Vigorous Defense V. Securities Suit in PA
COX COMMUNICATIONS: Sued Over Letter Agreement With At Home Corporation
CRITICAL PATH: Plaintiffs Voluntarily Withdraw Securities Fraud Suits
DYNACQ INTERNATIONAL: Bernstein Liebhard Launches Securities Suit in TX
ENRON CORPORATION: Insider Trading Claims To Be Significantly Expanded
FLAG TELECOM: Scott Scott Commences Securities Fraud Suit in S.D. NY
FLAG TELECOM: Milberg Weiss Commences Securities Fraud Suit in S.D. NY
GEMSTAR-TV GUIDE: Milberg Weiss Commences Securities Suit in C.D. CA
KMART CORPORATION: Marc Henzel Commences Securities Suit in E.D. MI
MEASUREMENT SPECIALTIES: Kaplan Fox Commences Securities Suit in NJ
METAWAVE COMMUNICATIONS: Abbey Gardy Lodges Securities Suit in W.D. WA
NEWPOWER HOLDINGS: Marc Henzel Commences Securities Suit in S.D. NY
PDI INC.: Marc Henzel Initiates Securities Fraud Suit in New Jersey
PNC FINANCIAL: Bernstein Liebhard Commences Securities Suit in W.D. PA
RARE MEDIUM: Agrees To Settle Securities Fraud Suit In Delaware Court
SAF T LOK: Milberg Weiss Commences Securities Fraud Suit in S.D. FL
SPECTRALINK CORPORATION: Marc Henzel Commences Securities Suit in CO
SYMBOL TECHNOLOGIES: Sued For Securities Act Violations in E.D. NY
VENCOR INC.: $3M Settlement Reached in Securities Fraud Suit in W.D. KY
*********
CONNECTICUT: Teens Challenge Detention Center's Strip-Search Policy
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A class action, filed on behalf of two teenage girls, challenges the
blanket strip-search policy of Connecticut's detention centers, in
Hartford, Bridgeport and New Haven, as unconstitutional, the Associated
Press reported recently. Attorney Thomas W. Kelly, one of the lawyers
for the two girls, ages 14 and 16, claims such a policy violates the
children's Fourth Amendment rights protecting against unreasonable
searches and seizures.
If Judge Peter C. Dorsey, who is listening to arguments in US District
Court in New Haven, finds the current practice unconstitutional, Mr.
Kelly and plaintiffs' co-counsel Anthony A. Wallace of New Haven, will
seek a temporary injunction to stop the practice immediately, and then
pursue damages.
The class action describes the strip-searches as "calculated,
institutional child abuse." The lawyers are seeking to prevent strip-
searches of all juveniles who are "status offenders," such as truants
and runaways.
"It's the humiliation of stripping them naked and examining their body
parts," said Mr. Kelly. ".to be subjected to that is very
humiliating."
Many of the children sent to the state's juvenile detention centers
every day are truants and runaways, some as young as 10. The children
must remove their clothes, squat and raise their arms above their heads
as adults check them for contraband.
Attorney General Richard Blumenthal's office is representing the State
Judicial Branch in the suit. The Judicial Branch has concluded the
policy is necessary when juveniles are evaluated and considered by a
judge to be "a danger to themselves or others," Mr. Blumenthal told the
Hartford Courant. "That is essentially how we will be presenting our
Case."
The issue of strip-searches is not new for Mr. Kelly, who recently won
a similar case in his home state of Rhode Island. Authorities in Rhode
Island started limiting their use of strip-searches about a year and a
half ago, after Mr. Kelly filed a similar class action in federal
courts there.
In Connecticut, Mr. Kelly already has the support of the state's child
advocate, Jeanne Milstein, who is watching the case closely. "We don't
automatically strip-search adults who are accused of crime, and we
think the same standard should hold for children," Ms. Milstein said.
She also said that children should only be strip-searched if there is
probable cause and they are accused of serious felonies or drug
offenses. "But if they are there [in a juvenile detention center] just
for being a runaway or skipping school, they should not be strip-
searched."
A check of state records between 1995 and 2000, showed that the
juvenile strip-searches have not resulted in a widespread seizure of
contraband, Mr. Kelly said. Of the more than 18,000 strip-searches
conducted during that time, not a single piece of contraband was found
in a body cavity, he said.
State Judicial Branch officials, who oversee the state's juvenile
detection centers in Hartford, Bridgeport and New Haven, did not return
telephone calls seeking comment.
CREDIT CARDS: Ask High Court To Review Antitrust Suit Certification
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Credit card giants Mastercard Corporation and Visa USA have asked the
US Supreme Court to review a New York appeals court ruling upholding
class certification to a lawsuit filed against the two companies by
retailers, Reuters reports.
The suit was commenced in 1996, lead by Wal-Mart Stores, Inc., charging
the defendants of "anti-competitive behavior." The defendants
allegedly used their clout in the credit card industry to force
merchants to accept their costly debit cards.
Class certification was granted to the suit, allowing four million
retailers to take part in the antitrust suit. The two companies filed
an appeal with the New York appeals court, seeking to stop class
certification. The appellate court turned down the motion, but
allegedly did so in a 2-to-1 decision that raised questions about the
size and scope of a class, Reuters reports.
"At a time when the growing number of massive class action suits is
attracting considerable attention, we hope that the court will
determine that this case should be reviewed" Noah Hanft, general
counsel of MasterCard International said in a press statement. "It
provides an excellent opportunity to clarify the standards under which
classes are certified which would serve to prevent needless and unfair
class action cases in the future."
The networks claim the large number of retailers in the class could
make damages so high, that defendants would be forced to settle
regardless of a case's merits, Reuters states. The defendants claim
the class is unwieldy and want to clear up the class size before trial.
"The current lack of uniformity simply encourages unseemly forum
shopping by plaintiffs eager to leverage class certification into
coercive settlements," the networks' lawyers wrote in court filings,
referring to different ways various courts have defined a class of
plaintiffs.
"Unfortunately, the lawyers, representing a small number of retailers,
are trying to restructure this in a way that will harm consumers and
limit consumer's payment choices," Kelly Presta, US vice president for
Visa told Reuters. "We take our commitment to consumers seriously, and
we're willing to fight to protect consumer choice."
FLORIDA: Firefighters Mull Filing Suit Over Denial of Hepatitis Tests
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Several firefighters have notified the city of Orlando that they plan
to file medical malpractice claims, the Associated Press reported
recently. The Orlando firefighters sought regular testing for
hepatitis four years before several of them contracted the disease, but
city officials continuously rejected the tests as too costly.
Audio tapes from a 1996 meeting between union leaders and city
officials confirmed that the firefighters pushed for the tests during
contract negotiations. In response, however, to the firefighters'
requests, city labor relations officials replied that the cost of
giving such tests each year would be like "shooting ourselves in the
foot."
City Attorney Scott Gabrielson recently defended these comments. He
said city officials and union leaders sometimes talk tough at the
negotiating table in order to strengthen their bargaining positions.
Firefighters are now claiming that if a testing program had been
established then, infected firefighters could have sought help years
earlier for the potentially deadly disease of hepatitis.
During the summer of 2001, 13 firefighters filed a class-action lawsuit
against the city, accusing the city officials of hiding illnesses
discovered in routine job physicals. A judge tossed out this suit on
a technicality. However, the firefighters have now notified the city
that they plan to file medical malpractice claims.
GILBERT EXPRESS: Agrees To Settle Truckers Suit Over Agreement Forms
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Gilbert Express agreed to settle a class action filed against the long-
haul carrier by the Owner Operator Independent Drivers Association
(OOIDA) in New Jersey Federal Court on behalf of individual owner
operators. The suit alleged that the form of owner-operator agreement
then used by the carrier violated certain federal Truth-in-Leasing
regulations.
The Company sought bankruptcy protection last June, citing the costs
and uncertainty related to the litigation as a principal reason for its
filing. According to Company President Richard Gilbert, the settlement
with OOIDA paves the way for the Company's emergence from Chapter 11.
"The cost to continue to defend the OOIDA litigation class action was
undoubtedly one of the biggest single factors that prompted the
bankruptcy filing and, until now, one of the impediments to our
successful emergence," Mr. Gilbert told Trucker.com
Though the terms of the settlement were not announced, they include a
commitment by the Company to use the form of agreement negotiated with
OOIDA that complies with federal regulations, OOIDA said in a
statement.
INSURANCE COMPANIES: Insurance Salesmen Sue To Recover Benefits, Wages
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The United States Seventh Circuit Court of Appeals has yet to decide on
the appeal of the dismissal of the class action against several
insurance companies relating to wages and benefits given to former
insurance salesmen. The suit names as defendants:
(1) First Commonwealth Corporation (FCC),
(2) Universal Guaranty Life Insurance (UG),
(3) United Trust Assurance Co. (UTAC),
(4) United Security Assurance Co. (USAC), and
(5) United Trust Group, Inc. (UTG)
The suit was initially commenced in the US District Court for the
Southern District of Illinois against UG and UTAC, which was merged
into UG in 1992. After the lawsuit was filed, the plaintiffs, who were
former insurance salesmen, amended their complaint to include USAC, UTG
and FCC as defendants.
The plaintiffs allege that they were employees of UG, UTAC or USAC
rather than independent contractors and seeks to recover various
employee benefits, costs and attorneys' fees, as well as monetary
damages based on the defendants' alleged failure to withhold certain
taxes.
On September 18, 2001, the case was dismissed without prejudice because
lead plaintiff David Morlan lacked standing to pursue the claims
against defendants. The plaintiffs then appealed the dismissal of the
case to the United States Court of Appeals for the Seventh Circuit.
The defendants believe that they have meritorious grounds to defend the
suit, and intend to defend the cases vigorously.
INDIANAPOLIS POWER: Employees File 401(k) Suit Due To AES Stock Losses
----------------------------------------------------------------------
Former employees of the Indianapolis Power and Light Company (IPALCO)
filed a class action in Indiana Federal Court against the utility owned
by AES Corporation, after they allegedly lost money in their 401(k) and
retirement plan investments. Company officers allegedly encouraged
them to invest in AES when the Company bought the utility last year,
according to a story in the Indianapolis Star.
The officers allegedly failed to inform them that "it was highly likely
their shares would dramatically drop" after they invested. AES stock
was about $50 a share at the time of the merger and fell to as low as
about $4 a share earlier this year. The stock is presently at the $9
range.
The suit further asserts employees were not able to withdraw their
IPALCO/AES investments and put them in other stock until Feb. 8. In the
meantime, IPALCO officers who urged them to invest in the company sold
more than $9 million worth of shares.
LAKEWOOD ENGINEERING: Recalls 107T Electric Heaters For Shock Hazard
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Lakewood Engineering and Manufacturing Company is cooperating with the
US Consumer Product Safety Commission (CPSC) by voluntarily recalling
about 107,000 electric heaters. The electrical connections inside of
the heater can become loose, causing the heater's metal frame to become
energized. This poses a serious electric shock hazard to consumers.
The Company has not received any reports of incidents. This recall is
being conducted to prevent the possibility of injuries.
The recalled electric heaters have model numbers 797 or 797 DFT, which
is stamped on the back of the unit. The Model 797, which is painted
white, and the Model 797 DFT, which is painted gray, have a control
panel with temperature and wattage selections. The rounded, metal
units also have the word, "Lakewood" printed on the control panel.
Retailers nationwide, including Wal-Mart and Kmart, sold the heaters
between October 2000 and February 2002 for about $30.
For more details, contact the Company by Phone: 888-858-3506 between
8:30 am and 5 pm CT Monday through Friday or visit the Company's Web
site: http://www.lakewoodeng.com.
NEW MEXICO: Ramah Lawyer Charges Detox Center With Illegal Detention
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A lawyer has filed a lawsuit against the detoxification center in
Gallup, New Mexico, alleging it is illegally detaining people against
their will and violating state laws, the Associated Press reported
recently.
Lawyer William Stripp of Ramah, in his filing in State District Court,
asked that the lawsuit be considered a class action. The lawsuit,
filed on behalf of client Lewison Watchman, contends that the Gallup
Police Department and the McKinley County Sheriff's Department put
people in the Na'Nizhoozhi Center Inc., known as NCI, when they should
not be there. The lawsuit further states that:
(1) the center habitually puts more people in a room than allowed
by state law;
(2) staff members at times threatened people placed there or
"touched or applied force to plaintiffs in a rude, insolent or
angry manner," and
(3) people were put together in locked rooms with no privacy.
The lawsuit also contends police officers and sheriff's deputies turned
over people to NCI without adequately investigating whether the center
was authorized to hold people as a licensed "health care facility."
Some of those picked up don't meet the requirement of having their
mental or physical functioning substantially impaired as a result of
alcohol, the lawsuit alleges.
The lawsuit requests that anyone who was illegally detained to be
compensated at a rate of $5,000 a day. NCI has said that 18,000
individuals are picked up and placed in the center each year. Mr.
Stripp said the daily rate was derived from the settlement of a lawsuit
Mr. Watchman filed against Gallup last year after being placed in NCI
for four days against his will. He settled the lawsuit for $20,000.
"The police should be enforcing the laws against false imprisonment,"
said Mr. Stripp. The lawsuit contends NCI does not have proper
certification from the state to operate as a health center, and that
the city and county are violating the law by allowing the center to
hold people there against their will.
Mr. Stripp said he plans to seek an injunction prohibiting police from
taking people to the center until NCI proves to the court that it has
the proper licenses and certification. Gallup Police Chief Daniel
Kneale said he visited the center last week to check its certification
and found it had the proper certification to detain people who had
alcohol or drug problems.
If approved, class action status would allow those persons placed in
the center, over the past few years, to become parties to the suit and
possibly receive compensation if it is successful.
Sheriff's Captain Donna Goodrich, who said she had not seen the
lawsuit, said that individuals taken to the center by deputies are
intoxicated and unable to care for themselves.
PNM RESOURCES: Plaintiffs in Kansas Gas Royalty Suit Drop Allegations
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Plaintiffs in the class action against several hundred gas companies
pending in the Stevens County Court in Kansas have dismissed their
claims against PNM Resources, Inc.
Gas producers, royalty owners, overriding royalty owners and working
interest owners commenced the suit, alleging that the defendants, all
engaged in various aspects of the natural gas industry, mismeasured
natural gas and underpaid royalties for gas produced on non-federal
and non-tribal lands.
On January 23, 2002, the plaintiffs filed a notice of dismissal with
the Kansas court dismissing all claims against the Company without
prejudice.
PACER LOGISTICS: Subsidiaries Prevail in Wage Fraud Suit In California
----------------------------------------------------------------------
The Los Angeles Superior Court, Central District decided in favor of
two of Pacer Logistics, Inc.'s subsidiaries in a class action accusing
the companies of defrauding truck drivers with their earnings.
The suit names Company subsidiaries Interstate Consolidation, Inc. and
Intermodal Container Service, Inc. as defendants. The suit alleges
among other things, breach of fiduciary duty, unfair business
practices, conversion, and money had and received in connection with
monies allegedly wrongfully deducted from truck drivers' earnings.
The defendants entered into a Judge Pro Tempore Submission Agreement
dated as of October 9, 1998, pursuant to which the plaintiffs and
defendants have waived their rights to a jury trial, stipulated to a
certified class, and agreed to a minimum judgement of $250,000 and a
maximum judgement of $1.75 million.
In August 2000, the court issued its statement of decision, in which
the two defendants prevailed on all issues except one. The only adverse
ruling was a court finding that Interstate failed to issue certificates
of insurance to the owner-operators and therefore failed to disclose
that in 1998, Interstate's retention on its liability policy was
$250,000.
The court has ordered that restitution of $488,978 be paid for this
omission, and entered judgment on the August 11, 2000 decision on
January 23, 2002. The plaintiffs' counsel has indicated that he
intends to appeal the entire ruling and the defendants intend to appeal
the restitution issue.
Based upon information presently available and in light of legal and
other defenses and insurance coverage, management does not expect these
legal proceedings, claims and assessments, individually or in the
aggregate, to have a material adverse impact on the Company's financial
position or results of operations.
RENT-A-CENTER INC.: Finalizes Settlements Of Three Gender Bias Suits
--------------------------------------------------------------------
Rent-A-Center, Inc. is working to finalize the settlements in the three
class actions pending in Tennessee, Missouri and Illinois Federal Court
charging the Company with gender discrimination.
The first suit was commenced in September 1999 in the US District Court
for the Western District of Tennessee by the US Equal Employment
Opportunity Commission (EEOC), alleging that the Company engaged in
gender discrimination with respect to four named females and other
unnamed female employees and applicants within its Tennessee and
Arkansas operations. The allegations underlying this EEOC action
involve charges of wrongful termination and denial of promotion,
disparate impact and failure to hire. The EEOC seeks relief on behalf
of a group of approximately seventy individuals.
Another suit was commenced in August 2000 in the US District Court in
East St. Louis, Illinois by Claudine Wilfong and eighteen other
plaintiffs. The suit charged the Company with engaging in class-wide
gender discrimination following its acquisition of Thorn Americas,
asserting claims of wrongful termination, constructive discharge,
disparate treatment and disparate impact. In addition, the EEOC filed
a motion to intervene on behalf of the plaintiffs, which the court
granted on May 14, 2001. The court later certified the suit as a class
action.
In December 2000, Margaret Bunch and Tracy Levings filed similar suits
in Federal Court in the Western District of Missouri, which were later
amended to allege class action claims similar to those in the Wilfong
suit.
In November 2001, the Company reached an agreement in principle for the
settlement of the Missouri suit, which is subject to court approval.
Under the terms of the proposed settlement, the Company agreed to pay
an aggregate of $12.25 million to the agreed upon class, plus
plaintiffs' attorneys fees as determined by the court and costs to
administer the settlement subject to an aggregate cap of $3.15 million.
The Missouri Federal Court granted preliminary approval in November
2001 and set a fairness hearing on such settlement for March 6, 2002.
In early March 2002, the Company reached an agreement in principle to
resolve the Wilfong suit and the Tennessee EEOC action. Under the
terms of the proposed settlement, while not admitting any liability,
the Company would pay an aggregate of $47.0 million to approximately
5,300 female employees and a yet to be determined number of female
applicants who were employed by or applied for employment with the
Company for a period commencing no later than April 19, 1998 through
the future date of the notice to the applicable class, plus up to
$375,000 in settlement administrative costs.
The $47.0 million payment includes the $12.25 million payment discussed
in connection with the Bunch settlement. Attorney fees for class
counsel in Wilfong would be paid out of the $47.0 million settlement
fund in an amount to be determined by the court. Members of the class
who do not wish to participate in the settlement would be given the
opportunity to opt out of the settlement.
The proposed agreement contemplates the settlement would be subject to
a four-year consent decree, which could be extended by the court for an
additional one year upon a showing of good cause. Also, under the
proposed settlement, the Company agreed to:
(1) augment its human resources department and internal employee
complaint procedures;
(2) enhance its gender anti-discrimination training for all
employees;
(3) hire a consultant mutually acceptable to the parties for two
years to advise the Company on employment matters;
(4) provide certain reports to the EEOC during the period of the
consent decree;
(5) seek qualified female representation on its board of
directors;
(6) publicize its desire to recruit, hire and promote qualified
women;
(7) offer to fill job vacancies within its regional markets with
qualified class members who reside in those markets and
express an interest in employment by the Company to the extent
of 10% of its job vacancies in such markets over a fifteen
month period; and
(8) take certain other steps to improve opportunities for women.
The proposed settlement contemplates that the Bunch case will be
dismissed with prejudice once such settlement becomes final. At the
parties' request, the court in the Bunch case stayed the proceedings in
that case, including postponing the fairness hearing previously
scheduled for March 6, 2002. The Company anticipates the Memphis
federal court will stay the Tennessee EEOC action as well.
The terms of the proposed settlement are subject to the parties
entering into a definitive settlement agreement and court approval.
While the Company believes the proposed settlement is fair, it cannot
give any assurance that the settlement will be approved by the court in
its present form.
VENTAS INC.: KY Court Dismisses Suit Over 1998 Spin-off From Vencor
-------------------------------------------------------------------
The United States District Court for the Western District of Kentucky
dismissed in its entirety a class action against Ventas, Inc. and
certain of its current and former employees over its 1998 spin-off from
Vencor, Inc.
The suit alleges that the defendants engaged in a fraudulent scheme to
conceal the true nature and substance of the 1998 spin-off resulting
in:
(1) a violation of the Racketeer Influenced and Corrupt
Organizations Act (RICO),
(2) bankruptcy fraud,
(3) common law fraud, and
(4) a deprivation of plaintiffs' civil rights.
The suits allege that the defendants failed to act affirmatively to
explain and disclose the fact that the Company was the entity that had
been known as Vencor, Inc. prior to the 1998 spin off and that a new
separate and distinct legal entity assumed the name of Vencor, Inc.
after the 1998 spin off.
The plaintiffs contend that the defendants filed misleading documents
in the plaintiffs' state court lawsuits that were pending at the time
of the 1998 spin off and that the defendants deceptively used the
bankruptcy proceedings of Vencor, Inc. (now known as Kindred
Healthcare, Inc.) to stay lawsuits against the Company. As a result of
these actions, the plaintiffs maintain that they and similarly situated
individuals suffered and will continue to suffer severe financial harm.
The court dismissed the suit on February 4, 2002. The plaintiffs then
filed a motion requesting that the dismissal be altered to allow the
plaintiffs to resume this action if they are unable to obtain relief in
the Kindred proceedings in the Bankruptcy Court. The plaintiffs have
filed a motion with the Kindred Bankruptcy Court requesting, among
other things, that the Kindred Bankruptcy Court set aside portions of
the releases of the Company contained in the Kindred Reorganization
Plan, as such releases apply to the plaintiffs.
Kindred, on behalf of the Company, is vigorously contesting these
motions.
WCI COMMUNITIES: FL Federal Court Refuses To Certify Homeowners Suit
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The United States District Court for the Middle District of Florida,
Ft. Myers Division refused to grant class certification to a lawsuit
filed against WCI Communities, Inc. by individuals who purchased lots
in Pelican Landing. The suit also names Company subsidiary WCI Realty,
Inc., as defendants.
The suit arose out of a preferred builder program under which
plaintiffs purchased vacant lots and then contracted with a builder of
their choice to construct a residence on their lots. In consideration
of the extensive costs incurred by the Company associated with the
marketing, sales and advertising of the community for the benefit of
the builders who participated in the program, these builders were
required to pay a marketing fee to WCI Realty based on a percentage of
the construction cost of the home.
The plaintiffs asserted that the Company had an obligation to disclose
to them that the preferred builder would pay a marketing fee. The
plaintiffs have demanded unspecified money damages and have alleged,
among other things, violation of the federal Racketeering Influenced
and Corrupt Organizations Act (RICO) and the Real Estate Settlement
Procedures Act (RESPA). In March 2002, the court denied plaintiffs'
preliminary motion for class certification, however, plaintiffs
have thirty days to appeal this ruling.
This litigation is still in its early stages and accordingly, the
Company is not able to estimate the range of possible loss. Therefore,
the Company is not yet able to determine whether the resolution of this
matter will have a material adverse effect on its financial condition
or results of operations. The Company believes it has meritorious
defenses and intends to vigorously defend this action.
Securities Fraud
ADELPHIA COMMUNICATIONS: Berger Montague Files Securities Suit in PA
--------------------------------------------------------------------
Berger & Montague, PC initiated a securities class action against
Adelphia Communications Corporation (Nasdaq: ADLAC) in the United
States District Court for the Eastern District of Pennsylvania on
behalf of all persons or entities who purchased Company securities,
including common stock and/or notes, between January 19, 2001 and April
1, 2002, inclusive. The suit names as defendants the Company and
certain of its principal officers and directors:
(1) John J. Rigas,
(2) James P. Rigas,
(3) Michael J. Rigas and
(4) Timothy J. Rigas
The suit alleges that defendants violated Section 10(b) and 20(a) of
the Securities and Exchange Act of l934. More specifically, the suit
alleges that defendants failed to disclose billions of dollars of off-
balance sheet debt.
Unbeknownst to investors, the Company guaranteed loans for certain
entities controlled by the Rigas Family (the Company's controlling
shareholder), who used the money, in substantial part, to purchase
Company securities.
Defendants first disclosed the existence of the off-balance sheet debt
during an earnings conference call on March 27, 2002. Then, on April 1,
2002, the Company announced that it was requesting an extension to file
its Annual Report on Form 10-K with the SEC. The Company also reported
that the extension was being sought to allow it and its outside
auditors additional time to review certain accounting matters relating
to co-borrowing credit facilities which the Company is party to.
In response to these negative announcements, the price of the Company's
common stock dropped from $20.39 per share on March 26, 2002, to $13.12
per share on April 1, 2002. The price of the Company's common stock
continues to decline. The Company also announced the SEC is conducting
an informal investigation. The price of other Company securities have
also materially declined.
For more information, contact Sherrie R. Savett, Robin Switzenbaum or
Kimberly A. Walker by Mail: 1622 Locust Street, Philadelphia, PA 19103
by Phone: 888-891-2289 or 215-875-3000 by Fax: 215-875-5715 by E-mail:
InvestorProtect@bm.net or visit the firm's Website:
http://www.bergermontague.com
ADELPHIA COMMUNICATIONS: Berman DeValerio Files Securities Suit in PA
---------------------------------------------------------------------
Berman DeValerio Pease Tabacco Burt and Pucillo initiated a securities
class action against Adelphia Communications Corporation (Nasdaq:ADLAC)
today, claiming that the Company deceived investors about its true
financial condition. The suit was filed in the U.S. District Court for
the Eastern District of Pennsylvania on behalf of all investors who
bought the Company's common stock and/or sold put options from April 2,
2001 through March 27, 2002.
The suit charges the Company, a provider of cable television and local
telephone service, with failing to disclose its liability from at least
$2.284 billion in off-balance-sheet debt during the class period. The
suit named four members of the Rigas family, the majority owners of the
company, as individual defendants.
According to the complaint, Highland Holdings, a partnership controlled
by the Rigas family, borrowed the $2.284 billion against credit
facilities that were co-guaranteed by the Company. The Rigas family
then used some of the loans' proceeds to buy more Company stock, the
complaint maintains. The information, which would have affected the
Company's stock price, was not disclosed to investors during the class
period. The SEC is investigating the company's accounting practices.
On March 27, 2002, the complaint says, the Company revealed the
existence of the off-balance-sheet debt. Its stock quickly fell 18%,
or $3.69, to close at $16.70 that day. The following day, the stock
price dropped an additional 11%, or $1.80, to close at $14.90, wiping
out more than $1 billion in market capitalization.
For more details, contact Nancy Ghabai or Alicia Duff by Mail: One
Liberty Square, Boston, MA 02109 by Phone: 800-516-9926 by E-mail:
law@bermanesq.com or visit the firm's Web site:
http://www.bermanesq.com.
ADELPHIA COMMUNICATIONS: Faruqi Faruqi Lodges Securities Suit in PA
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Faruqi and Faruqi LLP initiated a securities class action in the United
States District Court for the Eastern District of Pennsylvania on
behalf of all purchasers of the securities of Adelphia Communications
Corporation (Nasdaq:ADLAC) between April 2, 2001 and April 1, 2002,
inclusive.
The suit charges defendants with violations of federal securities laws
by, among other things, issuing a series of false and misleading press
releases concerning the Company's financial condition and business
prospects. The suit alleges, throughout the class period, that the
Company failed to disclose billions of dollars of off-balance sheet
debt. As a result, the prices of the Company's securities were
artificially inflated throughout the class period.
On March 27, 2002, however, the Company shocked the market when it
revealed during a conference call that it had $2.3 billion of off-
balance sheet debt. Moreover, it was further disclosed that the
Company guaranteed credit facilities for a closely-held partnership
named Highland Holdings, which is controlled by its controlling
shareholder, the Rigas Family, and which used the money, in substantial
part, to purchase securities from the Company.
The Company also revealed that it may be liable for $500 million in
bank loans secured by Adelphia Business. In response to this
announcement, over the next several trading days, the prices of Company
securities dropped precipitously. The price of the Company's common
stock dropped from $ 20.39 per share on March 26, 2002, to $ 13.12 per
share on April 1, 2002. The price of Company debt securities also
materially declined.
For more details, contact Anthony Vozzolo by Mail: 320 East 39th Street
New York, NY 10016 by Phone: 877-247-4292 or 212-983-9330 by E-mail:
Avozz@faruqilaw.com or visit the firm's Web site:
http://www.faruqilaw.com
ADELPHIA COMMUNICATIONS: Wolf Haldenstein Lodges Securities Suit in PA
----------------------------------------------------------------------
Wolf Haldenstein Adler Freeman & Herz LLP initiated a securities class
action in the United States District Court for the Eastern District of
Pennsylvania on behalf of purchasers of Adelphia Communications Corp.
(NASDAQ: ADLAC) securities between March 30, 2000 and April 1, 2002,
inclusive, against the Company and certain of its officers and
directors, including members of the Rigas family, the Company's
founders.
The suit alleges that during the class period, the Rigas borrowed $2.7
billion through various entities, including a limited partnership named
Highland Holdings, from credit facilities that were co-guaranteed by
the Company. This practice allowed for these debt obligations to remain
off the Company's balance sheet and, instead, appear as if they were
only the obligation of Highland and the other entities.
The Rigas family used the borrowed money to purchase Company stock and
convertible bonds during the past four (4) years. According to
published reports, the securities purchased by the Rigases cost
approximately $1.8 billion, but their market value has since shrunk by
approximately $1 billion.
Further, the Company's results and reported earnings were false
because, at all relevant times, defendants, including members of the
Rigas family:
(1) failed to disclose approximately $2.7 billion in off-balance
sheet debt that the Company had incurred during co-borrowing
ventures with various entities managed by the Company that
were under the control of the Rigas family;
(2) failed to disclose that this $2.7 billion in off-balance sheet
debt was not fully guaranteed by sufficient, underlying
assets;
(3) failed to disclose that Highland and other entities controlled
by the Rigas family had borrowed $2.7 billion and that the
loans were guaranteed by the Company. The Rigas family then
used these funds to purchase Company securities; and
(4) failed to disclose that the Rigas' purchase of Company
securities was effectuated through borrowed funds, guaranteed
by the Company.
The truth concerning the Company's true financial affairs began to
emerge on March 27, 2002, when the Company announced its Fourth Quarter
and Full-Year results. The press release and conference call that
followed revealed that the Company had at least $2.3 billion in off-
balance sheet debt stemming from the Company's guaranty of credit
facilities for Highland.
On April 1, 2002, the full-scope of the fraud was revealed when the
Company announced that it had requested an extension of time from the
SEC in which to file its Form 10-K.
The entirety and scope of the Company's malfeasance remains under
investigation. On April 3, 2002, the Wall Street Journal reported that
the Company's off-balance-sheet debt was at least $2.7 billion,
approximately $400 million more than it previously disclosed.
The Journal stated the additional $400 million debt obligation stems
from investments the Rigas family, which controls the Company, agreed
to make in the cable company earlier this year. People close to the
company say the Rigases paid for the shares with loans guaranteed by
the Company and made to Highland Holdings, the main off-balance-sheet
entity. The Company, which is based in Coudersport, Pa., and is the
nation's sixth-largest cable television company, didn't return calls
seeking comment. The SEC declined to comment.
On April 3, 2002, the Company disclosed that the SEC had commenced an
informal inquiry into its "co-borrowing agreements" and had petitioned
the Company for certain "clarification" related documents. Its stock
has continued to slide, falling an additional 14% by mid-day trading on
April 3, 2002.
For more information, contact Fred Taylor Isquith, Gregory Nespole,
Gustavo Bruckner, 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 Web
site: http://www.whafh.com. E-mail should refer to Adelphia.
ADELPHIA COMMUNICATIONS: Brian Felgoise Launches Securities Suit in PA
----------------------------------------------------------------------
The Law Offices of Brian M. Felgoise, PC initiated a securities class
action on behalf of shareholders who acquired Adelphia Communications
Corporation (Nasdaq:ADLAC) securities between April 2, 2001 and April
1, 2002, inclusive, in the United States District Court for the Eastern
District of Pennsylvania, against the Company and certain key officers
and directors.
The suit charges that defendants violated the federal securities laws
by issuing a series of materially false and misleading statements to
the market throughout the class period which statements had the effect
of artificially inflating the market price of the Company's securities.
For more information, contact Brian M. Felgoise by Mail: 230 South
Broad Street, Suite 404, Philadelphia, Pennsylvania, 19102 by Phone:
215-537-6810 or by E-mail: BrianFLaw@yahoo.com
ADELPHIA COMMUNICATIONS: Spector Roseman Lodges Securities Suit in PA
---------------------------------------------------------------------
Spector, Roseman & Kodroff, PC initiated a securities class action suit
on behalf of purchasers of the securities of Adelphia Communications
Corporation (Nasdaq:ADLAC) between April 2, 2001 and April 1, 2002,
inclusive, in the United States District Court, Eastern District of
Pennsylvania against the Company and:
(1) Timothy Rigas, CFO and
(2) John J. Rigas, President, CEO and Chairman
The suit charges the Company, a provider of cable television and local
telephone service, with failing to disclose its liability from at least
$2.284 billion in off-balance-sheet debt during the class period. The
suit specifically 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 Company securities.
Throughout the class period, plaintiff alleges that the Company failed
to disclose billions of dollars of off-balance sheet debt. As alleged
in the suit, unbeknownst to investors, the suit guaranteed credit
facilities for certain closely-held partnerships, which are controlled
by the Rigas Family (the Company's controlling shareholder), and which
used the money, in substantial part, to purchase securities from the
Company.
Defendants first disclosed the existence of the off-balance sheet debt
during an earnings conference call on March 27, 2002. On April 1,
2002, the Company announced that it was requesting an extension to file
its Annual Report on Form 10-K with the SEC. The Company reported that
the extension was being sought to allow it and its outside auditors
additional time to review certain accounting matters relating to co-
borrowing credit facilities which the Company is party to.
In response to these negative announcements, the price of Company
common stock dropped from $20.39 per share on March 26, 2002, to $13.12
per share on April 1, 2002. The price of Company debt securities also
materially declined. The Company also acknowledged that it is the
subject of an informal inquiry by the Securities and Exchange
Commission.
For more details, contact Robert M. Roseman by Phone: 888-844-5862 by
E-mail: classaction@srk-law.com or visit the firm's Web site:
http://www.srk-law.com.
APRIA HEALTHCARE: Agrees To Settle For US$43M Securities Suit in CA
-------------------------------------------------------------------
Apria Healthcare Group Inc. agreed to settle for US$43 million a
consolidated securities class action pending in the Superior State of
California for the County of Orange.
The suit arose from two similar class actions commenced in July 1998 on
behalf of shareholders who purchased the Company's common stock between
May 22, 1995 and January 20, 1998. These two actions were consolidated
by a court order dated October 22, 1998. In June 1999, the plaintiffs
filed a consolidated amended class action asserting claims founded
on state law and on Sections 11 and 12(2) of the 1933 Securities Act.
According to the Company's annual report, it has contributed $ 1
million to a settlement pool, with the balance of the settlement amount
of $42 million coming from its insurance carriers. The Company also
agreed to provide various indemnities to certain of its current and
former officers and directors.
The Orange County Superior Court has required that final settlement
documents be presented to the Court April 16, the filing said. The
Company is confident that ultimate disposition of the suit will not
have a material adverse effect on its results of operations or
financial condition.
AT CROSS: Shareholders Files Over Pen Computing Group Business in RI
--------------------------------------------------------------------
AT Cross and Company faces a securities class action filed in the
United States District Court for the District of Rhode Island on behalf
of all purchasers of the Company's Class A common stock between
September 17,1997 and April 22,1999. The suit names as defendants the
Company, certain of its officers and directors and:
(1) W. Russell Boss Jr. Trust A,
(2) W. Russell Boss Jr. Trust B and
(3) W. Russell Boss Jr. Trust C
The suit alleges that the defendants violated federal securities laws
by making material misstatements and omissions in the Company's public
filings and statements relating to its Pen Computing Group business.
In June 2000, the Company filed a motion to dismiss the suit, which the
court granted in June 2001. The plaintiffs then filed an appeal with
the US First Circuit Court of Appeals. On March 20, 2002, the appeals
court issued a judgment affirming the dismissal of all claims asserted
against the Trust funds and reversing the district court's dismissal of
the Section 10(b) and 20(a) claims asserted against the Company and the
named individual defendants.
The Appellate Court's ruling was limited to a finding that the
plaintiff's complaint had satisfied the pleading requirements of the
Private Securities Litigation Reform Act of 1995. The Court, however,
did not opine on the merits of plaintiff's claims. The Company
maintains that the claims are without merit and will continue to
vigorously contest the litigation.
CARESCIENCE INC.: To Mount Vigorous Defense V. Securities Suit in PA
--------------------------------------------------------------------
Carescience, Inc. vehemently denied allegations in the consolidated
securities class action pending against it and certain of its officers
in the United States District Court for the Eastern District of
Pennsylvania, alleging violations of federal securities laws.
The consolidated suit is the result of several complaints filed with
the court beginning on October 17, 2001, on behalf of all persons who
purchased the Company's common stock between June 29, 2000 and November
1, 2000. The consolidated suit alleges violations of Sections 11,
12(a)(2) and 15 of the Securities Act of 1933 by issuing a materially
false and misleading prospectus and registration statement with respect
to the initial public offering of our common stock.
Specifically, the complaints allege, among other things, that the
Company's prospectus and registration statement misrepresented and
omitted to disclose material facts concerning two of its prospective
products and its planned disposition of the offering proceeds.
The Company believes that the lawsuits are frivolous and without merit
and that it has meritorious defenses to plaintiffs' claims. The
Company further intends to vigorously defend against the lawsuits.
COX COMMUNICATIONS: Sued Over Letter Agreement With At Home Corporation
-----------------------------------------------------------------------
Cox Communications faces a consolidated class action pending in the
Superior Court of California for the County of San Mateo, on behalf of
stockholders of At Home Corporation (also referred to as Excite@Home).
The suit also names David Woodrow, Cox's former Executive Vice
President for Business Development, as defendant.
The consolidated suit arose from two class actions seeking to enjoin
consummation of a March 28, 2000 letter agreement among Excite@Home's
principal investors, including the Company. The suits assert that the
defendants breached purported fiduciary duties of care, candor and
loyalty to the plaintiffs by entering into the letter agreement and/or
taking certain actions to facilitate the consummation of the
transactions contemplated by the letter agreement.
On February 26, 2001, the Court stayed the action on grounds of forum
non conveniens. A related suit styled Linda Ward, et al. v. At Home
Corporation was filed on September 6, 2001 in the same court. On
February 7, 2002, the court consolidated the Ward action with the first
two suits, thereby staying the case.
The Company intends to defend these actions vigorously, though the
outcome cannot be predicted at this time.
CRITICAL PATH: Plaintiffs Voluntarily Withdraw Securities Fraud Suits
---------------------------------------------------------------------
All securities class actions filed against internet company Critical
Path, Inc. in February and March 2002 were voluntarily withdrawn by the
plaintiffs, two months after former president David Thatcher pleaded
guilty for securities and accounting fraud.
The suits were commenced after the Company restated results for the
third and fourth quarters of 2000 as a result of the settlement with
the Securities and Exchange Commission. The improper accounting
practices were exposed in January 2001, when the company restated 2000
revenues $19.3 million lower, iWon reports. In February, Mr. Thatcher
pleaded guilty to securities fraud and said he had helped book
nonexistent revenue on the company's income statements.
The Company has said no one involved in the activities that led to a
restatement of results is still with the company. "We are pleased by
the decision to withdraw each of these lawsuits," Company Senior Vice
President and General Counsel Michael Zukerman told HandyTEL.com.
These lawsuits are separate from the shareholder class action that the
Company settled in November 2001. That settlement was preliminarily
approved in late February 2002 by the United States District Court for
the Northern District of California. The Court has scheduled a hearing
for May 23, 2002 to consider final approval of the settlement.
DYNACQ INTERNATIONAL: Bernstein Liebhard Launches Securities Suit in TX
-----------------------------------------------------------------------
Bernstein Liebhard and Lifshitz, LLP initiated a securities class
action on behalf of all persons who acquired Dynacq International, Inc.
(NASDAQ: DYII) securities between November 29, 1999 and January 16,
2002, inclusive in the United States District Court for the Southern
District of Texas against the Company, Chiu Moon Chan, and Philip S.
Chan.
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. The Company is
engaged in the ownership and management of an acute care hospital, the
operation of two outpatient surgical facilities, the operation of a
medical office complex, the management of physician practices (all
located in the Vista medical center campus in Pasadena, Texas) and the
business of providing home infusion healthcare services to patients in
their homes.
The suit alleges that during the class period, defendants represented
that the Company's favorable financial results were due to its
commitment to quality and cost-effective care. Throughout the class
period, defendants repeatedly stated that the Company's financials were
strong and that it was consistently achieving "record results."
Defendants actually knew that the quality of the Company's balance
sheet was eroding, that it was violating federal law in the maintenance
of its facilities, and that it improperly cared for patients.
Then, on February 4, 20002, it was revealed that one of the named
defendants, Chiu Moon Chan, was identified by a news agency as one of
the 15 largest insider sellers for the reported week of January 25,
2002 to February 1, 2002. The news agency report stated that Mr. Chan
sold approximately $525,000 worth of his personal Dynacq shares in
January 2002. These sales took place during the class period.
For more details, contact Ms. Linda Flood, Director of Shareholder
Relations by Mail: 10 East 40th Street, New York, New York 10016 by
Phone: 800-217-1522 or 212-779-1414 by E-mail: DYII@bernlieb.com or
visit the firm's Web site: http://www.bernlieb.com.
ENRON CORPORATION: Insider Trading Claims To Be Significantly Expanded
----------------------------------------------------------------------
Lawyers in the securities suits against Enron Corporation will expand
insider trading allegations against the energy trader's top officials
next week, the National Post Online reports.
The suit will be revised to include claims that former Enron chairman
Kenneth Lay sold large amounts of Company shares after learning in
August 2001 of the accounting problems that led to the Company's
collapse late last year. An attorney for the suits told the National
Post "The numbers are huge, a lot bigger than what was initially
documented."
The suits initially alleged that Mr. Lay sold about 1.8 million shares
of Enron stock for about US$101.3-million between February 1999, and
July 2001, before the Company collapsed and filed the largest
bankruptcy in US history.
Kelly Kimberly, spokeswoman for Mr. Lay, who resigned as Enron chairman
and chief executive in January, told the National Post, "Mr. Lay firmly
denies any allegations of insider trading."
FLAG TELECOM: Scott Scott Commences Securities Fraud Suit in S.D. NY
--------------------------------------------------------------------
Scott + Scott LLC initiated a securities class action in the United
States District Court for the Southern District of New York on behalf
of purchasers of the shares of FLAG Telecom Holdings, Ltd. (Nasdaq:
FTHL) between March 23, 2001 and February 13, 2002, inclusive.
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 between March 23, 2001 and February 13, 2002, thereby
artificially inflating the price of Company shares.
The suti alleges that throughout the class period, the Company reported
strong year-over-year revenue growth. Unbeknownst to investors,
however, as alleged in the complaint, the Company was experiencing
diminishing revenue growth.
The suit alleges that in order to create the impression that the
Company was continuing to experience growth, the Company engaged in a
series of reciprocal transactions with certain competitors for the
purchase and sale of dark fiber optic cable - the so-called dark fiber
swap. The complaint alleges that as a result of these transactions, the
Company artificially inflated its operating results and materially
misrepresented its financial results at all relevant times.
For more information, contact Neil Rothstein, David R. Scott or James
E. Miller by Phone: 800-404-7700 or by E-mail:
nrothstein@scott-scott.com, drscott@scott-scott.com, or
jmiller@scott-scott.com.
FLAG TELECOM: Milberg Weiss Commences Securities Fraud Suit in S.D. NY
----------------------------------------------------------------------
Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class
action on behalf of purchasers of the shares of FLAG Telecom Holdings,
Ltd. (Nasdaq:FTHL) between March 23, 2001 and February 13, 2002,
inclusive, in the United States District Court, Southern District of
New York against the Company and:
(1) Andres Bande, CEO and Chairman,
(2) Edward McCormack, Chief Operating Officer,
(3) Andrew Evans, Chief Technology Officer and
(4) Larry Bautista, Chief Financial Officer until August 2001
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 Company shares.
The suit alleges that throughout the class period, the Company reported
strong year-over-year revenue growth. Unbeknownst to investors,
however, as alleged in the complaint, the Company was experiencing
diminishing revenue growth. The suit alleges that in order to create
the impression that the Company was continuing to experience growth,
the Company engaged in a series of reciprocal transactions with certain
competitors for the purchase and sale of dark fiber optic cable - the
so-called dark fiber swap.
The suit contends that as a result of these transactions, the Company
artificially inflated its operating results and materially
misrepresented its financial results at all relevant times.
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: flagcase@milbergNY.com or visit the
firm's Web site: http://www.milberg.com
GEMSTAR-TV GUIDE: Milberg Weiss Commences Securities Suit in C.D. CA
--------------------------------------------------------------------
Milberg Weiss Bershad Hynes and Lerach LLP initiated a securities class
action in the United States District Court for the Central District of
California on behalf of purchasers of Gemstar-TV Guide International,
Inc. (NASDAQ:GMST) publicly traded securities during the period between
August 11, 1999 and April 1, 2002.
The suit charges the Company and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. The complaint
alleges that during the class period, defendants caused the Company's
shares to trade at artificially inflated levels through the issuance of
false and misleading financial statements.
On April 1, 2002, the Company filed its 10-K, which stated in part,
"During 1997 through 1999, Scientific-Atlanta was under a license
agreement with the Company for the incorporation of interactive program
guides into Scientific-Atlanta set-top boxes. The license expired on
July 23, 1999, however, Scientific-Atlanta continued to ship set-top
boxes incorporating IPGs which are the same or similar to the products
shipped during the term of the agreement. The Company instituted legal
proceedings in federal district court to recover damages which are
probable, based upon the factors described above, to include revenues
commensurate with the licensing fees under the expired agreement. The
Company has accrued an aggregate of $107.6 million ($58.9 million,
$36.5 million and $12.2 million for the year ended December 31, 2001,
the nine months ended December 31, 2000 and for the period from July
23, 1999 through March 31, 2000, respectively) in license fees from
Scientific-Atlanta."
The 10-K also provides in relevant part, "In April 2001, the Company
entered into a nonmonetary transaction with an unrelated company in
which $20.8 million of intellectual property was acquired in exchange
for $750,000 in cash and advertising having a fair value of $20
million. In addition, the Company received an option to acquire the
company in the event that certain performance criteria were met in each
of the following two years. The Company determined the fair value of
the advertising consideration, all of which was recognized during 2001
as the advertising was aired, based on cash transactions for similar
advertising sold to other parties." The stock dropped below $9 per
share on this news.
For more information, contact William Lerach by Phone: 800-449-4900 by
Mail: wsl@milberg.com or visit the firm's Web site:
http://www.milberg.com
KMART CORPORATION: Marc Henzel Commences Securities Suit in E.D. MI
-------------------------------------------------------------------
The Law Offices of Marc S. Henzel initiated a securities class action
in the United States District Court, Eastern District of Michigan on
behalf of purchasers of the securities of Kmart Corporation (NYSE: KM)
between May 17, 2001 and January 22, 2002, inclusive, against CEO
Charles Conaway.
The suit alleges that defendant 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 Company securities.
Prior to and throughout the class period, as alleged in the complaint,
the Company and Mr. Conaway represented that the Company was engaged in
a comprehensive restructuring of its operations which were revitalizing
the Company and its sales. The suti alleges that these representations
were materially false and misleading because they failed to disclose
and misrepresented the following adverse material facts:
(1) that the Company's purported revitalization was a complete
failure as it was continuing to lose market share to
competitors and its purported efforts to reverse this trend
were not meeting with success;
(2) that the Company's supply chain management was extremely
problematic as its distribution centers were outdated and
inefficient and its supply chain software was plagued by bugs
and glitches, which were causing the Company to experience
inventory problems. As a result of these supply chain
management issues, the Company was experiencing difficulties
routing inventory to stores, thereby negatively impacting its
sales; and
(3) that the Company was experiencing substantial liquidity
problems which would necessitate a major restructuring of its
operations and possibly a bankruptcy filing, which ultimately
happened.
On January 22, 2002, the Company issued a press release announcing that
it had filed a voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code According to the press release, the
Company's decision to seek "judicial reorganization" was based on a
"combination of factors, including a rapid decline in its liquidity
resulting from Kmart's below-plan sales and earnings performance in the
fourth quarter."
Following this announcement, the price of the Company's common stock
dropped from $1.74 per share to $0.70 per share, a one day decline of
59%, on extremely heavy trading volume.
For more information, contact Marc S. Henzel by Mail: 273 Montgomery
Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or
888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com
MEASUREMENT SPECIALTIES: Kaplan Fox Commences Securities Suit in NJ
-------------------------------------------------------------------
Kaplan Fox and Kilsheimer LLP initiated a securities class action
against Measurement Specialties, Inc. (AMEX:MSS) and certain of its
officers and directors in the United States District Court for the
District of New Jersey, on behalf of all persons or entities who
purchased the Company's common stock between August 1, 2001 and
February 14, 2002, including all persons and entities who purchased or
otherwise acquired the Company's common stock pursuant, or traceable
to, a public offering, which became effective on or about August 1,
2001.
The suit charges the defendants with violations of the federal
securities laws, and alleges, among other things, that during the class
period, defendants issued a series of false and misleading statements
regarding the Company's financial condition. In addition, the
registration statement and prospectus issued in connection with the
offering misrepresented and omitted material facts concerning the
Company's financial results.
Furthermore, during the class period, and in violation of generally
accepted accounting principles, defendants caused the Company to
falsely report favorable financial results by, among other things,
improperly recognizing revenues and improperly overstating inventories.
As a result, Company stock traded at artificially inflated levels
during the class period.
For more details, contact Frederic S. Fox, Jonathan K. Levine or Hae
Sung Nam 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
METAWAVE COMMUNICATIONS: Abbey Gardy Lodges Securities Suit in W.D. WA
----------------------------------------------------------------------
Abbey Gardy, LLP commenced a securities class action against Metawave
Communications Corporation (Nasdaq:MTWV) in the United States District
Court for the Western District of Washington, on behalf of all persons
or entities who purchased the Company's common stock during the period
from April 24, 2001 through March 14, 2002.
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. The suit alleges that during the class period, defendants
caused the Company's shares to trade at artificially inflated levels
through the issuance of false and misleading financial statements. As
a result of this inflation, the Company was able to complete private
placement offerings, raising net proceeds of $30 million during the
class period.
On March 14, 2002, after the close of the markets, the Company issued a
press release disclosing several issues concerning the company,
including:
(1) that the Company would be restating its 2001 earnings,
reducing revenue by $5 million to $7 million out of the $43.6
million of total revenue previously reported, a change of 11%
to 15%, because of "unauthorized commitments" made to
customers in Asia;
(2) that the Company would terminate its SpotLight GSM product
line due to "insufficient customer demand;"
(3) that it would close it Taiwan facilities, cut its Chinese
operation and reduce its United States workforce by 42% in an
effort to lower operating expenses;
(4) that the restructuring would result in a first quarter (2002)
charge of $23 million to cover inventory and accounts
receivable write-offs, employee severance, facilities
closures, and other shutdown costs;
(5) that the Company had fired their Chief Financial Officer,
Stuart Fuhlendorf; and
(6) that the Company had revised its first quarter 2002 revenue
guidance to about $6 million, well below the $8.5 million to
$9 million range Wall Street had been led to expect for the
Company's first quarter (2002) revenue.
After disclosure of this news, Company shares lost more than 70% of
their value.
For more information, contact Nancy Kaboolian or Jennifer Haas by
Phone: 800-889-3701 or by E-mail: JHaas@abbeygardy.com or
nkaboolian@abbeygardy.com.
NEWPOWER HOLDINGS: Marc Henzel Commences Securities Suit in S.D. NY
-------------------------------------------------------------------
The Law Offices of Marc S. Henzel initiated a securities class action
in the United States District Court for the Southern District of New
York on behalf of all individuals and institutional investors that
purchased the common stock of NewPower Holdings, Inc. (NYSE: NPW)
between October 5, 2000 and December 5, 2001, inclusive.
The complaint charges the Company and its officers and directors with
violations of the Securities Exchange Act of 1934. In addition, the
Company, its officers and directors, as well as underwriters of the
Company's October 5, 2000 initial public offering, are also charged
with violations of the Securities Act of 1933.
The suit alleges that the Company, a nationwide provider of electrical
power and natural gas formed by Enron in 1999, engaged in a pattern of
misleadingly described policies and transactions throughout the class
period that served to mask the true nature of the Company's business,
and its financial condition.
Specifically, the suit alleges that the defendants made numerous false
and misleading statements concerning the Company's ability to succeed
in a volatile energy market through sophisticated risk management
strategies conceived and largely managed by its affiliate, Enron Energy
Services, Inc. (EES), an Enron subsidiary.
The suit asserts that neither EES nor the Company had identified any
hedging strategies that could enable the Company to operate profitably
under market conditions prevailing at the time of the IPO or, indeed,
at any time thereafter.
Moreover, as the complaint details, despite representations in the IPO
Prospectus designed to portray Enron and its affiliates as long-term
investors in the Company and believers in its prospects for success,
Enron, through its CFO, Andrew Fastow, had set up a partnership known
as "Raptor III," whose purpose was to hedge Enron's position against
such an anticipated decline in the Company's stock.
Although the Prospectus purported to describe fully the relationship
between Enron, its affiliates, and the Company, and all of their
related party transactions, it failed to fully disclose the extremely
troubling and material Raptor transactions.
As a result of these various misrepresentations and omissions, the IPO
garnered net proceeds to the Company of $543 million.
In addition, certain defendants made numerous statements concerning the
Company's financial performance throughout the class period that
falsely attributed disappointing results to factors beyond the
Company's control. As the complaint charges, they schemed to omit
mention of the true reasons the Company was drastically cutting costs -
i.e., that it did not have its claimed hedging system against high
prices in place (either independently or with the aid of Enron), and
that collateral obligations carried a material risk of loss, thereby
sapping the Company's ability to tap enough resources to successfully
carry out its business plan.
Thereafter, in connection with the collapse of Enron amid scandal in
the fall of 2001, the Company and other defendants belatedly began to
disclose that they had no substantial hedges in place, and that,
contrary to their repeated representations, a substantial portion (and
perhaps all) of the enormous collateral they had posted was at risk of
loss.
The suit alleges that defendants have now admitted in filings made by
them with Securities and Exchange Commission that the Registration
Statements were false and misleading in that they failed to disclose
that, contrary to defendants' prior representations, the collateral
postings were not guaranteed to return to the Company completely or
even substantially (as had been previously represented), but were at
risk of being seized by the creditor, Enron. The Company
misrepresented the true risk the Enron forward contracts presented
because the revelation of the truth would have led to investor
suspicions about the very viability of its business plan, its ability
to hedge against higher prices, the adequacy of its liquid resources,
and the fairness of its dealings with Enron.
For more information, contact Marc S. Henzel by Mail: 273 Montgomery
Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or
888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com
PDI INC.: Marc Henzel Initiates Securities Fraud Suit in New Jersey
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The Law Offices of Marc S. Henzel commenced a securities class action
in the United States District Court for the District of New Jersey, on
behalf of purchasers of the securities of PDI Inc. (NASDAQ: PDII)
between May 22, 2001 and November 12, 2001 inclusive, against the
Company, Charles C. Saldarini (CEO and Co-Chairman) and 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.
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 complaint, 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, would have on its
business.
In particular, the suit alleges that defendants represented, in an
August 23, 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 its 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
the Company's 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 information, contact Marc S. Henzel by Mail: 273 Montgomery
Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or
888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com
PNC FINANCIAL: Bernstein Liebhard Commences Securities Suit in W.D. PA
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Bernstein Liebhard and Lifshitz LLP initiated a securities class action
on behalf all persons who acquired PNC Financial Services Group, Inc.
(NYSE: PNC) securities between July 19, 2001 through January 29, 2002,
in the United States District Court, Western District of Pennsylvania
against the Company and:
(1) Ernst & Young, LLP,
(2) James E. Rohr, and
(3) Robert L. Haunschild
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 between July 19, 2001 and January 29, 2002, thereby artificially
inflating the price of Company securities.
The suit alleges that, throughout the class period, defendants issued
multiple press releases reporting the Company's quarterly financial
performance, and filed reports confirming such performance with the
United States Securities and Exchange Commission (SEC).
These reports positively portrayed the Company performance during the
class period. As alleged in the complaint, however, these statements
were materially false and misleading because the Company was engaged in
improper and/or suspect accounting practices which affected the
accuracy of its financial results and that, contrary to the statements
in documents filed with the SEC during the class period, the Company's
financial statements issued during the Class Period were not prepared
in accordance with generally accepted accounting principles.
On January 29, 2002, the Company issued a press release announcing that
the Federal Reserve Board had raised concerns about accounting
inaccuracies in its financial statements for the second, third, and
fourth quarters of fiscal year 2001.
Specifically, the Company had failed to consolidate preferred interests
in three subsidiaries. As a result, the Company announced that it would
restate its earnings for the second and third quarters of fiscal year
2001 and revise its fourth quarter earnings for the same year,
resulting in year-end earnings being reduced $155 million to
approximately $412 million, or $1.38 a share.
The Company also revealed that these accounting adjustments would cause
its non-performing assets to rise by $125 million to $393 million.
Additionally, the Company stated that the Federal Reserve Board and SEC
were making inquiries about its transactions and that it would
cooperate with the investigations.
In response to these disclosures, shares of the Company fell $5.79, or
nearly 10%, to close at $56.08 on extremely heavy trading volume of
6,305,100 shares.
For more details, contact Ms. Linda Flood, Director of Shareholder
Relations by Mail: 10 East 40th Street, New York, New York 10016 by
Phone: 800-217-1522 or 212-779-1414 by E-mail: PNC@bernlieb.com or
visit the firm's Web site: http://www.bernlieb.com
RARE MEDIUM: Agrees To Settle Securities Fraud Suit In Delaware Court
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Rare Medium Group, Inc. (NASDAQ: RRRR) agreed to settle a securities
class action litigation pending in the Delaware Court of Chancery in
which the law firm of Milberg Weiss Bershad Hynes & Lerach LLP serves
as lead counsel to the class action plaintiffs.
Under the settlement, AP/RM Acquisition, LLC, an affiliate of the
preferred stockholders, has agreed to commence promptly a cash tender
offer for up to 15,002,909 shares, or approximately 23%, of the
Company's common stock, at a price of 105% of the average closing
prices of the common stock for the five trading days prior to the
commencement of the tender offer, but in no event greater than $0.33
per share or less than $0.23 per share.
The tender offer is intended to provide additional liquidity for the
Company's common stockholders and, thereby, provide near term support
for the market price of its common stock. The tender offer will be
concluded prior to commencement of the rights offering. The Board of
Directors will not be making any recommendation with respect to the
tender offer, and stockholders are urged to make their own decision
with respect to the tender offer.
The Preferred Stockholders have agreed that all tendered shares which
would otherwise collectively entitle them and their affiliates to more
than 29.9% of the voting power of the Company will be voted pro rata
with all votes cast by holders of common stock.
The Company also announced that, in connection with the transactions
announced today, it has agreed to settle all outstanding claims
relating to the pending stockholder class action lawsuits. The
settlement agreement will be subject to court approval, which will be
sought promptly.
As part of the settlement, the Company has agreed with counsel for the
plaintiffs to pay $100,000 in cash and issue shares of its common stock
with a value of $1,000,000 based on the tender offer price as
plaintiffs' counsels' fees and expenses.
For more information, contact Craig Chesser of Rare Medium Group, Inc.
by Phone: 646-638-1306 or by E-mail: info@raremedium.com
SAF T LOK: Milberg Weiss Commences Securities Fraud Suit in S.D. FL
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Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class
action on behalf of purchasers of the securities of Saf T Lok
Corporation (OTC BB: LOCK.OB) between April 14, 2000 and April 16,
2001, inclusive, in the United States District Court, Southern District
of Florida against the Company and:
(1) Franklin W. Brooks,
(2) Jeffrey W. Brooks,
(3) William Schmidt,
(4) James E. Winner, Jr.,
(5) John Hornbostel, Jr. and
(6) Goldberg Wagner Stump and Jacobs LLP
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 Company securities.
Throughout the class period, as alleged in the complaint, defendants
filed materially false and misleading financial statements with the US
Securities & Exchange Commission, which, among other things, did not
comply with generally accepted accounting principles.
Specifically, at the start of the class period, defendants disclosed
that the Company had terminated its exclusive consumer market
distribution agreement with United Safety Action, Inc. (USA) and that
the Company itself would now be permitted to market its products to
retail customers. The suit alleges that the financial statements filed
by defendants failed to disclose, among other things, that:
(1) a catalog retailer had previously obtained Company products
from USA at a sharply reduced price and was now selling these
products at extremely low prices, thereby limiting the market
opportunity for the Company;
(2) the Company's earnings, assets and shareholder equity were
overstated by at least $3.2 million; and
(3) the Company's inventories were not stated at the lower of cost
or market, as represented.
When this information was finally disclosed on April 16, 2001, the last
day of the class period, the stock price of the Company fell to under
$0.30 per share. Subsequently, on May 15, 2001, the Company's
securities were delisted from the NASDAQ Small Cap Market and are
currently traded on the OTC (Over The Counter) Bulletin Board.
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 or contact Kenneth J. Vianale or Tara Isaacson by
Mail: 5355 Town Center Road, Suite 900 Boca Raton, FL 33486 by Phone:
561-361-5000 by E-mail: SafTLokcase@milbergNY.com or visit the firm's
Web site: http://www.milberg.com
SPECTRALINK CORPORATION: Marc Henzel Commences Securities Suit in CO
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The Law Offices of Marc S. Henzel initiated a securities class action
in the United States District Court for the District of Colorado on
behalf of purchasers of SpectraLink Corporation (Nasdaq: SLNK) publicly
traded securities during the period between July 19, 2001 and January
11, 2002, inclusive.
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 between July 19, 2001 and January 11, 2002, thereby artificially
inflating the price of Company securities.
Throughout the class period, as alleged in the complaint, defendants
issued statements which represented that the Company was experiencing
continued growth and increasing its market share and would continue to
do so in the future.
Unbeknownst to investors, however, the Company was suffering from a
host of undisclosed adverse factors which were negatively impacting its
business and which would cause it to report declining financial
results, materially less than the market expectations defendants had
caused and cultivated.
Specifically, defendants misrepresented or failed to disclose that:
(1) the Company was experiencing declining sales as its business
began to be affected by general market forces. Throughout the
class period, defendants repeatedly emphasized that the
Company was not being affected by the slowdown in the US
economy, when, in fact, that was not true;
(2) the Company was becoming increasingly reliant on end-of-the-
quarter sales to meet its sales forecasts. This sales pattern
necessarily subjected the Company to the increased risk that
it would not meet its sales expectations should it not
successfully complete certain anticipated sales; and
(3) certain of the Company's customers were experiencing financial
difficulty such that it was highly unlikely that they would be
able to complete anticipated sales, thereby causing the
Company to suffer a decline in its revenues.
On January 14, 2002, before the open of the Nasdaq stock market, the
Company issued a press release announcing preliminary financial results
for its fourth quarter of 2001, and disclosed, for the first time, that
its revenue and earnings would in fact be affected by the slowdown in
the overall economy.
In response to this announcement, the price of the Company's common
stock dropped precipitously, falling from $16.02 per share to $10.16
per share, a decline of more than 36%. While the Company was being
adversely affected by the aforementioned factors, but prior to any
disclosure to the market, the individual defendants and other senior
executives sold more than $13.7 million worth of their personally-held
common stock to the unsuspecting public.
For more information, contact Marc S. Henzel by Mail: 273 Montgomery
Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or
888-643-6735 by Fax: 610-660-8080 or by E-Mail: mhenzel182@aol.com
SYMBOL TECHNOLOGIES: Sued For Securities Act Violations in E.D. NY
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Symbol Technologies, Inc. faces six securities class actions pending in
the United States District Court for the Eastern District of New York
on behalf of purchasers of the Company's common stock between October
19, 2000 and February 13, 2002, inclusive. The suit also names as
defendants:
(1) Tomo Razmilovic,
(2) Jerome Swartz and
(3) Kenneth Jaeggi
The suit alleges that defendants violated the federal securities laws
by issuing materially false and misleading statements, throughout the
class period that had the effect of artificially inflating the market
price of the Company's securities. Specifically, the complaint alleges
that defendants engaged in the following conduct which had the effect
of increasing the Company's reported revenue and profits:
(i) the Company booked as profit in the third quarter of 2000 a
one-time royalty payment in excess of $10 million, enabling
it to make its third quarter projections;
(ii) the Company used expenses associated with its acquisition of
Telxon to mask the fact that its sales were declining; and
(iii) the Company booked as having shipped in the first quarter of
2001 more than $40 million in inventory that included side
provisions allowing customers to delay payments or return
merchandise, or included products that "never left the
warehouse."
The Company believes that these litigations are without merit and
intends to defend them vigorously.
VENCOR INC.: $3M Settlement Reached in Securities Fraud Suit in W.D. KY
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Vencor, Inc. agreed to settle for $3 million a securities class action
pending in the United States District Court for the Western District of
Kentucky against the Company and certain of its executive officers and
directors.
The suit alleges that defendants during a specified time frame violated
Sections 10(b) and 20(a) of the Exchange Act, by, among other things,
issuing to the investing public a series of false and misleading
statements concerning the Company's current operations and the inherent
value of its common stock. The suit further alleges that as a result
of these purported false and misleading statements concerning the
Company's revenues and successful acquisitions, the price of its common
stock was artificially inflated.
In December 2001, the parties filed a motion for the district court to
approve a settlement among the parties requiring the payment of $3.0
million to the certified class. A hearing to consider the settlement
has been scheduled for May 13, 2002.
There can be no assurance the settlement will be approved by the court.
However, if the settlement is not approved, the Company intends to
continue defending this action vigorously.
*********
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
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Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima
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Copyright 2002. All rights reserved. ISSN 1525-2272.
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