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/raid1/www/Hosts/bankrupt/CAR_Public/020717.mbx C L A S S A C T I O N R E P O R T E R Wednesday, July 17, 2002, Vol. 4, No. 140 Headlines CALIFORNIA: Awarding Firms $1.25B As Part of Tobacco Settlement ENERGY TRADERS: Snohomish County PUD Commences Suit Over Electric Rates FINOVA GROUP: Fairness Hearing On Securities Settlement Set For July FRED HUTCHINSON: Cancer Center Faces Suit Over Protocol 126 Trial Risks INDIAN FUNDS: House Panel Limits Historic Tracking Of Accounting Errors MICHIGAN: Builders Won't Join Suit V. Flint County Drain Commissioner NETSOLVE INC.: Fairness Hearing For Suit Settlement Set for September PERKINELMER INC.: Cauley Geller Commences Securities Fraud Suit in MA RJ REYNOLDS: GA Court Dismisses Consolidated Tobacco Antitrust Suit SCORPION TECHNOLOGIES: Fairness Hearing On Settlement Set For September SODEXHO INC.: DC Court Grants Class Certification to Race Bias Suit TIMCO AVIATION: Settlement Fairness Hearing Set for August UNIFY CORPORATION: CA Court Grants Final Settlement Approval WILDSIDE ADULT: Strip Club Faces Consumer Suit For ADA Violations in FL WORLDCOM INC.: Banks Charge $2.5B in Fraud After Accounting Fiasco *Catholic Church Called To Change as Survival, Authority In Question New Securities Fraud Cases CRYOLIFE INC.: Wolf Popper Commences Securities Fraud Suit in N.D. GA CRYOLIFE INC.: Charles Piven Commences Securities Fraud Suit in N.D. GA FLEXTRONICS INTERNATIONAL: Schatz & Nobel Lodges Securities Suit in NY MERCK & CO.: Berman DeValerio Commences Securities Suit in New Jersey MERCK & CO.: Glancy & Binkow Lodges Securities Fraud Suit in New Jersey MERRILL LYNCH: Wites & Kapetan Commences Securities Fraud Suit in NY PERKINELMER INC.: Schiffrin & Barroway Lodges Securities Suit in MA SUPERVALU INC.: Charles Piven Commences Securities Fraud Suit in MN UNIROYAL TECHNOLOGIES: Charles Piven Lodges Securities Suit in M.D. FL ********* CALIFORNIA: Awarding Firms $1.25B As Part of Tobacco Settlement --------------------------------------------------------------- The State of California will award US$1.25 billion in fees to law firms that helped it get $25.4 billion as part of a national cigarette litigation settlement four years ago, the Xinhua News Agency reports. Nearly 60 law firms, including four in California, the most populous state of the United States, will divide the award with a cap at $125 million dollars or 10 percent of the award per firm, according to the Los Angeles Times. Arbitrators John Calhoun Wells and Harry Huge, who formed the majority on the arbitration panel to decide the size of the award, called the $1.25 billion dollars "a full, reasonable fee" for the " Davis/Ellis" case. They said that if not for the efforts of these lawyers, the $206 billion dollar national tobacco settlement in 1998 would never have been reached. The "Davis/Ellis" case by California was one of the cases filed by various states against the nation's tobacco firms in the mid of 1990s. The suits were settled jointly in November 1998, with tobacco companies paying huge monetary award and being restricted in advertising campaigns. Of the $25.4 billion awarded in the "Davis/Ellis" case, the state's share was $12.7 billion and the rest went to cities and counties representing about 85% of California residents. The "Davis/Ellis" case grew out of a coordinated assault on the US tobacco industry, which was launched in 1994 when a group of lawyers filed the largest class-action suit in US history. The suit alleged that the major cigarette companies in the United States fraudulently failed to inform consumers that nicotine is addictive and that they manipulated the level of nicotine in cigarettes to sustain their addictive nature. ENERGY TRADERS: Snohomish County PUD Commences Suit Over Electric Rates ----------------------------------------------------------------------- The Snohomish County Public Utility District (PUD) today filed suit against a group of the nation's largest electric power companies, striking out against the allegedly artificial high prices that forced large and unpredictable rate increases on customers. The PUD serves 270,000 residential and commercial customers north of Seattle, Washington. This is the first suit in which a Washington state public utility district has sued power generating and marketing companies. According to the PUD, the suit attempts to right some of the wrongs inflicted on consumers during the recent power crisis in the Western US. "We were forced to impose some very significant rate increases on our customers, many of whom are seniors and working families, now struggling just to keep their lights on," Don Berkey, president of the PUD Board of Commissioners said in a press release. "We're learning more every day about how Enron and other power marketers manipulated the energy market, so we're asking the court to step in to force these companies to own up to their actions and refund these wrongfully obtained windfalls." Filed in California District Court by attorney Steve Berman of the Seattle-based law firm Hagens Berman, the suit claims that the power companies conspired to drive up electric prices by creating artificial shortages during last year's power crisis and reaped billions of dollars in unjust profits as a result. "Our mandate was to provide power to customers at a fair price," said PUD General Counsel Michael Gianunzio. "We intend to prove that these power traders created a wildly cynical scam that drove prices through the roof while cashing in on short-term profits. Snohomish County PUD did everything it could to provide low cost, reliable service for its customers, but found itself in a chaotic market manipulated by the defendants." Mr. Gianunzio added, "These energy traders used many strategies to game the Western energy market, including strategies from Enron with colorful names such as 'Get Shorty' or 'Death Star'. The 'Get Shorty ' strategy involved traders submitting false information in the energy grid to their financial advantage." The defendants include: (1) Williams Electric Marketing (NYSE:WMB), (2) Mirant Corporation (NYSE:MIR), (3) Reliant Energy Services (NYSE:REI), (4) Duke Energy Trading (NYSE:DUK), (5) Dynegy Power Marketing (NYSE:DYN) and (6) Sempra Energy Resources (NYSE:SRE) According to the complaint, the residents of Snohomish County saw their electricity rates increase by approximately 60 percent as a result of the alleged price inflation. The complaint states that before the Western energy crisis, wholesale prices for electricity in the Pacific Northwest averaged about $24 per megawatt hour (MWh). During late 2000 and early 2001, wholesale prices ballooned to $500 per MWh, with prices on the spot market recorded as high as $3300 per MWh. Lawyer for the plaintiffs Steve Berman states that the skyrocketing energy prices cornered the PUD, forcing it to balance the needs of understandably upset customers and the financial well being of the not- for-profit public utility. "Snohomish PUD found itself squarely in the middle of an economic and political storm," Mr. Berman said. The suit claims that in addition to withholding power in the longer- term markets to drive up prices in the short-term markets, the power companies conspired to set prices, and held those prices by monitoring one another's trading practices. It also alleges the defendants engaged in a series of electric trades designed to artificially inflate electric prices. The suit claims the defendants committed violations of California antitrust laws, committed unlawful and fraudulent business acts or practices, and violated California's business and professions code. For more details, contact Steve Berman by Phone: 206-623-7292 or by E- mail: steve@hagens-berman.com or Mark Firmani by Phone: 206-443-9357 or by E-mail: mark@firmani.com FINOVA GROUP: Fairness Hearing On Securities Settlement Set For July -------------------------------------------------------------------- The fairness hearing for the settlement of the class action against Finova Group, Inc. has been set for July 26,2002 in the United States District Court for the District of Arizona. The suit was filed on behalf of purchasers of Finova Group, Inc. or Finova Capital Corporation common stock or debentures between January 14,1999 through and including November 13,2000. The class includes persons who exchanged stock in Sirrom Capital Corporation for stock in the Finova Group, Inc. in March 1999. The hearing is being held for the purpose of determining: (1) whether the proposed settlement of the claims in this action for the sum of US$40,280,000 in cash and accrued interest, together with any recovery obtained from prosecution of an assigned claim for US$7,220,000 should be approved by the court as fair, reasonable and adequate; (2) whether, thereafter, this action should be dismissed with prejudice as set forth in the stipulation and agreement of settlement, dated February 19,2002; (3) whether the proposed Plan of Allocation is fair, reasonable and adequate and therefore should be approved; and (4) whether the application of plaintiffs' counsel for the payment of attorneys' fees and reimbursement of costs and expenses incurred should be approved. For more details contact Alan Schulman by Mail: Bernstein Litowitz Berger & Grossman LLP, 12544 High Bluff Drive, Suite 150, San Diego CA 92130. FRED HUTCHINSON: Cancer Center Faces Suit Over Protocol 126 Trial Risks ----------------------------------------------------------------------- The Fred Hutchinson Cancer Research Center in Seattle Washington faces a class action filed by the families of participants in a blood cancer clinical trial performed at the center. The suit alleges that the Center failed to adequately warn patients about the risks involved in the study in the 1980s and 1990s, the US Medicine, Inc. reports. The suit, filed on behalf of approximately 82 individuals, relates to a clinical trial called Protocol 126 that was conducted at the center between 1981 and 1993 and was aimed at preventing an adverse reaction called graft-versus-host disease (GVHD) from occurring in patients receiving bone-marrow transplants. According to the complaint, 80 of 82 patients have died "from graft failures and/or leukemic relapse attributable to the treatment." "Patients who participated in this trial did so because they thought it was their best chance for success in fighting their cancer," the plaintiff's attorney Alan Milstein, of the law firm of Sherman, Silverstein, Kohl, Rose & Podolsky, told US Medicine, Inc. "It obviously wasn't." The named plaintiffs are William Lee Wright, who is suing on behalf of his wife Becky who went to the center to undergo a bone marrow transplant and died following the treatment in 1985 and Peggy Draheim, whose husband Dr. John Draheim came to the center for chemotherapy, radiation and bone marrow transplants and died after a failed bone marrow transplant in 1984, the US Medicine, Inc. reports. The complaint alleges that the defendants failed to follow ethical standards, misrepresented the risks of participating in the trial, and failed to disclose their financial interests in the protocol to patients. The Seattle Times had earlier reported on the Protocol 126 trials in a five-part series. The Center responded in an open letter to the community, patients and staff, particularly to allegations that patients were not informed of the treatment risks in the trial. "We at the Hutchinson center believe our system for informing patients of the risks and anticipated benefits associated with their treatment is among the best in the country," the letter said, according to US Medicine, Inc. "We also know that we carefully and effectively monitor patient safety during the conduct of clinical trials." INDIAN FUNDS: House Panel Limits Historic Tracking Of Accounting Errors ----------------------------------------------------------------------- The House Appropriations Committee moved to limit a historic, court- ordered accounting for what are alleged to be multibillion-dollar errors in payments to Indians through a trust fund managed by the Interior Department, according to a report by The Wall Street Journal. While a federal judge has ordered the department to do an accounting of the trust fund going back to the 19th century, when it originated, the House committee says it will provide funds for only a search of computer records, which go back to 1985. Interior had estimated that the larger search would cost $2.4 billion. A committee aide, who asked not to be identified, said members felt the larger search was "not cost effective." The more narrow search, the aide said, could cost as much as $1 billion. As part of an amendment to the appropriation bill, the committee also acted to limit fees paid by the government to two special masters monitoring the Interior Department's actions in the case for Judge Royce C. Lamberth of the federal district court in Washington, DC. The appropriation bill, which must be approved by the full House and the Senate, would also pay legal fees for a number of current and former governmental officials charged with contempt of court in the tangled case, including Interior Secretary Gale Norton and former Interior Secretary Bruce Babbitt. The Indians' class action claims they may be owed as much as $10 billion for alleged errors, fraud and losses of monies which were supposed to be collected as royalties for use of Indian lands, monies, which then were supposed to be kept in trust funds for individual Indians by a government-run banking system on reservations. Judge Lamberth already has ruled that the Interior Department has violated its fiduciary duties as trustee. The remaining question is how much may be owed to individuals who had accounts in the trust fund. Eloise Cobell, lead plaintiff in the case, called the House Appropriations Committee's limitation a "naked abuse of power" initiated by the Bush administration to protect "corrupt activities" of public officials. Interior spokesman Eric Ruff said the committee's action was self-initiated. "We did not make the request," he stated. The department's lawyers have complained that the "magnitude of the historical accounting is enormous," because the trust fund has handled at least $13 billion according to records that go back to 1909. The amendment goes before the House Rules Committee, where it may face opposition from members of other committees that deal with Interior matters. MICHIGAN: Builders Won't Join Suit V. Flint County Drain Commissioner --------------------------------------------------------------------- Sixty-six Michigan builders signed affidavits stating they won't join in a possible class action against county Drain Commissioner Jeff Wright, relating to his moratorium on new water and sewer permits in Flint County, the Flint County Journal reports. The suit basically relates to the new US$1,000 fee on water and sewer tap-ins, and whether they constitute a violation of the Michigan Constitution's Headlee Amendment, which requires a public vote on any new taxes that exceed the rate of inflation, the Flint County Journal reports. Attorneys for Wright and developers Gateway Apartments and the Tobin Group, which filed the suit, talked this week but haven't resolved their differences, Raymond J. Branch, a county attorney, told the Journal. However, Mr. Wright hasn't backed off his moratorium on new water and sewer permits in most of the county. Barry Simon, executive vice president of the Builders Association of Metropolitan Flint, told the Journal he has collected the affidavits, which should show Wright the suit will not gain class-action status because most builders are vowing not to join in. The association's board of directors also has passed a resolution condemning the lawsuit and saying it does not represent the views of county builders. Mr. Simon added that he thinks "we are close to a resolution" on the moratorium, but Mr. Wright said Wednesday that he still wants the lawsuit against the county out of the way before he resumes issuing new subdivision approvals. The county filed papers this week asking Genesee Circuit Judge Geoffrey L. Neithercut for a summary disposition in the lawsuit. A hearing on the county's motion is scheduled for July 31, the Flint County Journal reports. NETSOLVE INC.: Fairness Hearing For Suit Settlement Set for September ---------------------------------------------------------------------- The fairness hearing relating to the proposed settlement of the consolidated securities class action against Netsolve, Inc. is set for September 13,2002 in he United States District Court for the Western District of Texas, Austin Division. The suit alleges violations of federal securities laws on behalf of purchasers of the Company's common stock from April 18,2000 through August 18,2000, inclusive. The hearing is being held to determine whether the proposed settlement should be court approved as fair, reasonable and adequate, and to consider the application for attorney's fees and reimbursement of expenses. For more information, contact Richard H. Weiss by Mail: Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York NY 10119- 0165 by Phone: 212-594-5300 or visit the firm's Website: http://www.milberg.com PERKINELMER INC.: Cauley Geller Commences Securities Fraud Suit in MA --------------------------------------------------------------------- Cauley Geller Bowman & Coates, LLP initiated a securities class action in the United States District Court for the District of Massachusetts on behalf of purchasers of PerkinElmer, Inc. (NYSE: PKI) common stock during the period between July 15, 2001 and April 11, 2002, inclusive. The complaint charges the Company and certain of its officers and directors with violating 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 July 15, 2001 and April 11, 2002. According to the complaint, the Company issued numerous press releases regarding its performance during the class period, which represented that: (1) the Company was successfully growing its revenues and earnings; (2) the Company's transformation into a provider of health-related products and services was proceeding successfully; and (3) the Company would meet its financial performance targets for 2002. The complaint further alleges that these, and other representations were materially false and misleading because they failed to disclose that: (i) the Company was experiencing a decline in the demand for its products, especially at its Optoeletronics division; (ii) the Company was carrying tens of millions of dollars of obsolete inventory on its books; and (iii) the Company's expenses were soaring due to the spate of numerous acquisitions and divestitures it had undertaken. On March 1, 2002, the Company issued a press release revealing that first quarter of 2002 revenues and earnings would be materially less than the Company had represented its figures would be only three weeks earlier. In reaction to the announcement, the price of the Company's common stock plummeted by 31%. The full truth regarding the Company's business was not fully disclosed until April 11, 2002, when the Company issued a press release revealing that its reported earnings will be breakeven, instead of the figure of $0.16-$0.17 per share that the Company had stated, on March 1, it expects to earn, and that its revenues will decline in the first quarter of 2002 because of weakness in all of its divisions. In reaction to the announcement, Company stock plummeted by another 28%, falling from $16.70 per share on April 10, 2002 to $12.04 by the close of April 11, on extremely heavy trading volume. The individual defendants and other Company insiders sold a total of 595,000 PerkinElmer common stock during the class period, reaping gross proceeds in excess of $18.4 million and the Company completed a significant acquisition using its common stock as currency. For more details, contact Jackie Addison, Sue Null or Ellie Baker by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944 by E-mail: info@classlawyer.com RJ REYNOLDS: GA Court Dismisses Consolidated Tobacco Antitrust Suit ------------------------------------------------------------------- The United States District Court for the Northern District of Georgia, Atlanta Division dismissed a consolidated antitrust class action against RJ Reynolds Tobacco Company, brought on behalf of wholesalers across the country. The court ruled that evidence did not support the claim that the Company and other cigarette manufacturers conspired to "fix" the wholesale prices of cigarettes. Disagreeing with the wholesalers' contention and granting summary judgment to the cigarette manufacturers, US District Court Judge Owen Forrester ruled that, "No reasonable jury could conclude that the activities in the cigarette industry during the relevant timeframe reflect a conspiracy to fix prices." Darryl Marsch, senior counsel for Reynolds Tobacco, said in a press statement, "As the judge determined, these cases had no merit. Reynolds Tobacco makes unilateral pricing decisions based on its independent business judgment." "We believe that these cases were manufactured by plaintiffs' lawyers, not the wholesalers that comprised the class," he continued. "Our wholesale distributors understand that Reynolds Tobacco competes intensely with the rest of the industry. The bottom line is that these cases should never have been brought in the first place." SCORPION TECHNOLOGIES: Fairness Hearing For Settlement Set Sept 2002 -------------------------------------------------------------------- The fairness hearing for the settlement of the securities class action pending on behalf of purchasers of Scorpion Technologies, Inc.'s common stock from May 13,1992 through December 31,1994, inclusive has been set for September 4,2002 in the United States District Court for the Southern District of New York. The suit names as defendants: (1) Richard Bauer, (2) Groupe Scorpion BV, (3) Green-Cohn Group, (4) Morton Cohn, (5) Van D. Greenfield, (6) CS First Boston, (7) Smith, Benton & Hughes, Inc., (8) Michael Zaman, (9) Claudia Zaman, (10) Edward Fisch, (11) Barry Witz, (12) Mario V. Andreade, (13) Westfield Financial Corporation, (14) Idata, Inc., (15) Robert Bogutski, and (16) Kathleen Bogutski The hearing is being held to determine whether: (i) the proposed settlement with Settling Defendants for the aggregate sum of US$1.25M with all interest and earnings thereon after the delivery of any portion of this amount into the escrow account having been established for the benefit of the class, should be approved by the court as fair, reasonable and adequate; (ii) whether, thereafter, this class action should be dismissed on the merits and with prejudice as against settling defendants as set forth in the stipulation of settlement on file with the court; and (iii) the reasonableness of the application of class counsel for the payment of attorney's fees and reimbursement of costs and expenses incurred subsequent to this settlement. For more information, contact Robert G. Eisler or Daniel P. Chiplock by Mail: Lieff, Cabraser, Heimann & Bernstein, LLP 780 Third Avenue, 48th Floor, New York, NY 10017 SODEXHO INC.: DC Court Grants Class Certification to Race Bias Suit ------------------------------------------------------------------- The United States District Court for the District of Columbia granted class action status to a racial discrimination suit filed against Food services company Sodexho, Inc. (formerly known as Sodexho Marriott Services), Reuters reports. The suit, filed by 10 current and former workers, accused the Company of racial discrimination in its hiring and promoting practices. The Company told Reuters that it believes the allegations in the case "are not supported by the facts." The Company added in a statement, "The company is strongly committed to its policy of equal employment practices, and to promoting diversity." TIMCO AVIATION: Settlement Fairness Hearing Set for August ---------------------------------------------------------- The fairness hearing for the settlement proposed in the securities class action pending against Timco Aviation Services, Inc. has been set for August 20,2002 in the United States District Court for the Southern District of Florida, Miami Division. The suit alleges federal securities violations on behalf of all persons who purchased the Company's common stock from April 30,1997 through and including April 14,2000. The settlement hearing is being held to determine: (1) whether the proposed settlement of the claims in the litigation should be approved by the court as fair, reasonable and adequate; (2) whether the plan of allocation is fair, reasonable and adequate and therefore should be approved; (3) whether the application of plaintiff's counsel for an award of attorneys' fees and reimbursements of costs and expenses incurred in connection with the litigation should be approved; and (4) whether the litigation should be dismissed with prejudice. For more information, contact Robert N. Kaplan by Mail: Kaplan Fox Kilsheimer LLP 805 Third Avenue, 22nd Floor, New York NY 10022 or contact Kenneth Vianale by Mail: Milberg Weiss Bershad Hynes & Lerach LLP 5355 Town Center Road, Suite 900 Boca Raton, FL 33486 UNIFY CORPORATION: CA Court Grants Final Settlement Approval ------------------------------------------------------------ The United States District Court for the Northern District of California granted final approval to a settlement of the consolidated securities class action against Unify Corporation (OTC System: UNFY). The suit, filed against the Company in 2000, related to financial restatements of the Company's financial results for fiscal year 1999 and for the first three quarters of fiscal year 2000, and alleges violations of federal securities laws. The Company reached a settlement in the suit in April 2002. Additionally, in May 2002, the Superior Court for the State of California for the County of San Francisco gave final approval to the settlement of the consolidated derivative actions filed against the Company. The Company's portion of the settlement will be covered by its insurance carrier and therefore have no negative impact on its earnings or financial position. "We are pleased that the court has given its final approval to the settlement," Todd Wille, chairman, president and CEO of Unify, said in a statement. "We have concluded this chapter in the Company's history and we look forward to continuing to execute on our strategic plan and build value for our shareholders, customers and employees." WILDSIDE ADULT: Strip Club Faces Consumer Suit For ADA Violations in FL ----------------------------------------------------------------------- The Wildside Adult Sports Cabaret faces a lawsuit from a quadriplegic alleging that it violated the American with Disabilities Act, the Associated Press reports. The suit alleges that the lap dance room of the strip club does not have wheelchair access. Florida resident Edward Law filed the suit after visiting the club on May 9 and June 14. The suit alleges that the lap dance room is only accessible by a short flight of stairs, and that the counter around the stage where strippers dance is too high, making it difficult for Mr. Law to see the stage and set down his drinks. "This is an industry that is high profit and knows about ADA and is ignoring it," his attorney, Anthony Brady Jr., told the South Florida Sun-Sentinel. "I have no sympathy for them violating ADA." The club's General Manager Bret Rudowsky told AP that he was unaware of the problems and that Mr. Law could have received a lap dance elsewhere in the club. Mr. Law has other suits pending against other establishments, namely the Landing Strip, an Orlando restaurant and a Daytona Beach Harley- Davidson motorcycle shop. WORLDCOM INC.: Banks Charge $2.5B in Fraud After Accounting Fiasco ------------------------------------------------------------------ A group of 25 banks is accusing WorldCom Inc. of defrauding them of nearly US$2.5 billion six weeks before publicly disclosing around $4 billion in accounting irregularities, according to a report by the Sun-News of Myrtle Beach, S.C.. The banks' lawsuit, recently filed in Manhattan's State Supreme Court, include a request for an order to immediately freeze $2.65 billion of WorldCom assets. Justice Helen Freedman, after oral arguments, denied their request and scheduled a hearing for July 16. The Company obtained the money from the banks by way of a credit agreement signed June 8, 2001, including Citigroup. That agreement allowed the Company to borrow, repay and re-borrow up to $2.65 billion within a year, and it was conditioned on certain terms and representations by the Company. Two of 27 banks are not part of the lawsuit. The other 25, whose $2.49 billion in loans are 93 percent of the total, say in court papers that "on May 15, 2002, barely six weeks before disclosing a massive accounting fraud," the Company told the lenders by telephone "that it intended to draw down the entire $2.65 billion in a single borrowing." Court papers say that on May 20, the Company assured lenders its quarterly financial statement for the first quarter of 2002 was prepared in accordance with generally accepted accounting principles, and that it presented a fair picture of its financial condition. The Company, however, issued a press release on June 25 disclosing an accounting fraud of "staggering proportions," the banks' court papers say. They say that if they had known the company's true condition, they would not have permitted the loans. The Company admitted it had disguised $3.9 billion in expenses as capital expenditures so it would appear more profitable. Court papers say that Michael Salisbury, the Company's general counsel, "stated that the fraud had been perpetrated at the highest level of the company." *Catholic Church Called To Change as Survival, Authority In Question -------------------------------------------------------------------- The Catholic Church is beset by hundreds of lawsuits, some class actions, not only against individual priests accused of child abuse, but against even the bishops, the dioceses and archdioceses. All have been called upon to answer charges of cover-up, of indifference to the sufferings of the victims, of breaking the law by failing to report commission of crimes, or at the least, of assault. The Catholic faith is, by its own definition, everlasting, but the sexual-abuse scandal in the US church has raised the question of how the American institution will survive, according to a report appearing recently in The Washington Times. "Whether the Catholic Church as currently governed and managed can proclaim the Gospel effectively in this milieu is an open question," Scott Appleby, a Notre Dame University professor, recently told the bishops at the conference in Dallas. "In the court of public opinion, the church is now guilty until proven otherwise," he said. At a time of lost credibility, the 60 million-member church, with its 178 dioceses and 46,000 priests, is facing internal and external pressures that may change it completely, said The Washington Times. Some of those pressures will be applied by what Professor Appleby called the church's "enemies," who have ranged from secularists opposing its religious influence to lawyers wanting to sue it to liberals denouncing its moral stances. "The current sex-abuse scandal has our society at a crossroads," said Gloria Feldt, president of Planned Parenthood Federation of America, in a statement regarding the church's problem. Without disclosing any new initiatives, she said her organization will "advance our proactive agenda for contraceptive equity and increased access to emergency contraception and medically accurate sexuality education." More traditional Catholics worry that in the fights over sex education, abortion, homosexual rights or pornography, the clerical voice may become meek. "My greatest fear is that the bishops will be too intimidated to speak out on matters sexual," said William A. Donohue of the Catholic League for Religious and Civil Rights. "That is where lay Catholics have to fill the gap." Church foes have not stripped it of its tax exemption, but the sexual- abuse liability has opened a door to church assets. A class action filed early last month has, analysts agree, little hope of success, while other lawyers have raised the specter of trying to use RICO, or racketeering, complaints against the church. Last month, a New York grand jury investigating sexual-abuse charges, said in a report that the church led an "orchestrated effort to protect abusing clergy members from investigation, arrest and prosecution." It recommended changing laws to make the church authorities accountable. A grand jury also has been called in Boston to investigate possible crimes in the archdiocese there, according to news reports. Still, says The Washington Times, investigations and lawsuits are unlikely to dissolve the church financially because the church is organized into many separate entities such as dioceses, orders and charities, said Kevin Baine, a Washington lawyer who has defended church cases. "There is a misconception that there is some legal entity called `the Catholic Church,' and that is not true," he said. Some commentators have noted how little anti-Catholicism has been spurred by the scandal. However, what negativity does exist may affect the fast-growing Hispanic sector of US Catholicism, where evangelical sects are competing for converts. Those sects traditionally emphasize the "corruption" of the church in Rome. Mainstream evangelicals will not "take advantage of this because we have problems in our own denominations," said Esdras Betancourt, chairman of the Hispanic commission for the National Association of Evangelicals. However, he said a sectarian minority will always "use whatever they can get to be anti-Catholic." Regular churchgoers, meanwhile, are worried about the use of their donations. An estimated $7.5 billion is put in collection plates each year, about $125 per Catholic annually. Some lay leaders are wondering whether that number will drop after the disclosure of millions of dollars in hush money paid to sexual-abuse victims. Mr. Betancourt's organizations represent donors who give $200 million a year to church charities and schools. He said that while the Vatican publishes every detail on its income and assets, the dioceses do not. "A policy of transparency will help a great deal," Mr. Betancourt said. He said that Catholics at the parish and diocesan level must demand a precise accounting of everything. An opinion poll cited during the bishop's deliberations in Dallas said that about 80 percent of Catholics blamed them for the crisis instead of questioning their faith. "But what about the 1 in 10 who does question it?" said Commonwealth editor Margaret O'Brien Steinfels, who also addressed the bishops. The scandal may accelerate a secularization seen in many denominations, including the Catholic Church, and will be especially hard to explain to young people who struggle with the church institution, she and Mr. Appleby said. An equally harsh effect is expected on the image of the hierarchy and priesthood and recruitment of new priests. In Dallas, the bishops voted to strip abusive priests of clerical activity short of firing them from the organization. A committee also was formed to "review the role of bishops themselves" and consider whether the pope should be advised to dismiss any for wrongdoing. That is also expected to be a policy proposal of a National Review Board, lead by Oklahoma Governor Frank Keating, a former prosecutor who said some bishops may have been "obstructing justice or, arguably, accessories to the crime." Professor Appleby reprimanded the bishops, saying that their "lack of Accountability" was "fostered by a closed clerical culture that infects the priesthood." He and others have urged changes so that lay leaders can make decisions on money and assigning priests. Others have urged a lay role in appointing bishops, which is presently the sole authority of the pope. The moral crisis, meanwhile has spared neither the conservative nor liberal wings of the church. Boston's Cardinal Bernard Law, a conservative, shielded one of the more abusive priests on record. A leading liberal in the church, Archbishop Rembert Weakland of Milwaukee, resigned after admitting that he paid $450,000 to a former seminarian. Amid the scandal, the Vatican's official spokesman said the church should not ordain homosexuals. Traditionalists are calling on the bishops to "purify" the priestly ranks, even as some of the heirarchy are themselves homosexual. Three bishops with such complaints against them resigned in recent months, according to The Washington Times. "Serious attention must be given to the problem of active homosexuals being admitted to the priesthood," said Robert Royal, a Catholic scholar with Catholics for Authentic Reform, which organized amid the current crisis. The church should be "rooting out such men," he said. Yet, in Dallas, one conservative bishop's motion to consider the impact of the "homosexual culture" on the problem was voted down. New Securities Fraud Cases CRYOLIFE INC.: Wolf Popper Commences Securities Fraud Suit in N.D. GA --------------------------------------------------------------------- Wolf Popper LLP initiated a securities class action against Cryolife, Inc. (NYSE:CRY) and two of its senior officers on behalf of purchasers of the Company's common stock from April 2, 2001 through July 5, 2002, inclusive. The suit is pending in the United States District Court for the Northern District of Georgia against the Company and: (1) Steven G. Anderson, and (2) David Ashley Lee The suit alleges violations Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. These allegations concern false statement made by the defendants, during the class period concerning the Company's purported compliance with FDA requirements for preserving and testing human tissue. The allegedly false statements defendants are accused of making all concern the safety of the Company's cryogenically frozen human tissue products. After being subjected to questioning concerning the safety of its products, defendants reiterated their statements about safety and about compliance with relevant laws and regulations. The complaint alleges that defendants' statements concerning safety were false and misleading. The true facts were disclosed beginning on June 24, 2002, when the Company acknowledged that it had received an FDA warning letter criticizing the Company for "significant deviations from the Quality System Regulation (QSR) . (which) cause your devices to be adulterated." The warning letter also stated that the specific violations noted by the FDA "may be symptomatic of serious underlying problems in your firm's manufacturing and quality assurance systems." However, even defendants' June 24, 2002 statements were materially false and misleading and remained uncorrected until July 5, 2002, when defendants acknowledged a further incidence of infection from Cryolife tissue and the existence of a prior undisclosed FDA warning letter. Disclosure of the FDA warning letter, and the other true facts concerning the Company's operating practices, caused the Company's common stock to plummet from $26.77 (its closing price on June 18, 2002) to close at $10.50 on July 10, 2002. For more details, contact Robert C. Finkel, by Mail: 845 Third Avenue, New York, NY 10022-6689 by Phone: 212-451-9620 or 877-370-7703 by Fax: 212-486-2093 or 877-370-7704 by E-mail: irrep@wolfpopper.com or visit the firm's Website: http://www.wolfpopper.com CRYOLIFE INC.: Charles Piven Commences Securities Fraud Suit in N.D. GA ----------------------------------------------------------------------- The Law Offices Of Charles J. Piven, PA initiated a securities class action on behalf of shareholders who acquired CryoLife, Inc. (NYSE:CRY) securities between August 11, 2000 and June 26, 2002, inclusive, in the United States District Court for the Northern District of Georgia, Atlanta Division, against the Company and: (1) Steven G. Anderson and (2) Albert E. Heacox The action charges that defendants violated 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 details, contact Charles J. Piven by Mail: The World Trade Center-Baltimore, 401 East Pratt Street, Suite 2525, Baltimore, Maryland 21202 by Phone: 410-986-0036 or by E-mail: hoffman@pivenlaw.com FLEXTRONICS INTERNATIONAL: Schatz & Nobel Lodges Securities Suit in NY ---------------------------------------------------------------------- Schatz & Nobel PC initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all persons who purchased Flextronics International, Ltd., (Nasdaq: FLEX) from October 2, 2001 through June 4, 2002, inclusive. The complaint charges the Company and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. The complaint alleges that the Company failed to disclose that its business and operations were being negatively impacted by declining sales. Specifically it is alleged that throughout the class period, many of the Company's customers were experiencing enough financial difficulty 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. It is also alleged that the defendants under-reported the amount of financing needed to complete the Company's restructuring and over- stated the progress of this reorganization. On June 4, 2002, Flextronics announced that it was recording at least an additional $150 million in restructuring charges. On this news, the Company dropped 23% from $12.32 to $9.50 per share. For more details, contact Andrew M. Schatz or Nancy A. Kulesa by Phone: 800-797-5499 by E-mail: sn06106@aol.com or visit the firm's Website: http://www.snlaw.net. MERCK & CO.: Berman DeValerio Commences Securities Suit in New Jersey --------------------------------------------------------------------- Berman DeValerio Pease Tabacco Burt & Pucillo initiated a securities class action, claiming that Merck & Co., Inc. (NYSE:MRK) and several top officers improperly inflated revenues by billions of dollars. The suit is pending in the United States District Court for the District of New Jersey, on behalf of all investors who bought the Company's common stock from July 1, 1999 through June 21, 2002. According to the complaint, Merck overstated revenues by billions of dollars from its subsidiary Merck-Medco Managed Care, LLC by including consumer co-payments for prescription drugs in its revenues. During the class period, Merck-Medco's revenues made up over 50% of the Company's total revenues. The lawsuit claims that the Company violated Generally Accepted Accounting Principles because neither company bills for the co-payments, gets billed for them, or otherwise comes into contact with co-payment money. Patients make co-payments directly to pharmacies when they purchase medicine. On June 21, 2002, The Wall Street Journal reported on the Company's accounting practices and estimated that the Company and Merck-Medco may have pumped up their 2001 revenues by as much as $4.6 billion. Similar overstatements may have occurred for 1999 and 2000, the complaint says. That same day, according to the complaint, a Company spokesman admitted that the company had been recording prescription drug co-payments as revenue since it acquired Merck-Medco in 1993. In the wake of these revelations, the Company's stock immediately dropped 4.25% from its closing price of $52.20 on June 20, 2002 to a closing price of $49.98 on June 21, 2002, its lowest closing price since late 1997. After the complaint was filed, Company shares fell again when the Journal reported that the company admitted, in a regulatory filing, booking $12.4 billion in Merck-Medco revenue that it had never collected. For more details, contact Steven D. Morris or Michael G. Lange by Mail: One Liberty Square, Boston, MA 02109 by Phone: 800-516-9926 by E-mail: law@bermanesq.com or visit the firm's Website: http://www.bermanesq.com. MERCK & CO.: Glancy & Binkow Lodges Securities Fraud Suit in New Jersey ----------------------------------------------------------------------- Glancy & Binkow LLP initiated a securities class action in the United States District Court for the District of New Jersey on behalf of a class consisting of all persons who purchased securities of Merck & Co., Inc. (NYSE:MRK) between July 1, 1999 and June 21, 2002, inclusive. The suit charges the Company and certain of its officers and directors with violations of federal securities laws. Among other things, plaintiff claims that defendants had materially overstated the Company's revenues by improperly including as revenue the value of co- payments made by consumers to their pharmacy to cover their portion of the cost of a prescription under an insurance plan. The complaint alleges that, during the class period, the Company overstated its revenue by billions of dollars (by approximately $4.6 billion in year 2001 alone) because neither Merck nor its Medco unit ever received any revenue from the co-payments that were made to pharmacies. As a result, during the class period, defendants' financial statements were materially overstated and failed to comply with Generally Accepted Accounting Principles (GAAP). The complaint alleges that defendants' material omissions and the dissemination of materially false and misleading statements regarding the nature of Merck's revenues and earnings caused the Company's stock price to become artificially inflated, inflicting damages on investors. For more details, contact Michael Goldberg by Mail: 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067 by Phone: 310-201-9161 or 888-773-9224 or by E-mail: info@glancylaw.com. MERRILL LYNCH: Wites & Kapetan Commences Securities Fraud Suit in NY -------------------------------------------------------------------- The Law Firm of Wites & Kapetan, PA initiated a securities class action in the United States District Court for the Southern District of New York, on behalf of purchasers of Merrill Lynch's Internet Infrastructure Holdrs/SM Trust (AMEX:IIH) during the period between February 24, 2000 through April 8, 2002, inclusive. The suit names as defendants the Company and: (1) John L. Steffens, (2) E. Stanley O'Neal, (3) George A. Schieren, (4) Ahmass L. Fakahany The defendants and the IIH Trust allegedly violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 by issuing a series of false and misleading statements to the market during the class period about the IIH Trust, which holds 20 publicly traded companies involved in the internet-infrastructure business. According to the suit, Merrill and the individual defendants failed to disclose in the Prospectus for the IIH Trust that Merrill's Internet research analysts issued inflated ratings and biased reports for many of the companies in the IIH Trust. The suit further alleges that Merrill engaged in such conduct despite knowing that these companies were overvalued and, as a result, the IIH Trust's value would decline. The suit's allegations are based, in part, on the New York State Attorney General's reports on the activities of Merrill's Internet research practices. For more details, contact Wites & Kapetan PA by Mail: 1761 West Hillsboro Boulevard, Suite 403, Deerfield Beach, FL 33442 by Phone: 954-570-8989 by Fax: 954-428-3929 by E-mail: mwites@wklawyers.com or visit the firm's Website: http://www.wklawyers.com PERKINELMER INC.: Schiffrin & Barroway Lodges Securities Suit in MA ------------------------------------------------------------------- Schiffrin & Barroway, LLP initiated a securities class action in the United States District Court for the District of Massachusetts on behalf of all purchasers of the common stock of PerkinElmer, Inc. (NYSE: PKI) from July 15, 2001 through April 11, 2002, inclusive. The complaint charges the Company and certain of its officers and directors with violating 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 July 15, 2001 and April 11, 2002. According to the suit, the Company issued numerous press releases regarding its performance during the class period, which represented that: (1) the Company was successfully growing its revenues and earnings; (2) the Company's transformation into a provider of health-related products and services was proceeding successfully; and (3) the Company would meet its financial performance targets for 2002. The complaint further alleges that these, and other representations were materially false and misleading because they failed to disclose that the Company was experiencing a decline in the demand for its products, especially at its Optoeletronics division, the Company was carrying tens of millions of dollars of obsolete inventory on its books and the Company's expenses were soaring due to the spate of numerous acquisitions and divestitures it had undertaken. On March 1, 2002, the Company issued a press release revealing that first quarter of 2002 revenues and earnings would be materially less than the Company had represented its figures would be only three weeks earlier. In reaction to the announcement, the price of the Company's common stock plummeted by 31%. The full truth regarding the Company's business was not fully disclosed until April 11, 2002, when the Company issued a press release revealing that its reported earnings will be breakeven, instead of the figure of $0.16-$0.17 per share that the Company had stated, on March 1, it expects to earn, and that its revenues will decline in the first quarter of 2002 because of weakness in all of its divisions. In reaction to the announcement, Company stock plummeted by another 28%, falling from $16.70 per share on April 10, 2002 to $12.04 by the close of April 11, on extremely heavy trading volume. The individual defendants and other Company insiders sold a total of 595,000 the Company's common stock during the class period, reaping gross proceeds in excess of $18.4 million and the Company completed a significant acquisition using its common stock as currency. For more details, contact Marc A. Topaz or Stuart L. Berman by Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone: 888-299-7706 (toll free) or 610-667-7706 by E-mail: info@sbclasslaw.com or visit the firm's Website: http://www.sbclasslaw.com SUPERVALU INC.: Charles Piven Commences Securities Fraud Suit in MN ------------------------------------------------------------------- The Law Offices Of Charles J. Piven, PA initiated a securities class action on behalf of shareholders who acquired Supervalu, Inc. (NYSE:SVU) securities between July 29, 1999 and June 25, 2002, inclusive, as well as former shareholders of Richfood Holdings, Inc. who exchanged their shares for Supervalu common stock. The case is pending in the United States District Court for the District of Minnesota, against the Company. The action charges that defendant violated 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 details, contact Charles J. Piven by Mail: The World Trade Center-Baltimore, 401 East Pratt Street, Suite 2525, Baltimore, Maryland 21202 by Phone: 410-986-0036 or by E-mail: hoffman@pivenlaw.com UNIROYAL TECHNOLOGIES: Charles Piven Lodges Securities Suit in M.D. FL ---------------------------------------------------------------------- The Law Offices Of Charles J. Piven initiated a securities class action on behalf of shareholders who acquired Uniroyal Technology Corp. (Nasdaq:UTCI) securities between February 8, 2000 and May 13, 2002, inclusive, in the United States District Court for the Middle District of Florida, against the Company and: (1) George Zulanas, Jr. and (2) Howard R. Curd The action charges that defendants violated 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 details, contact Charles J. Piven, PA by Mail: The World Trade Center-Baltimore, 401 East Pratt Street, Suite 2525, Baltimore, Maryland 21202 by Phone: 410-986-0036 or by E-mail: hoffman@pivenlaw.com ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2002. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re- mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *