/raid1/www/Hosts/bankrupt/CAR_Public/020625.mbx
C L A S S A C T I O N R E P O R T E R
Tuesday, June 25, 2002, Vol. 4, No. 124
Headlines
AAMES FINANCIAL: Discovery Proceeds In Suit For Labor Act Violations
ADAM INC.: Asks GA Court To Dismiss Securities Suit Over Nov 1995 IPO
AIR TRANSAT: Canada Court Okays Suit Over Disastrous Landing In Azores
APARTHEID REPARATIONS: South African Ambassador Mum on Swiss Banks Suit
CATHOLIC CHURCH: Lawyer Seeks $30M Lien On Diocese of Manchester Assets
CATHOLIC CHURCH: Suit Accuses Cleveland Priest Of Molesting 20 Children
CATHOLIC CHURCH: Plaintiffs Suing Two Dioceses Ordered To Name Names
DRYVIT SYSTEMS: California Homeowners May Get Benefits in EIFS Suit
ENRON CORPORATION: Former CFO Seeks To Avoid Testifying In Lawsuits
HAWAII: Deaf Women's Prison Inmate Files Suit For ADA Violations
HOME DEPOT: Women Employees Say Federal Court Review No Longer Needed
LEGATO SYSTEMS: CA Courts Grant Approval of Securities Suit Settlement
MEISTER PROTECTION: OH Judge Grants Certification To Consumer Suit
NANOPHASE TECHNOLOGIES: Asks IL Court To Dismiss Securities Fraud Suit
OHIO: ACLU Challenges Legality of Dublin Schools' Drug-Testing Policy
PHONE COMPANIES: Appeals Court Allows Customers To File Antitrust Suits
PHYCOR INC.: TN Court Sets Securities Suit Settlement Hearing For July
PTEK HOLDINGS: Forges $20.75M Settlement of Securities Suit in N.D. GA
REDDI BRAKE: CA Court Still Contemplating Settlement of Securities Suit
SAFEGUARD SCIENTIFICS: Asks NY Court To Dismiss Securities Fraud Suit
SAFEGUARD SCIENTIFICS: Plaintiffs File Consolidated Securities Suit
TYCO INTERNATIONAL LTD.: Shareholders Sue Over Securities Violations
WEST VIRGINIA: Coal, Logging Companies Sued On Behalf Of Flood Victims
*Legislators, Litigators Scrutinize Insurance Companies' Cash Surpluses
New Securities Fraud Cases
FLEXTRONICS INTERNATIONAL: Milberg Weiss Lodges Securities Suit in NY
FLEXTRONICS INTERNATIONAL: Fruchter & Twersky Files NY Securities Suit
HALLIBURTON COMPANY: Dyer & Shuman Commences Securities Suit in S.D. TX
MERRILL LYNCH: Pomerantz Haudek Commences Securities Fraud Suit in NY
OMNICOM GROUP: Much Shelist Investigates Possible Securities Fraud
PEREGRINE SYSTEMS: Shapiro Haber Commences Securities Suit in S.D. CA
*********
AAMES FINANCIAL: Discovery Proceeds In Suit For Labor Act Violations
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Discovery is continuing in a class action pending against Aames
Financial Corporation and certain of its subsidiaries in the United
States District Court of California. A former loan executive filed the
suit on behalf of himself and current and former loan executives
employed by the Company.
The plaintiff alleges that during his employment, he and other loan
executives worked in excess of 8 hours per day or 40 hours per week.
The suit alleges that the Company willfully failed to pay overtime in
violation of the Federal Fair Labor Standards Act and, with respect to
loan executives employed in California, in violation of the California
Labor Code and Business & Professional Code and Section 17200.
The Company filed an answer denying the claims and asserting various
affirmative defenses in September 2001. Trial is currently set for
October 2002.
The Company cannot predict the outcome of the suit, but intends to
vigorously against it.
ADAM INC.: Asks GA Court To Dismiss Securities Suit Over Nov 1995 IPO
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Adam, Inc. asked the Fulton County Superior Court in Atlanta, Georgia
to dismiss the securities class action pending against it and certain
of its then officers and directors, at the time of the Company's
November 1995 initial public offering (IPO).
The suit alleges violations of sections 11, 12(2) and 15 of the
Securities Act of 1933, violations of the Georgia Securities Act and
negligent misrepresentation arising out of alleged disclosure
deficiencies in connection with the Company's IPO.
The court held a status conference on May 15, 2002, during which the
Company intended to ask the court to take up on its motion to dismiss,
but the court has not released any decision yet. The Company and its
officers and directors are vigorously denying the allegations.
AIR TRANSAT: Canada Court Okays Suit Over Disastrous Landing In Azores
----------------------------------------------------------------------
An Ontario court's ruling has cleared the way for a single class action
against Air Transat, Airbus and Rolls-Royce in a near-disaster over the
Atlantic when Air Transat's Flight 236 ran out of fuel, The Globe and
Mail reports.
There were no deaths, and few serious injuries occurred in the "dead-
stick" landing and emergency evacuation of the passengers. The landing
and evacuation took place at a Portuguese military air base in the
Azores on August 24, 2001.
Many of the 291 passengers "believed they were going to die" after
being told to prepare for a water landing, lawyers handling the lawsuit
said.
APARTHEID REPARATIONS: South African Ambassador Mum on Swiss Banks Suit
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South Africa's ambassador to Switzerland on Sunday distanced her
government from the class action seeking compensation from Swiss banks
for those who suffered during apartheid, Associated Press Newswires
reports.
In an interview with a Swiss newspaper, Nozipho January-Bardill said
the South African government had not been consulted by any of the
lawyers involved in the lawsuit, which was filed last week. "Everybody
was surprised when the lawsuit was announced, including my government,"
Ms. January-Bardill told the NZZ am Sonntag newspaper. "We have never
supported this type of class-action suit."
The Swiss banks stand accused, in the lawsuit, of hiding behind Swiss
neutrality and undermining a United Nations embargo between 1985 and
1993, by helping the white-dominated regime of South Africa with loans
and other business deals worth billions of dollars, as foreign capital
fled the country.
The lawsuit was filed by a group of lawyers in US District Court in
Manhattan, fashioned after a precedent established in litigation on
behalf of Holocaust victims and their heirs, who gained a US$1.25
billion settlement from Swiss banks and corporations. The apartheid
lawsuit seeks billions of dollars in damages from as many as 100
corporations, including Citigroup, the largest financial institution in
the United States, and Swiss banking giants UBS and Credit Suisse. One
of the lawyers heading the lawsuit is Ed Fagan, an attorney in New
York, who was at the fore of the Holocaust suit. He is hoping that
hundreds of thousands of South Africans will join the lawsuit.
The Ambassador told the newspaper that her government hopes the lawsuit
will not cause economic relations with Switzerland to suffer. About
300 Swiss firms have investments worth some 10 billion Swiss francs
(US$6.2 billion) in South Africa, making it the fifth most important
foreign investor. "The lawsuit could have an impact on relations, but
we are trying to avoid this by continuing our dialogue with the Swiss,"
said the Ambassador, who is based in Berne, the Swiss capital.
Ms. January-Bardill said her government had little sympathy with the
idea that Switzerland and other foreign countries should forgive South
African debts to make up for support they might have given to the
apartheid regime. "South Africa has to repay its foreign debts because
we want to stay creditworthy in the future," she said.
Acknowledging that she had suffered from the racist laws, starting in
1948, that stripped even the most basic rights from those who were not
white, Ms. January-Bardill told the newspaper that her past is part of
her and cannot be undone. "But I do have control over my current life
and that tells me that we should not continue to be victims of the
past, otherwise the burden becomes too heavy."
Credit Suisse has said it saw no grounds for the lawsuit and said the
company should not be held responsible for apartheid's crimes. Swiss
government officials have refused to comment on the lawsuit, saying the
matter would be discussed at the weekly cabinet meeting on Wednesday.
CATHOLIC CHURCH: Lawyer Seeks $30M Lien On Diocese of Manchester Assets
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A lawyer representing more than 50 people who say they were molested by
Roman Catholic priests recently asked a judge to approve a $30 million
lien against the Diocese of Manchester, the Associated Press Newswires
reports.
Peter Hutchins, who filed a class action against the diocese on April
10, asked the court to freeze the diocese's real estate, bank accounts
and other assets to ensure it has enough money to pay any settlement or
verdict for his clients.
"There is a danger that there will not be adequate assets to fund such
a global settlement of claims in New Hampshire on a fair and evenhanded
basis if this requested attachment is not granted," Mr. Hutchins wrote
in the request. Mr. Hutchins said he decided to request the lien after
the diocese announced last week the details of a voluntary independent
mediation program to settle claims against the church by alleged
victims of sexual abuse.
He said the mediation program could drain the diocese's assets, leaving
little or nothing for those who join the class action filed in
Hillsborough County Superior Court. Mr. Hutchins says that he expects
more than 100 people to sign on.
"It is clearly the intent of the mediation program to settle some cases
on a case-by-case basis," Mr. Hutchins wrote. "This program will
result in this defendant spending money with no assurances to anyone
that available or potentially available assets are sufficient to
compensate all valid claims (that) are reasonably expected to exist."
The lien figure was calculated by assuming an average award of $300,000
per alleged victim, Mr. Hutchins said. He also said he does not know
the value of the church's property, and has requested a list of assets.
Pat Schiltz, dean of the University of St. Thomas School of Law in
Minnesota, and a former defense lawyer who represented dioceses in
hundreds of sex abuse cases, said the request was more publicity stunt
than legal tactic. He also said it would be unusual for a lien to be
granted prior to the conclusion of the case, unless the defendant has a
history of failing to pay debts.
However, Daniel Shea, a Houston lawyer handling priest abuse cases in
Massachusetts, said the diocese's mediation program is another example
of the church trying to set the terms of engagement. He said Mr.
Hutchins exercised sound legal judgment when requesting the lien.
"The church seems to think that it can determine the maximum amount of
money that it is going to pay," he said. "When you go out and commit
tortious acts, you don't get to determine the limits of liability."
The class action filed by Mr. Hutchins, still must be approved by a
judge as must the lien request. If granted, the lien could prevent the
church from selling property and strictly limit spending by the
diocese.
Mr. Hutchins said he is not trying to financially cripple the church,
but wants to ensure his clients and other alleged victims are treated
fairly. The request acknowledges that the diocese needs some of its
assets for day-to-day operations, and Mr. Hutchins said he will not
seek attachments on anything the church can prove it needs.
More than 40 lawsuits have been filed against the church in New
Hampshire since January. Nationally, at least 250 priests have been
suspended due to abuse allegations.
CATHOLIC CHURCH: Suit Accuses Cleveland Priest Of Molesting 20 Children
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A woman filed a lawsuit accusing a priest who killed himself in April
of improperly touching her and 20 or more children at a city church in
the Cleveland Catholic Diocese, in the mid-1980s, according to a report
by the Associated Press Newswires.
The 25-year-old woman, identified only as "Jane Doe," sued the Diocese,
claiming it knew about the Reverend Donald Rooney's abuse and failed to
stop him, The Plain Dealer reports. She said Rev. Rooney molested
altar boys and altar girls in the basement of St. Patrick's Church.
The lawsuit was filed in Cuyahoga County Common Pleas Court and asks
for class action certification, which would entitle the students who
were "fondled, molested or inappropriately touched" by Rev. Rooney to
join as plaintiffs. The lawsuit also names St. Patrick's Church as a
defendant.
"The case is not about money," Howard Schulman, the woman's lawyer told
the newspaper. "It's about giving a voice to victims of Father Rooney.
Hopefully, that combined voice will lead to a change and this will
never happen again."
Rev. Rooney, 48, shot himself in the head shortly after a woman told
the Diocese that he sexually abused her when she was a child. She said
it happened at Sacred Heart of Jesus Church in 1980, a year after Rev.
Rooney's ordination.
The "Jane Doe" plaintiff says Rev. Rooney improperly touched her and
about 20 other girls while they wore altar robes, saying he was fitting
the garments. The woman was told that a similar number of boys in the
program to become altar boys also had been touched improperly during
their robe fitting.
The woman informed a teacher about what had happened to her and the
other girls, and when nothing was done, she tried unsuccessfully to
organize the girls to boycott the altar-girl program, according to the
lawsuit.
CATHOLIC CHURCH: Plaintiffs Suing Two Dioceses Ordered To Name Names
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A Fayette Circuit Court Judge recently ordered plaintiffs in a $50
million lawsuit against the Catholic dioceses of Lexington and
Covington, in Kentucky, to reveal their identities, those of their
alleged sexual abusers and specifics of their allegations, The
Lexington Herald Leader reports.
However, the revelations will not be made public, because, in her
ruling, Judge Mary Noble ruled that the file will be sealed from public
view when the more detailed lawsuit is filed within the next 20 days.
A similar seal on priest sex-abuse lawsuits in Louisville has prompted
newspapers to intervene and challenge the constitutionality of a
Kentucky law that allows court records to be sealed to protect
children.
The Lexington lawsuit was filed by attorney Robert Treadway on behalf
of four men and one woman who allege that up to 30 years ago they were
abused by priests, and that the church covered up the alleged crimes
and failed to report them to the legal authorities. The suit refers
only to four John Does and a Jane Doe, and does not go into detail
about the crimes they allege occurred or the names of the priests they
allege committed the crimes.
The Catholic dioceses say they have to have specifics spelled out in
the lawsuit in order to intelligently respond. It was at their request
that Judge Noble made her ruling.
The Covington Diocese says that the statute of limitations for the
lawsuit has passed, barring the class action as to the abuses alleged
by plaintiffs' in their lawsuit. The church contends that the
plaintiffs should have been aware of problems with priests in the early
1990s, when there was widespread publicity and allegations of diocesan
cover-ups after the Rev. Earl Bierman was sentenced to 20 years in
prison for sexually abusing students at Covington Latin School.
DRYVIT SYSTEMS: California Homeowners May Get Benefits in EIFS Suit
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Los Angeles-area homeowners who believe their houses are covered with
Exterior Insulation and Finish System (EIFS), a synthetic product, may
be eligible to receive cash compensation, free property inspections,
extended warranties and other class action benefits, according to Gary
Mason co-lead counsel in the lawsuit filed by homeowners against Dryvit
Systems Inc., the Los Angeles Times reports.
The plaintiffs allege the Company's EIFS traps moisture between the
house wall and the exterior faux-stucco material, potentially causing
damage to the residence.
Los Angeles is one of the cities nationwide where the synthetic stucco
materials were widely distributed, Mr. Mason said. He added that the
impact of the alleged defects has been more widely reported in damp
climates, such as Texas and the northwestern United States.
Houses do not have to be damaged for homeowners to participate in the
lawsuit, Mr. Mason said. One simply must have owned a one- or two-
story home or town house as of June 5, 2002, that is partially or
wholly covered with Dryvit EIFS, installed after January 1, 1989.
ENRON CORPORATION: Former CFO Seeks To Avoid Testifying In Lawsuits
-------------------------------------------------------------------
Andrew Fastow, Enron Corporation's former chief financial officer, has
asked a judge to temporarily shield him from testifying in civil
lawsuits until possible criminal charges against him are resolved, the
Houston Chronicle reports. This move has resulted, in turn, in filings
by attorneys representing plaintiffs in class actions against the
Company and its various executive officers.
Attorneys for Andrew Fastow say he will put himself in jeopardy if he
is forced to provide documents or answer questions in the civil suits
while being investigated by federal officials. "If Mr. Fastow responds
to the civil discovery, he jeopardizes his Fifth Amendment privilege
against self-incrimination by creating the possibility his answers will
aid the prosecution of him," says the filing by San Francisco attorney
John Keker.
Therefore, Mr. Keker has asked US District Judge Melinda Harmon to
issue a stay against the civil suits as to Mr. Fastow until criminal
liability is resolved. Judge Harmon has yet to rule on the request.
Mr. Fastow created and managed the partnerships that investigators say
enabled the Company to hide debt and inflate revenues. He reportedly
profited by the deals, sometimes at the Company's expense. Mr. Fastow
now finds himself at the crossroads of criminal and civil law, where
exercising his Fifth Amendment rights can increase his civil liability,
said David Berg, an experienced white-collar-crime defense attorney.
If a defendant takes the Fifth in a criminal case, jurors are often not
told they did so. Even if they are told, jurors are instructed not to
make any negative assumptions about the person's guilt. In a civil
case, however, if a defendant takes the Fifth, a jury can assume the
worst, said Mr. Berg. "It would ruin him in front of a civil jury," he
added.
Attorneys for plaintiffs in class actions against the Company, Mr.
Fastow and the Company's other executive officers argue that Mr. Fastow
already has taken the Fifth in testimony before Congress and in
depositions taken in the criminal case against Arthur Andersen.
Therefore, further harm to him in continuing to take the Fifth would be
minimal.
"Finally," say the filings by plaintiffs' attorneys, "grant Mr. Fastow
the remedy he seeks, and the court will no doubt face a torrent of
copycat motions by other defendants," including Arthur Andersen
partners and former Enron executives.
Another response, filed by attorneys representing Ken L. Harrison, a
former Enron director and chief executive of Portland General Electric,
argues that charges against Mr. Fastow may not be filed before the
December 1, 2003, trial date of the class actions. That would mean,
says the response to Mr. Fastow's request for a stay of the civil suits
as to him, that Mr. Harrison and other defendants "would be severely
prejudiced if they were forced to go to trial without having deposed
Mr. Fastow or reviewed documentary discovery obtained from him."
Mr. Berg said there is very strong case law in the US Court of Appeals
for the Fifth Circuit that allows a judge to stay civil proceedings
until criminal liability has been resolved. However, he said, it is
likely that Judge Harmon has not ruled on the request because Mr.
Fastow has not been indicted publicly and has not yet been deposed in
the civil lawsuits. "The fact that they haven't taken depositions yet,
indicates they are probably trying to settle the case with Mr. Fastow,"
he said.
HAWAII: Deaf Women's Prison Inmate Files ADA Violations Suit
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A deaf inmate at the Women's Correctional Center in Kailua claims the
state has failed to provide her with an American sign language
interpreter and equal access to facilities, programs and activities,
the Associated Press Newswires reports.
Inmate Charing Bernard recently filed a class action in US District
Court, saying the state violated her prisoner's rights under the
Americans with Disabilities Act (ADA). Her lawyers said they will cite
a Ninth US Circuit Court of Appeals ruling that disabled prisoners must
be provided with accommodations for their deaf condition.
Carl Varady, one of the plaintiff's attorneys, said Ms. Bernard was
denied an interpreter at a parole hearing in October of last year.
Cheryl Kaster, Ms. Bernard's social worker and president of Na Lima
Aloha, a nonprofit organization for Hawaii's deaf community, said the
prison's only telephone device for the deaf is broken. This is a
condition that also cuts Ms. Bernard off from the outside world, Ms.
Kaster said.
Department of Public Safety Director, Ted Sakai, said he was surprised
by the lawsuit because he was not aware of the problem.
Ms. Bernard has served three years of an eight-year sentence for drug
charges.
HOME DEPOT: Women Employees Say Federal Court Review No Longer Needed
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Some female employees who alleged discrimination at Home Depot Inc.
(HD), joined with the Company this week in asking a federal judge in
California to end court supervision of the retailer's employment
practices, according to a recent report by Dow Jones Business News.
The Company's commitment to equal-opportunity employment has been
called into question this week after it was disclosed that it refuses
to sell to the federal government. By avoiding the federal contractor
label, the Company does not have to file affirmative-action plans for
its 1,300 stores nationwide or report on specific deficiencies in the
hiring or pay of women and minorities.
The Company, the nation's largest home-improvement retailer, said that
escaping additional federal scrutiny of its employment practices is not
a factor in its decision to ban federal sales. The Company has said it
does not have the "capabilities and systems in place that the
government requires" of federal contractors and it does not want to
violate the law.
At least on one front, it appears the Company has made progress in the
promotion of female employees. In 1997, the Company agreed to pay
$87.5 million and establish a new hiring process to settle a class
action alleging discrimination against women. The Company did not
admit any wrongdoing in the case.
In the class action, female employees had alleged that women were
funneled into cashier jobs instead of sales positions in the store
aisles. This point was critical, because applicants for department
supervisor, assistant store manager and store manager, were largely
drawn from the sales floor, not the cash register lane.
In the motion filed this week in US District Court in San Francisco,
attorneys representing the female employees who had spoken in the
Company's behalf, said the Company had exceeded benchmarks for hiring
women in the most recent six-month reporting period under the consent
decree, which covers 10 states in the Western United States. This
agreement is not set to expire until September 2003.
James Finberg, a lawyer with Lieff Cabraser Heimann & Bernstein LLP, in
San Francisco, said the benchmarks compare the number of women hired
for certain store-level positions to the percentage of women who were
qualified and interested applicants for the job. The consent decree
generally requires that the percentage of women hired must meet or
exceed the percentage of women in the final applicant pool, Mr. Finberg
said.
Almost a quarter of the store managers hired in the Western stores
during this six-month period were women, the plaintiffs and the Company
said in the motion, but females only represented 11.8 percent of the
applicants in the "adjusted qualified pool." There will be a hearing
on the motion next week.
The point which argues for terminating the decree early, said Mr.
Finberg, is the recognition that the court no longer needs to look over
their shoulder. They are doing a good job on their own. In 1994, when
employees filed the initial discrimination case in California, Mr.
Finberg said, only about 10 percent of the Company's employees on the
sales floor nationwide were female. Today, he said it is about 23
percent.
The Company declined to discuss its employment numbers in detail.
Jocelyn Hunter, a senior corporate counsel at Home Depot, told Dow
Jones, "We are deeply committed to equal opportunity for all of our
associates [employees]."
A separate consent decree, but similar to the one being reviewed in the
San Francisco court, and filed in US District Court in New Orleans,
covers Company stores in the eastern United states. It will expire
at the end of this year. Christine Carty, attorney with Schnader,
Harrison Segal & Lewis LLP in New York, said her firm does not plan to
terminate its decree early, and she said she could not discuss
confidential employment data supplied by the Company as part of the
agreement.
Meantime, the Federal Equal Employment Opportunity Commission sued the
Company in the United States District Court in Galveston, Texas, last
year, on behalf of a female employee alleging discrimination. The
Company has denied the allegations in that case.
LEGATO SYSTEMS: CA Courts Grant Approval of Securities Suit Settlement
----------------------------------------------------------------------
California federal and state courts approved the settlements proposed
by Legato Systems, Inc. in the securities class actions and derivative
suits pending against them in the United States District Court for the
Northern District of California and in San Mateo County Superior Court,
respectively.
Both the securities class action and the derivative action arose from
events that caused the Company to restate its results for the first
three quarters of 1999.
The federal suit generally alleged that, between April 22, 1999 and May
17, 2000, the defendants made false or misleading statements of
material fact about the Company's prospects and failed to follow
generally accepted accounting principles in violation of the federal
securities laws. Additionally, the derivative suit charges that the
defendants breached their fiduciary duties by issuing false and
misleading statements about the Company's business prospects and
engaged in improper insider trading.
The settlements in the federal and state litigation call for the
Company to pay a total of US$87.7 million, which includes attorneys'
fees, in May 2002. The settlements do not constitute any admission of
wrongdoing on the part of the Company or the individual defendants.
On May 3, 2002, the Superior Court of California for San Mateo County
approved the settlement in the derivative litigation. On May 6, 2002,
the US District Court for the Northern District of California granted
preliminary approval to the class action settlement. The parties to
the litigation expect final approval of the class action settlement in
the summer of 2002.
MEISTER PROTECTION: OH Judge Grants Certification To Consumer Suit
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A consumer fraud class action brought by eight Cleveland homeowners
against a security-alarm company recently was given class action
status, reports The Plain Dealer (Cleveland, Ohio). At least 100
people could become plaintiffs in the lawsuit against Meister
Protection Services of South Euclid, according to an order issued
recently by Judge Stuart Friedman of Cuyahoga County Common Pleas
Court.
The lawsuit, filed by plaintiffs' lawyer Edward Icove, claims that the
Company "induced" the homeowners to enter into "illegal, deceptive
and/or unconscionable contracts." In hundreds of instances, the
Company received permission from building contractors to install
security alarms in new or renovated homes, for free, while they were
under construction. Homeowners then were told that to activate the
system, they would have to sign monitoring leases with Meister. After
signing, many realized they could not afford the service and fell
behind in payments.
The Company then sued its customers in Small Claims Court, seeking not
just back payments, but the entire amount of the contracts, usually
about $2,000, plus 10 percent annual interest. At the time Mr. Icove
filed the lawsuit, the Company had sued more than 100 customers in
Cleveland Municipal Court, winning judgments against 70 homeowners and
placing more than $81,000 in liens on homes.
Mr. Icove's lawsuit also names Rysar Properties and Cresthaven
Development as defendants.
NANOPHASE TECHNOLOGIES: Asks IL Court To Dismiss Securities Fraud Suit
----------------------------------------------------------------------
Nanophase Technologies asked the United States District Court for the
Northern District of Illinois to dismiss an amended securities class
action, alleging that the Company and one of its officers are liable
under the federal Securities Exchange Act of 1934.
The original suit asserts that defendants made supposedly fraudulent
material misstatements of fact and omitted to state material facts
necessary to make other statements of fact not misleading in connection
with the Company's public disclosures, including certain press
releases, concerning the Company's dealings with a certain British
customer.
The complaint alleges that the action should be maintained as a
plaintiff class action on behalf of certain persons who purchased
shares of the Company's common stock from April 5, 2001 through
October 24, 2001.
The defendants filed a motion to dismiss the complaint in December
2001. Rather than respond to that motion, plaintiff filed an amended
suit on March 8, 2002, making the same allegations, alleging the same
putative class, and seeking the same relief, as in the initial suit.
The defendants filed a motion to dismiss the amended complaint on April
12, 2002. Although the Company believes that the allegations of the
amended complaint are without merit, it is not feasible for the Company
to predict at this time the outcome of this litigation or whether its
resolution could have a material adverse effect on the Company's
results of operations or financial condition.
OHIO: ACLU Challenges Legality of Dublin Schools' Drug-Testing Policy
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The American Civil Liberties Union (ACLU) of Ohio Foundation filed a
class action in the United States District Court in Columbus, Ohio
against Dublin, Ohio schools, challenging the legality of the school's
drug-testing policy in the school system, The Columbus Dispatch
reports. That case, however, is on hold until the Supreme Court
decides a similar case from Oklahoma.
Meanwhile, Dublin school Superintendent Sharon Zimmers has recommended
ending mandatory drug tests for student athletes. The Dublin
Board of Education will decide next Tuesday whether to continue the
two-year-old policy. The school's policy mandates testing at the
beginning of each season for all athletes who participate in a sport
and allows for random testing during the season.
Ms. Zimmer's recommendation to eliminate the testing comes after a
year-long study on the effectiveness of the program, as well as legal
issues surrounding it. In its place, Ms. Zimmers is recommending that
the Board hire a third drug and alcohol counselor.
During the policy's first year, there were nine positive tests out of
the 2,516 administered. This past school year, there were 12 positive
tests out of 2,849 administered. "You could argue that the policy has
been effective based on the number of positive tests," said Board
President Mark Holderman. "But by instituting a (third) drug and
alcohol counselor, we can target many more students in a manner
different from just testing athletes."
PHONE COMPANIES: Appeals Court Allows Customers To File Antitrust Suits
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A federal appeals court in New York ruled that consumers can sue their
local telephone companies, the Baby Bells, for antitrust violations,
potentially exposing the much-criticized phone companies to a slew of
lawsuits, The Wall Street Journal reports.
In a decision that could end up before the Supreme Court, the US Court
of Appeals for the Second Circuit said consumers must be able to bring
antitrust actions because "the antitrust laws serve the purpose of
affording the consumer compensation that the Telecommunications Act
does not provide."
The court recognized that, while competitors can make claims based on
existing federal regulations, consumers have had no such recourse. The
court's ruling changes that, with potentially high stakes for the
regional Bells, in antitrust actions plaintiffs can collect treble
damages.
The new case involves a class action brought against Bell Atlantic on
behalf of local telephone customers whose phone companies were Bell
Atlantic competitors. The plaintiffs alleged that Bell Atlantic did
not give competitors equal access to its network as required under
telecommunications law, and as a result they received inferior service.
An earlier action, known as the Goldwasser case, found that the Bells
are not subject to antitrust claims with regard to the service they
provide to their competitors. The Bells have successfully used the
Goldwasser ruling to fend off rivals' antitrust complaints. Unlike
Goldwasser, the recent Second Circuit decision appears to apply only to
consumers.
Philip Verveer, a partner at the law firm Willkie, Farr and Gallagher,
said the decision could be pivotal. "This is a very important
decision," said Mr. Verveer. "Goldwasser has had an extremely
pernicious effect on companies that seem to feel they have been victims
of anti-competitive behavior."
Using Goldwasser, Bell companies have successfully argued that federal
courts lack jurisdiction to review claims of anticompetitive behavior
arising from the service the companies provided smaller competitors
leasing access to the Bells' networks and equipment. A string of
courts have found, instead, that the rules governing the Bells'
interaction with their competitors were all regulations imposed under
the Telecommunications Act of 1996, meaning that the company only could
be guilty of breaking that law, not the Sherman Antitrust Act.
As a result, claims about anticompetitive behavior by the Bells
typically have been heard by the Federal Communications Commission, not
the courts.
The recent Second Circuit ruling asserts that federal courts indeed can
review claims of anticompetitive behavior arising from the service the
Bells provide smaller competitors leasing access to the Bells' networks
and equipment. Mr. Verveer said he expects the arguments over
jurisdiction to decide antitrust claims now will go to the Supreme
Court.
"Bell companies have used Goldwasser to get a whole series of Sherman
Act cases dismissed on preliminary motions, and this kind of balances
the Goldwasser precedent," Mr. Verveer said.
Verizon Communications Inc. General Counsel John Thorne said the
decision creates conflicted rulings and could end up being resolved by
the Supreme Court. Verizon, said Mr. Thorne, has not decided whether to
request that resolution. Mr. Thorne also said the appeals court
believed Goldwasser did not apply because a customer initiated the
suit, not a competitor, as has been typical.
Similarly, Paul Mancini, assistant general counsel for SBC
Communications Inc., of San Antonio, the nation's second-largest local
phone company behind Verizon, said the recent Second Circuit decision
will set a precedent primarily for the rare cases brought by customers
rather than rival carriers. He said the decision does not necessarily
overturn Goldwasser in the majority of cases, in which rivals claim
that a Bell's anticompetitive conduct has hurt their business.
PHYCOR INC.: TN Court Sets Securities Suit Settlement Hearing For July
----------------------------------------------------------------------
The United States District Court for the Middle District of Tennessee
set for July 20, 2002 a final hearing for the settlement proposed by
Phycor, Inc. relating to the consolidated securities class actions
filed against it and certain of its current and former officers and
directors:
(1) Joseph C. Hutts,
(2) Derril W. Reeves,
(3) Thompson S. Dent,
(4) Richard D. Wright, and
(5) John K. Crawford
Ten securities class actions were initially filed in state and federal
courts in Tennessee between September 1998 and June 1999. The factual
allegations of the complaints in all 10 actions are substantially
identical and assert that during various periods between April 22, 1997
and September 22, 1998, the defendants issued false and misleading
statements which materially misrepresented the Company's earnings and
financial condition and the Company's clinic operations. The
defendants also allegedly misrepresented and failed to disclose various
other matters concerning the Company's operations in order to conceal
the alleged failure of the Company's business model.
Plaintiffs further assert that the alleged misrepresentations caused
the Company's securities to trade at inflated levels while the
individual defendants sold shares of the Company's stock at such
levels.
The Company and the individual defendants eventually reached a
settlement with the plaintiff class, which will resolve all of the
claims in the consolidated suits. On March 12, 2002, the parties filed
with the court, a memorandum of understanding which outlines the
proposed settlement, the terms of which include the payment of US$3.4
million to be paid by insurance proceeds in exchange for complete
releases of all defendants and dismissal of the consolidated cases with
prejudice.
In connection with the Company's bankruptcy filings, an amended
stipulation and order of the Bankruptcy Court lifting the automatic
stay for purposes of allowing the settlement process to proceed in the
district court was entered on April 12, 2002. Fully executed
settlement documents were filed with the district court on April 12,
2002 and any opt-outs or objections to the settlement must be filed
with the district court on or before July 8, 2002. The final hearing
on the settlement is scheduled for July 20, 2002.
The reorganized company will take whatever steps are necessary to
complete the settlement of the litigation. Subject to approval by the
district court, KPMG LLP, the Company's independent public auditors,
has also settled the claims against it in the litigation.
The same class period and the same factual allegations made in the
federal suit are alleged in a separate derivative action filed in the
Chancery Court for Davidson County, Tennessee. By order entered
October 14, 1999, the derivative action was stayed pending the outcome
of the federal suits. Although the lead plaintiff has not agreed to
settle his claim as a part of the proposed federal court settlement, it
is a condition of the settlement agreement that under the terms of the
plan, which is subject to creditor and court approval, the lead
plaintiff's interest as a common stockholder be cancelled and his
litigation claim be discharged.
In addition, the Company will not pursue any alleged claims made in the
derivative action against the Company's current and former officers and
directors. Finally, under the terms of the plan, the Company is
releasing any claims it may have against its current and former
officers and directors.
PTEK HOLDINGS: Forges $20.75M Settlement of Securities Suit in N.D. GA
----------------------------------------------------------------------
Ptek Holdings, Inc. agreed to settle for $20.75 million the
consolidated securities class action pending against it and certain of
its officers and directors in the United States District Court for the
Northern District of Georgia.
The suit was originally filed on behalf of individuals, including a
subclass of former Voice-Tel Enterprises, Inc. (Voice-Tel) franchisees
and a subclass of former Xpedite Systems, Inc. (Xpedite) shareholders,
who purchased or otherwise acquired the Company's common stock from as
early as February 11, 1997 through June 10, 1998.
Plaintiffs allege the Company admitted it had experienced difficulty in
achieving its anticipated revenue and earnings from voice messaging
services due to difficulties in consolidating and integrating its sales
function. Plaintiffs allege, among other things, violation of Sections
10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and
Sections 11, 12 and 15 of the Securities Act of 1933.
The Company filed a motion to dismiss this complaint in April 1999. In
December 1999, the court issued an order that dismissed the claims
under Sections 10(b) and 20 of the Exchange Act without prejudice, and
dismissed the claims under Section 12(a)(1) of the Securities Act with
prejudice. The effect of this order was to dismiss from this lawsuit
all open-market purchases by the plaintiffs.
The plaintiffs filed an amended complaint in February 2000, which the
defendants moved to dismiss in April 2000. The court granted in
part and denied in part the motion in December 2000.
In January 2002, the court ordered the parties to mediate, which the
parties did on February 8-9, 2002. Following the mediation, the
parties reached a proposed settlement of all claims, which has been
preliminarily approved by the court. A final fairness hearing on the
proposed settlement before the court is set for July 8, 2002.
Under the terms of the proposed settlement, the Company will contribute
$3.075 million in cash and/or Company common stock, as the Company
elects, and the insurance carriers will contribute $17.675 million, for
a total settlement of $20.75 million, exclusive of interest. The
claims to be settled include:
(1) all claims by the open market purchasers under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934,
(2) all claims by the Xpedite subclass under Sections 10(b),
14(a), and 20(a) of the Exchange Act and Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933, and
(3) all claims by the Voice-Tel subclass under Sections 10(b) and
20(a) of the Exchange Act and Sections 12(a)(2) and 15 of the
Securities Act
The Company can make no assurances, however, that the proposed
settlement will receive final approval by the court. In addition, the
Company has the right to withdraw from the proposed settlement if more
than a pre-agreed number of class members choose to opt-out of the
settlement, and upon such withdrawal there is no minimum settlement
amount.
REDDI BRAKE: CA Court Still Contemplating Settlement of Securities Suit
-----------------------------------------------------------------------
The Los Angeles County Superior Court in California has yet to decide
on the three-year-old settlement proposal forged by Reddi Brake Supply
Corporation in the class action filed on behalf of all persons or
entities who bought the Company's common stock prior to March 23, 1996,
and/or who bought or sold any shares thereafter until August 13, 1996.
The complaint asserts causes of action for breach of fiduciary duty by
officers and director and conspiracy to manipulate the price of the
common stock of the defendant.
The parties to the litigation entered into a stipulation of settlement
dated May 21, 1999, dismissing the litigation with prejudice. The
settlement provides that the plaintiffs will release the Company from a
$20 million judgment if the Company and individual defendants assign
any and all rights for insurance coverage to the plaintiffs.
SAFEGUARD SCIENTIFICS: Asks NY Court To Dismiss Securities Fraud Suit
---------------------------------------------------------------------
Safeguard Scientifics, Inc. asked the United States District Court for
the Southern District of New York to dismiss the consolidated
securities class action pending against it, its subsidiary Compucom
Systems, and a former officer of the Company who served as a director
of Opus360 Corporation.
The plaintiffs allege material misrepresentations and/or omissions in
connection with the initial public offering of Opus360 Corporation
stock on April 7, 2000. The plaintiffs allege, among other things,
that the prospectus and registration statement for Opus360's initial
public offering contained misrepresentations and/or omissions
regarding:
(1) Opus360's products, including Opus Xchange,
(2) Opus360's cash flow and liquidity, including its need for
additional financing in the 12-month period following the
initial public offering, and
(3) Opus360's relationships with its customers.
The suit asserts claims under Sections 11, 12 and 15 of the Securities
Act of 1933.
The Company and the other defendants have moved to dismiss this
complaint for failure to state a claim upon which relief may be
granted. While the outcome of this litigation is uncertain, the
Company believes that it has valid defenses to plaintiffs' claims and
intends to defend the lawsuits vigorously.
SAFEGUARD SCIENTIFICS: Plaintiffs File Consolidated Securities Suit
-------------------------------------------------------------------
Plaintiffs in the securities class action against Safeguard
Scientifics, Inc. filed a consolidated amended suit in the United
States District Court in Philadelphia.
The first suit was commenced in June 2001 against the Company and
Warren V. Musser, its former Chairman, and alleges claims under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Plaintiffs allege that defendants failed to disclose that Mr. Musser
had pledged some or all of his Company stock as collateral to secure
margin trading in his personal brokerage accounts. Plaintiffs allege
that the defendants' failure to disclose the pledge, along with their
failure to disclose several margin calls and the consequences thereof
on Company's stock price, violated the federal securities laws.
In August 2001, a second class action was filed against the Company and
Mr. Musser asserting claims similar to those brought in the first suit.
In addition, plaintiffs in the second case allege that the defendants
failed to disclose possible or actual manipulative aftermarket trading
in the securities of the Company's partner companies, the impact of
competition on prospects for one or more of the Company's partner
companies and the Company's lack of a superior business plan.
The Company is in the process of responding to the consolidated suit.
While the outcome of this litigation is uncertain, the Company believes
that it has valid defenses to plaintiffs' claims and intends to defend
the lawsuit vigorously.
TYCO INTERNATIONAL LTD.: Shareholders Sue Over Securities Violations
--------------------------------------------------------------------
Two lawsuits filed in the United States District Court charge Tyco
International Ltd., its Board of Directors and former chief executive
Dennis Kozlowski, of violations of federal securities laws and
wrongdoing, the Associated Press Newswires reports.
One lawsuit, which requests class action status, claims the Company
and Mr. Kozlowski made false and misleading statements about the
Company's financial situation. The other lawsuit accuses the 11 board
members of gross mismanagement and asks that all board members be
removed immediately and an election be held for new ones.
The Company's stock has been battered, particularly since Mr. Kozlowski
resigned and was indicted for tax evasion this month. Rating agencies
have downgraded the Company's debt rating and there is uncertainty
regarding the initial public offering of the Company's financial arm,
CIT Group, Inc. The Company bought CIT last year for about $10 billion
and hoped to receive more than $7 billion for it from an initial public
offering. The company now expects to realize $5.8 billion, writing off
$4.5 billion.
The class action, brought by shareholder William C. Williams of Albany,
New York, alleges that the Company and Mr. Kozlowski violated
securities laws and that the Company and the former executive officer
made false and misleading statements in that, among other things, they
did not tell investors that Mr. Kozlowski was under investigation for
sales tax evasion in New York. The suit also claims the Company and
Mr. Kozlowski made false and misleading statements concerning the spin
off of CIT.
The class action also claims that the company and Mr. Kozlowski
knowingly made or issued false statements or public documents, or
issued them in such a "reckless manner" as to manipulate the price of
the stock upward.
Lawyer Dennis Johnson of the South Burlington, Vermont firm Johnson &
Parkinson, said that the suit seeks to "recover the amount overpaid for
stocks during the class period - anyone who purchased or sold and
suffered a loss, but purchase is the key."
Shelley Evans of Hawaii filed the second lawsuit on behalf of the
company and its shareholders. It accuses the 10 current Board Members
and former Board member Dennis Kozlowski of breaching their fiduciary
duties and gross mismanagement. The lawsuit asks for damages resulting
from the directors' "bad faith and reckless failure to prevent
financial abuse through the unfettered use of Tyco corporate
assets for the individual benefit of certain Tyco executives."
The complaint outlines Mr. Kozlowski's and other executives' possible
misuse of company funds for housing and other purchased that were not
reported in disclosures, as well as unreported compensation to
executives.
The lawsuit requests that all Board members be removed, and claims that
the Board's action has exposed the company to potentially massive
liability and expenses from lawsuits and federal securities violations.
WEST VIRGINIA: Coal, Logging Companies Sued On Behalf Of Flood Victims
----------------------------------------------------------------------
Lawyers representing some 1,400 victims of last summer's floods in West
Virginia filed a class action against some 100 coal and logging
companies, the Associated Press Newswires reports.
The lawsuit was filed recently in McDowell, Wyoming and Raleigh County
circuit courts, by Beckley lawyer Warren Randolph McGraw III and the
Provost Umphrey Law Firm of Beaumont, Texas. The lawsuit alleges that
coal and timber companies in southern West Virginia, caused the
devastating July 8, 2001, flooding.
"The plaintiffs contend that irresponsible logging, mountaintop removal
and valley fills caused excessive flooding and resulted in flood damage
in several southern West Virginia counties," Mr. McGraw said. "Four of
my clients are the families of individuals who died in the flood."
Although the lawsuit does not mention the May 2, flood, Mr. McGraw said
his office has been in contact with families of victims of that flood.
Soon after last year's flood, Governor Robert Wise ordered the state
Department of Environmental Protection (DEP) to determine the possible
part mining and timbering played in the disaster. DEP lawyer Perry
McDaniel released a draft copy of the report earlier this month that
said coal and timber operations contributed to the heavy flooding.
Numerous lawsuits already have been filed against coal companies,
timber operators and large landowners. The lawsuits allege that mining
and logging caused natural surface waters "to be diverted and delivered
in an unnatural way and in incomprehensible amounts down the mountains,
hills and valleys . destroying the lives and property" of residents."
The state Supreme Court has referred the lawsuits to the state's six-
member Mass Litigation Panel to decide how to best litigate the complex
cases. Chief Justice Robin Davis has instructed the panel to recommend
a panel member or another circuit judge to preside over the flood
cases.
*Legislators, Litigators Scrutinize Insurance Companies' Cash Surpluses
-----------------------------------------------------------------------
The issue of large, and according to critics, "excessive," cash
surpluses held by nonprofit health insurance companies is coming under
close scrutiny by state legislators and has resulted in some class
actions. The parties' stated positions and arguments reveal this is
another aspect of the health insurance landscape ripe for heated,
prolonged controversy.
On the litigation scene, the Blue Cross, Blue Shield companies of
Pennsylvania (the four Blues) are fighting class actions in Bucks and
York Counties, in Pennsylvania, that seek to force them to return a
portion of their surpluses to the ratepayers, or to provide programs
for some of the 1.1 million Pennsylvanians who have no health
insurance. The issue of the Blues' surpluses has become even more
controversial and prime for litigation, as insurance rates have soared
and doctors have complained that reimbursement rates are too low.
On the legislative scene, a group of five Pennsylvania legislators
recently unveiled proposals that would impose restrictions on and
greater oversight of the nonprofit Blue Cross and Blue Shield companies
with large cash surpluses and profit-making subsidiaries, according to
a report by The Philadelphia Inquirer.
The lawmakers, five House Democrats, said they were concerned that Blue
Cross and Blue Shield companies in Pennsylvania are maintaining
excessive surpluses while raising subscribers' insurance rates by 10
percent to 15 percent a year.
"This is extremely troubling because more and more Pennsylvania
families and employers are finding it increasingly difficult to afford
health insurance," Rep. Phyllis Mundy (D., Luzerne) said at a Capitol
press conference. Rep. Mundy has sponsored a bill to require nonprofit
health insurers to use surplus funds to reduce premiums for subscribers
if they [the insurers] had more than three months' worth of claims
payments on reserve.
All four Blues in Pennsylvania, Independence Blue Cross, Highmark of
Pittsburgh, Highmark of Camp Hill and Capital Blue Cross of Harrisburg,
hold reserves substantially exceeding requirements set by the State
Insurance Department, but it is unclear whether their reserves are so
great as to exceed three months' worth of claims. In Philadelphia,
Independence Blue Cross said earlier this year, that its $689.6 million
in reserves would cover less than two months of claims payments.
However, without enactment of additional legislation, the state
Insurance Department requires the Blues, to have slightly more than $1
billion. The state's four Blue Cross, Blue Shield companies, which
provide health coverage to more than half the state's population, have
surpluses totaling $3.8 billion. However, the Blues qualify these
surplus figures, saying:
(1) that the trade organization, The Blue Cross and Blue Shield
Association, requires them to keep almost twice as much money
in reserve as the state mandates and
(2) that it is prudent business policy to keep ample reserves,
well in excess of required minimums, so money will be
available for claims in times of crisis.
Another bill introduced by Rep. Mundy, according to The Philadelphia
Inquirer, would require any Blue Cross company that converts from
nonprofit to profit-making status, a country-wide trend, to place its
assets in a charitable foundation that would provide health benefits
for needy people. This provision would appear to rest on the Charters
that create the Blues and the mandate they contain that one of the
functions of a nonprofit insurer is to minister to the insurance needs
of the community.
Other legislative proposals call for a House investigation of
insurance-reimbursement rates to doctors and hospitals, a study by the
State Government Commission of charitable assets held by Blue Cross
Companies and the establishment of a consumer advocate for insurance in
the state Attorney General's Office.
New Securities Fraud Cases
FLEXTRONICS INTERNATIONAL: Milberg Weiss Lodges Securities Suit in NY
---------------------------------------------------------------------
Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class
action on behalf of purchasers of the securities of Flextronics
International Ltd. (Nasdaq: FLEX) between October 2, 2001 and June 4,
2002, inclusive, in the United States District Court, Southern District
of New York, against the Company and:
(1) Michael E. Marks,
(2) Michael Mcnamara and
(3) Robert R. B. Dykes
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 October 2, 2001 and June 4, 2002, thereby artificially
inflating the price of Company securities.
The complaint alleges that the Company failed to disclose that its
business and operations were being negatively affected by a host of
adverse factors, including, but not limited to, the following:
(i) that the Company was experiencing declining sales as its
business began to be affected by adverse market forces.
Throughout the class period, defendants repeatedly emphasized
that the Company was not being affected by the slowdown in the
US or global economy, when, in fact, that was not true;
(ii) throughout the class period, many of the Company's customers
were experiencing severe financial difficulty such that it was
highly foreseeable that they would be unable to complete
anticipated sales, thereby causing the Company to suffer a
decline in its revenues. At all times throughout the class
period, defendants lacked a reasonable basis upon which to
publish and/or affirm the revenue guidance they provided to
analysts and investors; and
(iii) defendants had purposely and/or recklessly under-reported the
amount of financing needed to complete the Company's
restructuring and over-stated the status of the completion of
this reorganization, as well as made false statements
concerning the Company's financial and operational condition
because it was critical that defendants raise cash by selling
more equity during the upcoming months.
On June 4, 2002, the last day of the class period, defendants shocked
the market when they finally revealed that the restructuring, which was
purportedly paid for in October 2001 and substantially completed
thereafter, was still far from complete.
Defendants now admitted that there were at least an additional $150
million in restructuring charges that must be recorded. In addition,
defendants also stated that they could not possibly meet the Company's
previous earnings and revenue forecasts for its first fiscal quarter
2003.
In response to this negative announcement, the price of Company stock
dropped precipitously, falling from $12.32 per share to as low as $9.50
per share, a decline of almost 23%, on tremendous volume of 47 million
Flextronics shares traded.
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: FlextronicsCase@milbergNY.com or visit
the firm's Website: http://www.milberg.com
FLEXTRONICS INTERNATIONAL: Fruchter & Twersky Files NY Securities Suit
----------------------------------------------------------------------
Fruchter & Twersky LLP initiated a securities class action on behalf of
purchasers of the securities of Flextronics International Ltd. (Nasdaq:
FLEX) between October 2, 2001 and June 4, 2002, inclusive, in the
United States District Court, Southern District of New York against the
Company and:
(1) Michael E. Marks,
(2) Michael Mcnamara and
(3) Robert R. B. Dykes.
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 October 2, 2001 and June 4, 2002, thereby artificially
inflating the price of Company securities.
The complaint alleges that the Company failed to disclose that its
business and operations were being negatively affected by a host of
adverse factors, including, but not limited to:
(i) that the Company was experiencing declining sales as its
business began to be affected by adverse market forces.
Throughout the class period, defendants repeatedly emphasized
that the Company was not being affected by the slowdown in the
US or global economy, when, in fact, that was not true;
(ii) throughout the class period, many of the Company's customers
were experiencing severe financial difficulty such that it was
highly foreseeable that they would be unable to complete
anticipated sales, thereby causing the Company to suffer a
decline in its revenues. At all times throughout the class
period, defendants lacked a reasonable basis upon which to
publish and/or affirm the revenue guidance they provided to
analysts and investors; and
(iii) defendants had purposely and/or recklessly under-reported the
amount of financing needed to complete the Company's
restructuring and over-stated the status of the completion of
this reorganization, as well as made false statements
concerning the Company's financial and operational condition
because it was critical that defendants raise cash by selling
more equity during the upcoming months.
On June 4, 2002, the last day of the class period, defendants shocked
the market when they finally revealed that the restructuring, which was
purportedly paid for in October 2001 and substantially completed
thereafter, was still far from complete. Defendants now admitted that
there were at least an additional $150 million in restructuring charges
that must be recorded.
In addition, defendants also stated that they could not possibly meet
the Company's previous earnings and revenue forecasts for its first
fiscal quarter 2003.
In response to this negative announcement, the price of Company stock
dropped precipitously, falling from $12.32 per share to as low as $9.50
per share, a decline of almost 23%, on tremendous volume of 47 million
Company shares traded.
For more details, contact Jack G. Fruchter by Mail: One Pennsylvania
Plaza, 19th Floor, New York, New York 10119 by Phone: 212-279-5050,
800-440-8986 by Fax: 212-279-3655, or by E-mail:
JFruchter@FruchterTwersky.com.
HALLIBURTON COMPANY: Dyer & Shuman Commences Securities Suit in S.D. TX
-----------------------------------------------------------------------
Dyer & Shuman, LLP initiated a securities class action in the United
States District Court for the Northern District of Texas, Dallas
Division on behalf of purchasers of Halliburton Company (NYSE: HAL)
publicly traded securities during the period between July 22, 1999 and
May 28, 2002 inclusive, against the Company, certain of its officers
and directors, and Arthur Andersen, LLP, its accountant and auditor.
The suit alleges that defendants violated the federal securities laws
by disseminating false and misleading statements throughout the class
period. Throughout the class period, the Company improperly recognized
revenues from long-term construction projects in violation of generally
accepted accounting principles.
Around the fourth quarter of 1998, and without disclosing the
accounting practice to the market, the Company began reporting revenues
to cover cost overruns, while tacitly assuming that its customers would
pay the disputed amounts. The Company changed its accounting policy in
the midst of a difficult year, with lower oil prices contributing to a
net loss of $14.7 million for fiscal 1998. However, for the change in
accounting policy, however, the Company would have reported a loss in
excess of $100 million in 1998.
Further, prior to the accounting changes made by the Company, it had
just completed its acquisition of Dresser Industries, Inc., which was
suffering from hundreds of thousands of asbestos-related lawsuits.
Defendant Andersen was complicit in the fraud, and issued unqualified
audit opinions accompanying each of the Company's annual reports filed
with the SEC during the class period.
Andersen's actions were done knowingly, or while at least recklessly
disregarding, the fact that the Company's accounting changes resulted
in its financial results being false and misleading.
For more details, contact Trig R. Smith by Mail: 801 East 17th Avenue
Denver, CO 80218-1417 or by Phone: 303-861-3003/800-711-6483
MERRILL LYNCH: Pomerantz Haudek Commences Securities Fraud Suit in NY
---------------------------------------------------------------------
Pomerantz Haudek Block Grossman & Gross LLP initiated a securities
class action charging Merrill Lynch & Co., Inc. (NYSE:MER), its former
Internet research analyst Henry M. Blodget, and its research analyst
Virginia Syer Genereux with issuing false and misleading research
reports about Aether Systems, Inc. (Nasdaq:AETH). The case was filed
on behalf of investors who purchased the common stock of Aether during
the period from November 15, 1999 through February 20, 2002, inclusive,
in the United States District Court for the Southern District of New
York.
The lawsuit charges that during the class period, defendants' research
reports and ratings on Aether were neither independent nor objective,
but instead were biased and improperly influenced by Merrill Lynch's
lucrative investment banking relationships with this important client.
It is also alleged that at the time defendants were issuing positive
ratings and coverage about Aether, they were concealing their
contemporaneous, private negative assessments of the Company.
Indeed, Merrill Lynch's research reports on Aether were so tainted that
Mr. Blodget internally acknowledged, in a December 1, 2000 e-mail, the
need to "just start calling the stocks. including AETH (Aether) like we
see them, no matter what the ancillary business consequences are."
Plaintiff asserts that despite this telling concession, neither Mr.
Blodget nor the other defendants started calling Aether stock as they
saw it.
The suit further alleges that defendants failed to disclose that
although Merrill Lynch technically had five ratings, it had a policy
and practice of assigning only its top three ratings (buy, accumulate,
and neutral) to Internet companies. During the relevant time herein,
defendants not once issued Merrill Lynch's two lowest ratings, reduce
or sell, on such companies, including Aether.
As a result of defendants' false and misleading statements, the market
price of Aether common stock was artificially inflated, maintained or
stabilized during the class period.
For more details, 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
OMNICOM GROUP: Much Shelist Investigates For Possible Securities Fraud
----------------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, PC is investigating
for possible securities fraud on behalf of purchasers of the securities
of Omnicom Group, Inc. (NYSE:OMC) between April 25, 2000 and June 11,
2002, inclusive.
It has been alleged that Omnicom Group, Inc. and officers John D. Wren,
Randall J. Weisenburger, Bruce Crawford and Philip J. Angelastro
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.
According to the allegations, before and throughout the class period,
the Company reported that it was continuing to experience growth in its
revenues and earnings, despite the overall economic slowdown and the
worst decline in advertising revenue that the industry had ever
experienced. The Company's growth was attributed, for the most part,
to the numerous acquisitions made by the Company, which were accretive
to the Company's earnings.
However, on June 12, 2002, an article in The Wall Street Journal
highlighted the Company's acquisition accounting and raised questions
concerning the Company's creation of an off-balance sheet entity in
which it transferred certain Internet investments. Specifically, with
respect to the Company's accounting for acquisitions, the article noted
that:
(1) the Company immediately included revenue and earnings from
recent acquisitions in its reported financial results, in
contrast to its competitors who excluded the results for the
first year after the company was acquired, thereby creating
a materially misleading impression of the Company's
performance;
(2) the Company continued to owe hundreds of millions of dollars
in additional payments for companies that it had previously
acquired; and
(3) the Company faced a potential future liability whereby, under
certain circumstances, it might be required to acquire
companies in which it had invested.
With respect to the off-balance sheet entity, the article described the
Company's transfer of its Internet investments to Seneca, which had
been jointly created with Pegasus Capital LLP in May 2001. According to
the article, Seneca had been created as a vehicle for the Company to
avoid reporting a loss on its investments in Internet companies that
had become devalued.
In response to the revelations contained in The Wall Street Journal
article, the price of Omnicom common stock dropped precipitously,
falling almost 20% to close at $62.28, on volume of more than 31
million shares traded.
For more details, contact Carol V. Gilden by Phone: 800-470-6824 or by
E-mail: investorhelp@muchshelist.com
PEREGRINE SYSTEMS: Shapiro Haber Commences Securities Suit in S.D. CA
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Shapiro Haber & Urmy LLP initiated a securities class action on behalf
of persons or entities who received common stock of Peregrine Systems,
Inc. (Nasdaq: PRGN), in exchange for their stock in Remedy Corporation
(Nasdaq: RMDY), in connection with its acquisition by the Company on or
around August 27, 2001. The lawsuit was filed in the United States
District Court for the Southern District of California against the
Company, certain of its officers and directors, and its former
independent auditor, Arthur Anderson LLP.
The complaint alleges that the defendants violated Sections 11 and 15
of the Securities Act of 1933 by making materially false and misleading
statements regarding the Company's revenue and income for fiscal year
2000 and certain fiscal periods in 2001 in the Registration Statement
and Prospectus issued in connection with the Company's acquisition of
Remedy.
On May 23, 2002, the Company shocked the market by announcing that it
was restating up to $100 million of previously recognized revenues for
fiscal years 2000, 2001 and the first three quarters of 2002, based on
information resulting from its ongoing internal investigation into
accounting "errors and irregularities." Peregrine also reported that
the SEC has begun an investigation into the Company's accounting
practices.
For more details, contact Ted Hess-Mahan or Liz Hutton by Mail: 75
State Street, Boston, MA 02109 by Phone: 800-287-8119 by Fax:
617-439-0134, or by E-mail: cases@shulaw.com.
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