/raid1/www/Hosts/bankrupt/CAR_Public/021004.mbx
C L A S S A C T I O N R E P O R T E R
Friday, October 4, 2002, Vol. 4, No. 197
Headlines
ALLIANCE PHARMACEUTICAL: Motion to Dismiss Still Undecided by NY Court
CALIFORNIA AMPLIFIER: Final Hearing on $1.5 M Settlement Slated Monday
CATHOLIC CHURCH: New Hampshire Diocese Wants Court to Delay Trial
DIVA ENTERTAINMENT: New York Subsidiary Rapped for Antitrust Violations
EDISON SCHOOLS: Motion to Consolidate Ten Suits in NY Still Pending
EDISON SCHOOLS: Negotiates Stipulation in Two of Three Derivative Suits
ELECTRONIC DATA: Beset by Suits, SEC Inquiry Due to Stunted Q3 Forecast
EVOLVE SOFTWARE: Vows Vigorous Defense Against S.D. NY Securities Suit
GLOBAL CROSSING: Chairman Winnick Offers $25 Million To Aid Employees
INTERNATIONAL RECTIFIER: Settlement of 1991 Suit Won't Involve Money
INTERWAVE COMMUNICATIONS: Motion to Dismiss NY Suit Remains Undecided
INVENSYS BUILDING: Recalls 560T Siebe Actuators, Offers to Replace Them
IPO UNDERWRITERS: Giant Lawsuit Hinges On Defense's Motion To Dismiss
J.L. HALSEY: Appeal of Dismissed Securities Fraud Suit Remains Pending
MARTHA STEWART: Identified as "Tippee" In U.S. Attorney's Information
OPENWAVE SYSTEMS: Dismisses NY Suits as Mere Trend in Litigation
OPENWAVE SYSTEMS: Shareholders Want Derivative Suit Moved to S.D. NY
PERFORMANCE INC.: Recalls 900 Defective Bar Ends for Mountain Bikes
THOMAS & BETTS: Reaches Deal to Settle Consolidated Securities Lawsuit
UNITED ONLINE: Affiliate Asks NY Court to Dismiss Consolidated Lawsuit
UNITED ONLINE: Unit's Motion to Dismiss for Want of Claim Still Pending
UNITED ONLINE: Demurrer to Nationwide Action Granted, Denied in Part
VENTURE CATALYST: Case in S.D. CA Remanded to San Diego Superior Court
* Asbestos Alert *
ASBESTOS ALERT: IMO Industries, Units Face 4,500 Asbestos Claims
ASBESTOS ALERT: Chubb Books $195.5 Million in Asbestos Liabilities
ASBESTOS ALERT: Lincoln Asbestos Cases on the Upside to 24,680
ASBESTOS ALERT: Pfizer Battles 169,000 Asbestos Claims
ASBESTOS ALERT: Con Edison Discloses Asbestos-Cost Estimates
ASBESTOS ALERT: CSR Faces Asbestos Lawsuits in US and Australia
ASBESTOS ALERT: GPC Sees Lower Than $1 Billion Asbestos Costs
ASBESTOS ALERT: Bankrupt Grace Faces 65,656 Asbestos Cases
ASBESTOS ALERT: ConRail Faces 524 Asbestos Lawsuits
ASBESTOS ALERT: Cooper May Press Claims in Federal-Mogul Bankruptcy
ASBESTOS LITIGATION: Asbestos Leads ACandS to Seek Court Protection
ASBESTOS LITIGATION: Lawmakers Weigh Asbestos-Claims Resolution
ASBESTOS LITIGATION: Asbestos Reserves Come Short By $120 Billion
New Securities Fraud Cases
CONCORD EFS: Scott + Scott Commences Securities Suit in W.D. Tennessee
ELECTRONIC DATA: Cohen Milstein Commences Securities Suit in E.D. Texas
ESS TECHNOLOGY: Scott + Scott Lodges Securities Fraud Suit in N.D. CA
FLEMING COMPANIES: Schiffrin & Barroway Files Securities Suit in TX
SALOMON SMITH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
VODAFONE GROUP: Scott + Scott Commences Securities Suit in S.D. NY
*********
ALLIANCE PHARMACEUTICAL: Motion to Dismiss Still Undecided by NY Court
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On February 23, 2001, a lawsuit was filed by two former shareholders of
Molecular Biosystems, Inc. (MBI) purportedly on behalf of themselves
and others against the Company and certain of its officers.
Alliance MBI, which became a wholly owned subsidiary of the Company, in
exchange for 770,000 shares of Alliance common stock. MBI is the
developer of "Optison," the only intravenous ultrasound contrast agent
for the heart being marketed in both the United States and Europe.
On March 1, 2001 and March 19, 2001, two additional similar lawsuits
were filed by other former shareholders of MBI. The lawsuits, filed in
the U.S. District Court for the Southern District of New York, allege
that the Company's registration statement filed in connection with the
acquisition of MBI contains misrepresentations and omissions of
material facts in violation of certain federal securities laws.
In May 2001, the actions were consolidated. The plaintiffs are seeking
rescission or compensatory damages, payment of fees and expenses, and
further relief.
In January 2002, the plaintiffs filed a second amended complaint adding
an additional securities claim against the Company and the named
officers. The Company and its officers have filed a motion for summary
judgment seeking dismissal of the action, but the Court has not yet
decided the motion.
In August 2001, another purported class action alleging substantially
identical allegations was filed in the U.S. District Court for the
Southern District of California. The plaintiffs in that action
dismissed the action without prejudice in September 2001.
"The Company believes that the lawsuits are completely without merit;
however, there can be no assurances that the Company will ultimately
prevail or that the outcome will not have a material adverse effect on
Company's future financial position or results of operations," Alliance
said in its latest Securities and Exchange Commission disclosure.
Alliance is a pharmaceutical research and development company that
focuses on developing scientific discoveries into medical products and
licensing these products to larger pharmaceutical companies in exchange
for fixed payments and royalty or profit-sharing payments.
The Company's strategy is to identify potential new medical products
through its own efforts and scientific collaborations with researchers
and clinicians in universities and medical centers where many of the
basic causes of disease and potential targets for new therapies are
discovered.
Using its experience in defining pharmaceutical formulations, designing
manufacturing processes, conducting pre-clinical pharmacology and
toxicology studies, and conducting human testing, Alliance endeavors to
advance these discoveries into clinical development.
The Company seeks collaborative relationships for the final stages of
product development, including completing late-phase human testing,
obtaining worldwide regulatory approvals, building large-scale
manufacturing capacities, and marketing.
The Company was incorporated in New York in 1983. Its principal
executive offices are located at 6175 Lusk Boulevard, San Diego,
California 92121, and its telephone number is (858) 410-5200.
CALIFORNIA AMPLIFIER: Final Hearing on $1.5 M Settlement Slated Monday
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California Amplifier, Inc. and plaintiffs in the securities fraud suit
against the company are due in court Monday for the final approval of
the offer to settle the matter.
According to the company's latest Securities and Exchange Commission
disclosure, the plaintiffs agreed to drop the class action litigation
and the shareholder derivative lawsuit in exchange for an aggregate sum
of $1.5 million.
"Of this amount, the Company's primary directors and officers liability
insurance carrier agreed to contribute $575,000 toward the settlement,
which amount was paid in December 2001, and agreed to withdraw its
policy rescission lawsuit," the SEC report said.
"The Company accrued its $925,000 share of the settlement in the fiscal
year ended February 28, 2002. Of this amount, $425,000 was paid by the
Company in December 2001, and the remaining $500,000 is to be paid once
the Court approves the settlement," the SEC disclosure added.
"At the Company's option, this final settlement installment of $500,000
may be paid in the form of cash or Common Stock. The Stipulation of
Settlement seeking preliminary Court approval of the settlement was
filed with the Court in May 2002. The Court granted its preliminary
approval on June 6, 2002, ordered that notice be given to the class and
scheduled a hearing date on October 7, 2002 for final approval of the
settlement agreement," the company said.
This lawsuit stems from a March 2001 announcement of the resignation of
the company controller and the possible overstatement of net income for
the fiscal year ended February 28, 2000 and the subsequent restatement
of the Company's financial statements for fiscal year 2000 and the
interim periods of fiscal years 2000 and 2001. The Company and certain
officers were named as defendants in twenty putative actions in Federal
Court.
On June 18, 2001, the twenty actions were consolidated into a single
action pursuant to stipulation of the parties, and lead plaintiffs'
counsel was appointed.
In July 2001, all of the current directors of the Company were named as
defendants in a shareholder derivative lawsuit filed in Los Angeles
Superior Court. The Company was named as a nominal defendant. The
complaint alleged claims against the directors for breach of fiduciary
duty, abuse of control and gross mismanagement, arising out of the
Company's restatement of earnings for fiscal year 2000 and portions of
fiscal year 2001.
In October 2001, the insurance company that provides the Company's
primary director and officer liability coverage applicable to the above
matters filed a lawsuit seeking to rescind the policy on the grounds
that there was a misstatement in the policy application that
incorporated by reference the Company's financial statements prior to
their restatement.
The Court granted its preliminary approval of the settlement on June 6,
2002, ordered that notice be given to the class and scheduled a hearing
date on October 7, 2002 for final approval of the settlement agreement.
California Amplifier makes microwave amplification and conversion
components that improve reception in satellite television (nearly 80%
of sales), wireless cable, and wireless broadband access systems. Its
products include antennas, amplifiers, and transceivers and receivers
for broadband wireless transmission.
California Amplifier also makes the MultiCipher cable signal scrambling
system that prevents unauthorized viewing of cable programming. The
company's customers include Echostar, DirecTv, and Sprint.
CATHOLIC CHURCH: New Hampshire Diocese Wants Court to Delay Trial
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The Roman Catholic Diocese of Manchester, New Hampshire, asked a judge
to delay 56 lawsuits by alleged victims of clergy sexual abuse until
after the state's criminal investigation of the church is complete,
Associated Press Newswires reported recently.
"The information brought out in the civil discovery process may
unfairly compromise the diocese in the criminal investigation," said
Diane Quinlan, the diocese's assistant to the delegate for policy
administration. The attorney general's office began investigating,
early this year, how the diocese handled complaints of abuse against
priests.
Ms. Quinlan said the church has asked that discovery in the 56 cases be
delayed until February. Discovery is the exchange of information and
evidence between parties in a lawsuit.
Mark Abramson, the lawyer handling the 56 cases, said the church's
request of the court was a petition to say, "We want the right not to
incriminate ourselves while this investigation is going on." But Mr.
Abramson said, "There is no such right in the state of New Hampshire."
The diocese is facing a number of lawsuits by alleged victims,
including Mr. Abramson's clients, as well as a class-action lawsuit
representing another 60 people who say they were molested by clergymen
as far back as the 1950s.
In a separate motion, the diocese also asked the Hillsborough County
Superior Court judge to order Mr. Abramson to share with the church the
names of his clients, some of whom filed their cases anonymously as
John or Jane Doe. Ms. Quinlan said the diocese needs the names in
order to prepare a defense.
According to Ms. Quinlan, the church's motions were prompted when Mr.
Abramson backed out of negotiations last week and "aggressively pursued
the legal process of discovery."
Mr. Abramson said the church refused to negotiate unless he provided
his clients' names. The request for the names as well as the motion
for a delay until February, are an attempt to victimize and intimidate
his clients all over again.
"They know that is one of the most harmful things they can do," said
Mr. Abramson. "It is another instance of the arrogance of power that
they think they can re-victimize these people, and they think they can
intimidate me."
DIVA ENTERTAINMENT: New York Subsidiary Rapped for Antitrust Violations
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Talent management company, Diva Entertainment, Inc., disclosed in its
latest Securities and Exchange Commission report that its subsidiary,
Que Management Inc., is facing an antitrust lawsuit in the United
States District Court for the Southern District of New York.
Styled as Amanda Masters, et al v. Wilhelmina Model Agency, et al, Case
No. 02-CV-4911 (HB), plaintiffs want to maintain the suit as a class
action under Rule 23 of the Federal Rules of Civil Procedure.
"The Plaintiffs allege a per se restraint of trade or commerce in
violation of the Sherman Antitrust Act, forfeiture and disgorgement of
all fees paid to Que received as a result of its alleged wrongful
conduct, punitive and exemplary damages and accounting of all costs and
expenses, pre-judgment and post-judgment interest, reasonable attorneys
fees and costs and such other relief as the Court deems appropriate,"
the SEC document states.
"Que was served with a Summons and Amended Complaint and intends to
vigorously defend this action. At this stage of the litigation, the
Company cannot estimate the range of the potential loss, if any, in the
event Que is unsuccessful in the defense of this Action," the company
said in its SEC disclosure.
Diva Entertainment, Inc. was incorporated in Delaware in December 1992
under the name Quasar Projects Company. The Company was formed for the
purpose of merging with or acquiring an operating company with
operating history and assets. The primary activity was seeking
companies with which to merge or to acquire. From its inception
through April 28, 1999, the Company generated nominal revenues and,
prior to April 28, 1999, the Company did not actively engage in
business for at least one fiscal year.
Since April 28, 1999, the Company has been engaged in the business of
owning, operating and managing talent management companies through its
subsidiary Diva Entertainment, Inc., a Florida corporation, and its
subsidiaries - Prima Eastwest Model Management, Inc., a California
corporation, and Que Management Inc., a New York corporation.
The Company is in the business of representing talent including
professional fashion models, commercial actors and theatrical actors.
The talent management business, including model management, is based
upon obtaining talent and matching talent to clientele. Traditional
modeling clientele include print and television advertising, and
runway.
The Company has over 500 clients, which include magazine publishing
houses, designers, national retailers and catalogs like Elle Magazine,
Talbot's, Nordstroms, Banana Republic and Macy's.
The Company also provides hair, makeup and styling services for models,
actors, actresses and celebrities. These services not only add value to
the Company's existing clients but also provide the Company with entry
into the celebrity/entertainment field.
EDISON SCHOOLS: Motion to Consolidate Ten Suits in NY Still Pending
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Between May 15, 2002 and July 3, 2002, ten class action lawsuits were
filed against Edison Schools, Inc. and certain of its officers and
directors in the United States District Court for the Southern District
of New York.
The ten lawsuits are captioned:
(1) Dively v. Edison Schools, Inc., Civ. Action No. 02-CV-3692;
(2) Barry v. Edison Schools, Inc., Civ. Action No. 02-CV-3704;
(3) Devine v. Edison Schools, Inc., Civ. Action No. 02-CV-3726;
(4) Cooper v. Edison Schools, Inc., Civ. Action No. 02-CV-3828;
(5) Neuenfeldt v. Edison Schools, Inc., Civ. Action No. 02-CV-
3912;
(6) Berman v. Edison Schools, Inc., Civ. Action No. 02-CV-4269;
(7) Minich v. Edison Schools, Inc., Civ. Action No. 02-CV-4410;
(8) Vanlaere v. Edison Schools, Inc., Civ.Action No. 02-CV-4692;
(9) Seiden v. Edison Schools, Inc., Civ. Action No. 02-CV-5078;
and
(10) Grace v. Edison Schools, Inc., Civ. Action No. 02-CV-5198.
The Barry, Devine and Seiden lawsuits name as an additional defendant
PricewaterhouseCoopers LLP. The Grace lawsuit names as additional
defendants Merrill Lynch & Co., Inc., Banc of America Securities LLC,
Credit Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette
Corp. and J.P. Morgan Securities Inc.
These lawsuits are largely identical and each alleges that Edison and
certain of its officers and directors violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934. They seek an unspecified amount
of compensatory damages, costs and expenses related to bringing the
actions, and in a few instances, injunctive relief.
Plaintiffs allege that Edison's public disclosures from November 1999
to March 2002 regarding its financial condition were materially false
and misleading because Edison allegedly improperly inflated its total
revenues by including certain payments, including payments for teacher
salaries, that were paid directly to third parties by local school
districts and charter school boards that contracted with Edison.
Each of the lawsuits references the May 14, 2002, cease-and-desist
order issued by the United States Securities and Exchange Commission on
consent against Edison. Several of the lawsuits also mention two
restatements of Edison's financial statements, one regarding a warrant
purchased in 1998 by a philanthropic organization and the other
regarding a severance agreement between Edison and one of its senior
officers, made by Edison as a result of the May 14, 2002 cease-and-
desist order.
The Grace lawsuit also contains an allegation that Edison, certain of
its officers and directors, and the investment banks that underwrote
Edison's November 1999 offering of class A common stock violated
Sections 11 and 15 of the Securities Act of 1933 by issuing a
prospectus containing untrue statements of material fact or omissions
of material fact, regarding Edison's financial condition and its
inclusion in its stated revenue of certain payments made directly to
third parties by local school districts and charter school boards that
contracted with Edison.
In July 2002, several plaintiffs filed motions to be appointed lead
plaintiff and also moved to consolidate the ten lawsuits in one action.
"As of the date of this Annual Report, there has been no ruling by the
court on these motions. Edison believes that it has strong defenses to
the claims raised by these lawsuits," said an SEC filing. "However, if
Edison were not to prevail, the amounts involved could be material to
Edison."
Edison Schools, the nation's largest private operator of public
schools, manages about 150 public schools (some are different grade
levels on the same campus) in 23 states from coast to coast and
Washington, DC, a Hoovers.com dossier says.
The charter and contract schools have an academy-style focus, as well
as longer school days and school years; some offer summer and after-
school programs. However, results have been mixed for Edison, which
has seen rave reviews from some parents but contracts cancelled in
several school districts; in addition, the company has yet to make a
profit.
EDISON SCHOOLS: Negotiates Stipulation in Two of Three Derivative Suits
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Between May 15, 2002 and July 19, 2002, three lawsuits were filed
derivatively on behalf of Edison against certain of Edison's officers
and directors in the Supreme Court for the State of New York, County of
New York.
The derivative lawsuits are captioned:
(1) Urbach, et al. v. Christopher D. Cerf, et al., Index No.
02/111413;
(2) Devine, et al. v. Christopher D. Cerf, et al., Index No.
02/111414; and
(3) Goldstein v. Schmidt, Jr., et al., Index No. 02/602659.
Plaintiffs in these lawsuits contend that Edison's officers and
directors committed various common law torts against the Company in
connection with the allegedly improper inflation of Edison's total
revenues by including certain expenses, including teacher salaries that
were paid directly by local school districts.
In particular, the plaintiffs allege that the officers and directors
named as defendants violated their fiduciary duties to Edison by
failing to implement and maintain an adequate internal accounting
control system, causing Edison to conceal from the public its true
financial condition, and using material non-public information to sell
shares of Edison common stock and thereby reap millions of dollars in
illegal insider trading gains.
These lawsuits seek compensatory damages in the amount of the profits
that the individual defendants allegedly made, as well as a
constructive trust over such profits.
The Company has negotiated a stipulation in the first two derivative
actions, which allows (1) plaintiffs until November 22, 2002 to file a
consolidated amended complaint and (2) defendants until January 22,
2003 to file a responsive pleading to plaintiffs' consolidated
complaint.
"The Company is in the process of attempting to negotiate a comparable
stipulation in the third derivative action. The Company believes that
Edison's officers and directors also have strong defenses to these
lawsuits," an SEC filing states.
ELECTRONIC DATA: Beset by Suits, SEC Inquiry Due to Stunted Q3 Forecast
-----------------------------------------------------------------------
Beleaguered computer-services company Electronic Data Systems Corp.
(EDS) said recently that the Securities and Exchange Commission (SEC)
is seeking information about financial transactions and recent warning
that third-quarter earnings would fall 80 percent short of previous
expectations, said the Associated Press Newswires recently.
But this is not the end of the company's problems. The company has
been sued by attorneys who are seeking class-action status for their
lawsuits and who are claiming that EDS misled the investors about EDS'
financial condition. The company also faces exposure to the bankruptcy
filings of two large customers, WorldCom Inc. and U.S. Airways.
Additionally, analysts and investors have grown increasingly restless,
as the company has failed to convert robust revenue growth into cash
flow. Analysts blame the disparity on the large upfront costs EDS
faces on some of its biggest contracts, such as a $6.9 billion deal for
the Navy and Marines, which has fallen behind schedule.
EDS has said it will cooperate fully with the SEC and is "confident the
inquiry will confirm its actions were proper." Prakash Parthasarathy,
an analyst with Banc of America Securities, said that news of the SEC
inquiry would chill EDS shareholders, bondholders and customers.
Rumors of an SEC inquiry began almost immediately after EDS issued its
startling earnings warning on September 18. The company said third-
quarter profits would be between $58 million and $74 million, down from
a big July forecast of $364 million, which triggered a stock sell-off.
EDS had been hoping to announce an $8 billion contract to run back-
office operations for Procter & Gamble, but the consumer-products firm
has not made the announcement yet. EDS is also bidding for a big
outsourcing contract from JP Morgan Chase Bank.
EDS chairman and chief executive Richard H. Brown recently defended the
company's financial position and denied any liquidity problems in a
statement and in a note to shareholders. He said EDS is more than
strong enough financially to keep serving current clients and to
aggressively pursue new contracts, including large ones.
Mr. Parthasarathy, the Banc of America analyst, said Mr. Brown is under
pressure to emerge from the SEC inquiry and prove that the underlying
condition of EDS is sound.
EVOLVE SOFTWARE: Vows Vigorous Defense Against S.D. NY Securities Suit
----------------------------------------------------------------------
In November 2001, a complaint seeking class action status was filed
against EVOLVE SOFTWARE INC in the United States District Court for the
Southern District of New York.
The complaint is purportedly brought on behalf of all persons who
purchased the firm's common stock from August 9, 2000, through December
6, 2000.
The complaint names as defendants some former and current officers of
the company and several investment banking firms that served as
managing underwriters of the firm's initial public offering.
Among other claims, the complaint alleges liability under the
Securities Act of 1933 and the Securities Exchange Act of 1934, on the
grounds that the registration statement for the initial public offering
did not disclose that:
(1) the underwriters had allegedly agreed to allow certain of
their customers to purchase shares in the offering in exchange
for alleged excess commissions paid to the underwriters; and
(2) the underwriters had allegedly arranged for certain of their
customers to purchase additional shares in the aftermarket at
pre-determined prices under alleged arrangements to manipulate
the price of the stock in aftermarket trading.
"We are aware that similar allegations have been made in numerous other
lawsuits challenging initial public offerings conducted in 1998, 1999
and 2000," the company said in its latest SEC filing. "No specific
amount of damages is claimed in the complaint involving the initial
public offering. We intend to contest the claims vigorously."
Evolve Software's flagship Evolve 4 Web-based software suite automates
project management and the allocation and delivery of professional
services. The application's modules track projects, monitor
collaborative work, supervise expense billing, and manage service
organizations' business processes.
According to a Hoovers.com dossier, Evolve provides application
hosting, consulting, and related support services. Customers include
Novell, Sun Microsystems, and Ericsson. The company is extending its
technology into management consulting, advertising, and other markets.
Private investment firm Warburg Pincus owns 87% of Evolve.
GLOBAL CROSSING: Chairman Winnick Offers $25 Million To Aid Employees
---------------------------------------------------------------------
In a move that could pressure other executives to follow suit, Gary
Winnick, chairman of Global Crossing Ltd., pledged to contribute $25
million to offset some of the retirement plan losses sustained by
thousands of the company's current and former employees, The Wall
Street Journal recently reported.
The offer was immediately dismissed as far too low by many lawmakers,
as well as by the employees involved in the class-action lawsuits
against the company over its handling of the 401(k) funds. Mr.
Winnick's offer represents just three percent of the all-over total of
$734 million worth of stock he personally sold.
Still, the unexpected offer by Mr. Winnick, which could raise the legal
risks facing him and the company, marks the first time that a senior
executive in the scandal-plagued telecom industry has voluntarily
offered money to those hurt by the companies' stock-price declines.
Mr. Winnick is facing numerous lawsuits and a government inquiry into
whether he improperly sold $124 million of Global Crossing shares last
year. The company's January filing for bankruptcy protection was the
fourth largest in American history.
But Mr. Winnick's offer could have far-reaching implications, in
addition to putting him at legal risk if it were viewed as an admission
of liability. " This [Mr. Winnick's offer] sets a high moral bar, so I
do think some other executives will take the cue and do it," said James
Cox, a law professor at Duke University.
People familiar with the matter said Mr. Winnick's offer would have
little impact on the continuing investigations into Mr. Winnick's
activities by the Securities and Exchange Commission and Justice
Department. The House Energy and Commerce investigations subcommittee
examining Mr. Winnick presented e-mail messages and other memoranda
that suggested he was aware of the company's deteriorating financial
condition, which eventually led to a drop in its stock price.
Lawmakers cited a memo expressing the concerns of former CEO Tom Casey,
who said the company was in a "crisis," as evidence that Mr. Winnick
knew about the revenue concerns when he sold $124 million in stock on
May 23, 2001.
But Mr. Winnick, throughout the congressional questioning, tried to
portray himself as relatively unaware of the company's business
affairs, and tried repeatedly to pin responsibility for Global
Crossing's accounting and business practices on the other executives
gathered at the hearing table.
The steep decline in the value of retirement accounts and stock
holdings of many telecom employees has sparked intense anger at the
insiders and executives who have cashed out more than $14.2 billion in
shares since 1997, according to a Wall Street Journal analysis. Many
telecom executives cashed out at the peak of the telecom boom, unlike
thousands of shareholders who watched as their shares retreated to all-
time lows, and as once high-flying companies, such as Global Crossing
and WorldCom Inc., have sought bankruptcy protection.
INTERNATIONAL RECTIFIER: Settlement of 1991 Suit Won't Involve Money
--------------------------------------------------------------------
International Rectifier Corporation informed the Securities and
Exchange Commission that it had recently settled three lawsuits that
had been pending before the U.S. District Court for the Central
District of California.
The Company said the settlement, reached in August last year,
contemplates the dismissal of all claims without any payments. The
settlement requires the filing of formal documents with the court and
court approval. The company did not say whether it had already
complied with these requirements.
The lawsuits had named the company and certain of its directors and
officers, seeking unspecified but substantial compensatory and punitive
damages for alleged intentional and negligent misrepresentations and
violations of the federal securities laws in connection with the public
offering of the company's common stock completed in April 1991 and the
redemption and conversion in June 1991 of its 9% Convertible
Subordinated Debentures due 2010.
They also alleged that the firm's projections for growth in fiscal 1992
were materially misleading. Two of these suits also named the
company's underwriters, Kidder, Peabody& Co. Incorporated and
Montgomery Securities, as defendants.
International Rectifier claims to be a leading designer, manufacturer
and marketer of power management products and the leading worldwide
supplier of a type of power semiconductor called a MOSFET (a metal
oxide semiconductor field effect transistor). Power semiconductors
process electricity into a form more usable by electrical products.
The technology advancements of power semiconductors increase system
efficiency, allow more compact end products, improve features and
functionality and extend battery life. The company says its products
are used in a range of end-markets, including consumer electronics,
information technology, automotive, aerospace and defense,
communications and industrial.
INTERWAVE COMMUNICATIONS: Motion to Dismiss NY Suit Remains Undecided
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On November 21, 2001, a securities class action, Middleton v. interWAVE
Communications International, Ltd., et. al., Case No.01 CV 10598, was
filed in United States District Court for the Southern District of New
York against certain investment bank underwriters for the Company's
initial public offering, the Company, and three of the Company's
officers.
The amended complaint alleges undisclosed and improper practices by the
underwriters concerning the allocation of the Company's IPO shares, in
violation of the federal securities laws, and seeks unspecified damages
on behalf of persons who purchased the Company's stock during the
period from January 28, 2000 through December 6, 2000.
Other actions have been filed making similar allegations regarding the
IPOs of more than 300 other companies. All of these lawsuits have been
coordinated for pretrial purposes as In re Initial Public Offering
Securities Litigation, Civil Action No.21-MC-92.
"The Company believes it has meritorious defenses to the claims and
will defend itself vigorously," a latest SEC document says. "The
Company and the named officer defendants have made a motion to dismiss
the complaint."
interWAVE Communications International claims to be a global provider
of scaleable wireless infrastructure networks that offer a cost
effective solution to extend coverage and connection to hard to reach
areas. These systems support voice and data in both mobile and fixed
environments.
interWAVE's cellular networks target communities with a few thousand
subscribers that could grow up to more than a hundred thousand
subscribers. The entire cellular network is based on a common hardware
platform where the software for the full functionality cellular switch,
the base station controller, as well as the base station reside on a
single hardware system. This gives the operator a simple, easy to
support and maintain network that is software configurable to various
network architectures.
INVENSYS BUILDING: Recalls 560T Siebe Actuators, Offers to Replace Them
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In cooperation with the U.S. Consumer Product Safety Commission (CPSC),
Invensys Building Systems, of Love Park, Ill., is recalling up to
560,000 Siebe actuators for testing and replacement, if necessary,
which could be found in fire and smoke dampers. Actuators hold open
fire and smoke dampers in a building's heating, ventilation and air
conditioning (HVAC) system. A spring mechanism, integrated with the
damper, is designed to close the damper during a fire to limit the
spread of smoke, fire and fumes. The recalled actuators can jam, and
prevent the dampers from closing. If dampers fail to close during a
fire, serious injury or death can be suffered by building occupants
because smoke, fire and fumes can spread through a building's
ventilation system
Building owners, damper manufacturers, and fire and safety
investigators have reported dampers not closing during testing.
These MA-200 and MA-200-1 series actuators were used in fire and smoke
dampers that were manufactured by various companies from December 1993
through October 1999, which were installed by private contractors in
commercial and residential buildings. The actuators have manufacture
date codes of 9348 through 9947.
Building owners and managers whose buildings have dampers containing
Invensys/Siebe actuators should immediately contact Invensys' Program
Coordination Office at (877) 481-2372 between 7 a.m. and 7 p.m. CT
Monday through Friday. A web site where building owners can obtain a
complete copy of the program information has been established at
http://www.regcen.com/MA200
To be eligible for a free actuator replacement, the building owner must
test the actuator and report the results to Invensys. Only actuators
that fail testing will be replaced.
IPO UNDERWRITERS: Giant Lawsuit Hinges On Defense's Motion To Dismiss
---------------------------------------------------------------------
A mountainous lawsuit in which investors are claiming that Wall Street
brokerages and their corporate clients rigged hundreds of initial
public stock offerings has hardly begun, but the most important
arguments already may have been made, reports the Los Angeles Times.
The final documents in a motion by the defendants to have the case
dismissed have been filed. The motion was made by defendants including
Goldman Sachs Group Inc. and Credit Suisse First Boston, as well as
some once-hot companies including the now-defunct EToys Inc.
The motion is a standard tool, but lawyers on both side of this case
say that expanding government investigations into IPO practices, the
breadth of litigants and the sheer size of a potential settlement make
this ruling on the dismissal motion particularly critical.
Barring an outright dismissal, Judge Shira Scheindlin, who presides in
the U.S. District Court in the Southern District of New York, has an
array of options in deciding how the case proceeds. Because both sides
are expected to be more interested in settling than going to trial, the
judge's decision will have a major effect on each side's position of
strength during settlement negotiations.
"This is especially important," said Melvyn Weiss, managing partner at
the well-known law firm specializing in class-action lawsuits, Milberg,
Weiss, Bershad, Hynes & Lerach. Mr. Weiss is also co-chair of the
executive committee representing the plaintiffs.
The ruling, said Mr. Weiss, will tell, "not only which parties are in
the case but which claims are viable, and that will give lawyers more
ability to guard their clients in settlement talks."
The ruling itself could take months, because it requires reviewing all
308 IPOs implicated, many of which are technology companies, and
addressing issues for dismissal that are common to each. But Judge
Scheindlin has a reputation for setting an aggressive schedule. She
refused requests from both sides to extend the period for the last
motion.
The motion to dismiss and opposing responses have been pored over by
the litigation firms. Securities lawyers representing 55 underwriting
investment banks and the 308 issuer companies have tried to punch holes
in the range of complaints with six motions to dismiss.
Investors, led by class-action attorneys, allege that there was
industry-wide misconduct to artificially boost demand and the price of
IPO shares during the bull market. Among the complaints: that
brokerage analysts manipulated the market with overly optimistic
research; that investment banks charged buyers excessive commissions in
exchange for access to IPO shares; and that investors who received IPOs
were required to buy shares in the after-market in a practice known as
"tie-ins."
A key defense argument is that allegations have been made with too
broad a brush, and do not provide the detailed support required to
bring claims of fraud. In the tie-in arguments, for instance, the
complaints lack specific instances for each investment bank, defense
lawyers say.
"You can't just say there is a fraud, you need to set forth detailed
allegations. You need some meat on the bone," said Joseph De Simone,
an attorney at Mayer, Brown, Rowe & Maw, which represents GigaMedia
Inc. and several other issuer defendants. And, say the defense
attorneys, even if the investors' allegations are true, there is no
evidence to show a related cause of the investors' losses.
But the argument that no legal lines were crossed has become more
difficult amid a steady stream of headlines from government
investigations into alleged fraud by investment banks. For example,
among the probes is an extensive review by the House Financial Services
Committee into the IPO allocations and research practices of Citigroup
Inc.'s Salomon Smith Barney unit, as well as into the practices of
Goldman Sachs and CSFB, which is an investment bank owned by Credit
Suisse Group.
And, New York Attorney General Eliot Spitzer and other state securities
regulators are conducting their own probes into brokerage conduct.
Driven by this flow of new evidence, the Securities and Exchange
Commission is expected soon to announce a set of new regulations
governing investment banks, which could include a complete divorce
between investment banking operations and sell-side research
departments.
Bad press can be a powerful incentive to settle legal suits and bring
closure, said James Cox, a securities law professor at Duke University
and a member of the New York Stock Exchange legal advisory committee.
"Press reports can substantiate claims," Professor Cox said. "These
government investigations have brought a lot of things to light." They
tend to provide the fuel, the alleged facts, for investors' lawsuits.
All of that could put pressure on the defendants' to settle the IPO
case if the plaintiffs' case emerges from the dismissal motion on
strong footing. The alternative of bringing the case to trial could
take years and cost millions in legal fees. Many experts believe a
trial is highly unlikely.
The group of attorneys representing banks, which are the primary
target, include Gandolfo DiBlasi from the New York law firm of Sullivan
& Cromwell, the lead counsel for Goldman Sachs and the liaison for the
entire group.
J.L. HALSEY: Appeal of Dismissed Securities Fraud Suit Remains Pending
----------------------------------------------------------------------
Plaintiffs who brought a securities fraud suit against J.L. Halsey
Corporation, styled as BRADY V. NAHC, INC., ET AL., in the United
States District Court for the Eastern District of Pennsylvania have
appealed the dismissal of the case October last year.
This is a purported class action filed on behalf of all persons who
purchased the common stock of the Company during the period from April
5, 1999 and including November 22, 1999.
Five similar actions have been filed in the Eastern District of
Pennsylvania, including one that alleges a class period from May 20,
1998 through November 22, 1999. They have been consolidated into a
single action. PricewaterhouseCoopers LLP is named as a defendant in
the case.
The case is subject to the provisions of the Private Securities
Litigation Reform Act of 1995 (PSLRA).
The Plaintiffs asserted that the Company and certain of its directors
and officers violated Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 by making false and misleading statements and
omissions regarding the prospects of the Company's business and the
Company's liquidation value and by failing timely to disclose the
impact of the Balanced Budget Act of 1997 on the long term care
services business.
The Plaintiffs allege that these statements and omissions artificially
inflated the value of the Company's stock during the class period. The
Plaintiffs also assert a violation of Section 14(a) of the Exchange Act
and Rule 14a-9 against the Company and individual Defendants as well as
against Wasserstein Perella & Co. in connection with the Company's
proxy statements dated August 13, 1999, as amended through September
10, 1999.
The Plaintiffs allege that the Defendants were negligent in
disseminating the proxy statements, which allegedly contained
materially false and misleading statements. Wasserstein Perella & Co.
has notified the Company that it will seek indemnification from the
Company in connection with this action, pursuant to its engagement
agreement with the Company.
The Company has notified its insurance carriers of this action. If the
Defendants suffer an adverse judgment which the Company is required to
pay, it will likely result in there being no assets for acquisition of
a business or liquidation; in such event, the Company may file for
bankruptcy law protection.
On October 17, 2001, the U.S. District Court for the Eastern District
of Pennsylvania dismissed the Brady case against the Company and
PricewaterhouseCoopers LLP with prejudice. The plaintiff has appealed
this decision.
MARTHA STEWART: Identified as "Tippee" In U.S. Attorney's Information
---------------------------------------------------------------------
The U.S. Attorney for the Southern District of New York has identified
Martha Stewart as an insider trading "tippee" in a Misdeamor
Information filed against Douglas Faneuil, the Merrill Lynch brokerage
assistant who facilitated Ms. Stewart's December 27, 2001 sales of
Imclone Systems, Inc. common stock. The Misdeamor Information filed in
Federal District Court alleges that on December 27, 2002 a Merrill
Lynch Financial Advisor (presumably Peter Bacanovic) "directly and
indirectly, disclosed to another client (the `Tippee') confidential,
material, non-public information... regarding the sale of Imclone stock
by Samuel Waksal's family member and the attempted sale of Imclone
stock by Samuel Waksal."
That Tippee is identified in the Information as having sold 3,928
shares of Imclone common stock on December 27, 2002, the exact number
of shares sold that day by Ms. Stewart.
The Information is the clearest indication to date that the U.S.
Attorney's Office has identified Ms. Stewart as a target of its insider
trading investigation.
The allegations in the Information are at odds with Ms. Stewart's prior
public statements that she sold her Imclone common shares on the basis
of a pre-existing agreement to sell those shares if Imclone's stock
price fell below $60 per share and that she had no information,
directly or indirectly, that the Waksals were selling those shares.
Those statements were intended to assure investors in Martha Stewart
Living Omnimedia, Inc. (NYSE: MSO) that she would be exonerated in the
inside trading investigation.
The Misdemeanor Information referencing Ms. Stewart's knowledge of the
Waksal's trades prior to the sale of her Imclone common stock
substantiates the allegations and significantly boosts the prospects
for recovery in the securities class actions pending against MSO
brought on behalf of investors who purchased MSO common stock during
the period January 8, 2002 through August 5, 2002.
Class members only have until October 7, 2002 to file motions to be
appointed lead plaintiff. Class members who acquired their MSO common
shares between January 8, 2002 and August 5, 2002, and have significant
losses, and other persons with information that may be helpful to the
prosecution of the action, are urged to contact Wolf Popper LLP, a New
York law firm specializing in class action litigation, concerning their
rights at:
For more information, contact Wolf Popper LLP through James A. Harrod,
Esq. by Phone: 212-451-9642 or 877-370-7703 (toll free) by Fax:
212-486-2093 or by e-mail: irrep@wolfpopper.com
OPENWAVE SYSTEMS: Dismisses NY Suits as Mere Trend in Litigation
----------------------------------------------------------------
On November 5, 2001, a purported securities fraud class action
complaint was filed against Openwave Systems, Inc. in the United States
District Court for the Southern District of New York.
The case is now captioned as In re Openwave Systems, Inc. (sic) Initial
Public Offering Securities Litigation, Civ. No. 01-9744 (SAS)
(S.D.N.Y.), related to In re Initial Public Offering Securities
Litigation, 21 MC 92 (SAS) (S.D.N.Y.).
On April 22, 2002, plaintiffs electronically served an amended
complaint. The amended complaint is brought purportedly on behalf of
all persons who purchased the company's common stock from June 11, 1999
through December 6, 2000.
It names as defendants the Company; five of its present and former
officers; and several investment banking firms that served as
underwriters of the initial public offering and secondary public
offering.
The amended complaint alleges liability as to all defendants under
Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, on the grounds that the
registration statement for the offerings did not disclose that:
(1) the underwriters had agreed to allow certain customers to
purchase shares in the offerings in exchange for excess
commissions paid to the underwriters; and
(2) the underwriters had arranged for certain customers to
purchase additional shares in the aftermarket at predetermined
prices.
The amended complaint also alleges that false analyst reports were
issued. No specific damages are claimed.
"We are aware that similar allegations have been made in other lawsuits
filed in the Southern District of New York challenging over 300 other
initial public offerings and secondary offerings conducted in 1999 and
2000. Those cases have been consolidated for pretrial purposes before
the Honorable Judge Shira A. Scheindlin," the company said in its
latest SEC filing.
"On July 15, 2002, we (and all other issuer defendants) moved to
dismiss the respective complaints, which motion is still pending. Based
upon our current understanding of the facts, we believe that the claims
against us are without merit, we intend to defend the case vigorously,
and we do not believe that resolution of this matter will have a
material adverse effect on the financial condition of our Company," the
SEC document states.
Openwave, which developed much of the technology behind the wireless
application protocol (WAP) standard, provides software and services
that wireless operators use to give customers Internet and corporate
intranet access from their mobile phones.
According to a Hoovers.com dossier, the firm's applications allow
service providers to offer e-mail and messaging to mobile users, as
well as infrastructure software to automate billing and service
provisioning. In addition, Openwave's Mobile Browser is a leading Web
navigation application for Internet enabled phones. Customers include
Cox Communications, Sprint, and Telefonica.
OPENWAVE SYSTEMS: Shareholders Want Derivative Suit Moved to S.D. NY
--------------------------------------------------------------------
On May 3, 2002, Openwave Systems, Inc. received notice of the pending
filing of a purported shareholder derivative lawsuit titled Lefort v.
Black et al. The case is now pending before the United States District
Court, Northern District of California, No.C-02-2465 VRW.
Plaintiff has moved to transfer the case to the United States District
Court, Southern District of New York, and that motion presently was
scheduled to be heard on October 3, 2002.
The lawsuit purports to be filed on behalf of our Company, asserting
claims against the officers and directors at the time of our initial
public offering. The complaint includes allegations similar to the
allegations in the securities class action case described above.
In the derivative case, however, plaintiff asserts that the alleged
conduct injured the Company because its shares were not sold for as
high a price in the IPO as they otherwise could have been.
"We are aware that similar allegations have been made in other
derivative lawsuits involving issuers that also have been sued in the
Southern District of New York securities class action cases," the
company said in its recent SEC disclosure.
"On July 12, 2002, we moved to dismiss the complaint. Subsequently,
plaintiff made demand that the Board of Directors assert his purported
claims. The parties have stipulated to take the motion off the calendar
while the Board considers the demand. We do not believe that resolution
of this matter will have a material adverse effect on the financial
condition of our Company," the SEC disclosure states.
PERFORMANCE INC.: Recalls 900 Defective Bar Ends for Mountain Bikes
-------------------------------------------------------------------
In cooperation with the U.S. Consumer Product Safety Commission (CPSC),
Performance Inc., of Chapel Hill, N.C., is voluntarily recalling about
900 sets of bar ends, which are handlebar extensions used on mountain
bikes. The bar ends can crack when tightened and come loose during
use, which can cause riders to lose control of the bicycle and possibly
suffer injuries.
Performance Inc. has received two reports of the bar ends cracking,
though no injuries have been reported.
The recalled Performance Forte Pro Stix Bar Ends are three to four
inches in length and attach to the ends of the handlebar. The bar ends
are primarily used during hill climbing when mountain biking, as they
give a rider added leverage when he/she is off the seat and pedaling up
a steep incline. The bar ends were manufactured in Taiwan.
Performance stores nationwide, as well as the Performance Inc. web
site, sold the bar ends from April 2002 through September 2002 for
between $13 and $20.
Consumers should stop using the bar ends immediately and return them
for a replacement or refund. Consumers can return the bar ends to the
nearest Performance Store or by mailing them to Performance Inc.,
Attn: Returns Dept., One Performance Way, Chapel Hill, NC 27514. For
more information, consumers should call Performance Inc. at
800-553-8324 between 9 a.m. and 6 p.m. ET Monday through Friday or
visit the company's Web site at http://www.performancebike.com/recall
To see a picture of the recalled product(s), click on this link:
http://www.cpsc.gov/cpscpub/prerel/prhtml03/03002.html
THOMAS & BETTS: Reaches Deal to Settle Consolidated Securities Lawsuit
-----------------------------------------------------------------------
Thomas & Betts Corporation (NYSE: TNB) announced on Wednesday that it
has signed a memorandum of understanding to settle the consolidated
securities class action lawsuit pending against the company in the U.S.
District Court for the Western District of Tennessee.
Claims in the suit relate primarily to alleged violations of federal
securities laws and have been fully disclosed in the company's filings
with the Securities and Exchange Commission (SEC).
Five class action suits were filed against the company in 2000 and were
consolidated into a single action in December 2000. In July 2002, the
Court ordered the parties to enter into formal mediation.
"Reaching this agreement is an important step in putting the legacy
issues behind us," said T. Kevin Dunnigan, chairman and chief executive
officer. "We continue to make excellent progress in rebuilding Thomas &
Betts into a world- class competitor in electrical markets and are
pleased that investors can now value the company on the performance of
our businesses without the uncertainty associated with this
litigation."
Under terms of the agreement, which is pending approval by the Court,
all claims against Thomas & Betts will be dismissed in their entirety
without admission of liability or wrongdoing and the class action
plaintiffs will receive $46.5 million in cash. The company's Directors'
and Officers' Liability insurance will pay approximately $26.5 million
of the settlement, with the company responsible for the balance. Thomas
& Betts expects to record a pre-tax charge of approximately $20 million
in the third quarter 2002.
Mr. Dunnigan noted that the company has comprehensively revised many
key processes and facets of its manufacturing, administrative and
financial operations over the course of its turnaround, which began in
mid-2000. Detailed disclosure regarding the actions taken can be found
in Thomas & Betts' filings with the SEC, particularly its 2000 and 2001
Annual Reports on Form 10-K.
Mr. Dunnigan also said that the company continues to cooperate with the
Securities and Exchange Commission in its ongoing investigation of the
company.
Thomas & Betts (http://www.tnb.com)is a leading designer and
manufacturer of connectors and components for electrical and
communication markets, steel structures used in a variety of
applications, and industrial heating units. Headquartered in Memphis,
Tenn., the company has manufacturing, distribution and office
facilities worldwide. The company had sales of $1.5 billion in 2001 and
employs approximately 10,000 people worldwide.
For more information, contact Tricia Bergeron by Phone: 901-252-8266
UNITED ONLINE: Affiliate Asks NY Court to Dismiss Consolidated Lawsuit
----------------------------------------------------------------------
On April 26, 2001, plaintiff Jodi Bernstein filed a complaint in United
States District Court for the Southern District of New York, Case
No.01-CV-3358 (WHP), against NetZero, certain of its officers and
directors and the investment firms Goldman Sachs, BancBoston Robertson
Stephens and Salomon Smith Barney.
NetZero is a subsidiary of United Online Inc., a leading Internet
service provider, offering consumers free and value-priced Internet
access and e-mail.
The plaintiff's complaint alleges violations of the federal securities
laws. A number of other complaints brought by different plaintiffs
have since been filed and/or served against NetZero containing similar
allegations.
These complaints were brought as purported stockholder class actions
under Sections 11 and 15 of the Securities Act of 1933, as amended. The
complaints generally allege that the prospectus through which NetZero
conducted its initial public offering in September 1999 was materially
false and misleading because it failed to disclose, among other things,
that:
(i) the underwriters of NetZero's initial public offering had
solicited and received excessive and undisclosed commissions
from certain investors in exchange for which the underwriters
allocated to those investors material portions of the
restricted number of NetZero shares issued in connection with
initial public offering; and
(ii) the underwriters had entered into agreements with customers
whereby they agreed to allocate NetZero shares to those
customers in the initial public offering in exchange for which
the customers agreed to purchase additional NetZero shares in
the aftermarket at pre-determined prices.
The complaints against NetZero have been consolidated with similar
complaints filed against other companies and investment firms under the
caption In Re: Initial Public Offering Securities Litigation, Master
File No. 21 MC 92 (SAS).
The defendants, including NetZero, in these consolidated cases have
moved to dismiss the plaintiffs' Consolidated Amended Complaint.
United Online was created in 2001 by the merger of leading US Internet
service providers NetZero and Juno Online Services. With the combined
subscriber bases of the two companies, United Online has 4.8 million
active users, with nearly 1.7 million paid subscribers, under the Juno
and NetZero brands.
The company offers market research through its CyberTarget Division.
The executive team from NetZero, whose shareholders received 63% of the
new company, manages United Online; Juno Online stakeholders received
37% of United Online's stock.
UNITED ONLINE: Unit's Motion to Dismiss for Want of Claim Still Pending
-----------------------------------------------------------------------
On May 17, 2001, plaintiff Ann Louise Truschel filed a complaint
against Juno on behalf of herself and all others similarly situated in
Supreme Court of the State of New York, County of New York, Index No.
01/602486.
Juno is a subsidiary of United Online Inc., a leading Internet service
provider, offering consumers free and value-priced Internet access and
e-mail.
The plaintiff alleges unjust enrichment, violation of N.Y. G.B.L. Sec.
349 (deceptive acts and practices), violation of Arizona Consumer Fraud
Act section 44-1522 and breach of contract. Specifically, the
plaintiff alleges that Juno was unjustly enriched and deceived
consumers by:
(a) advertising "free" Internet access services and limiting the
usage of heavier users of the service, and
(b) advertising a free trial month for its premium service and not
disclosing that the free month begins when the software is
requested, rather than when it is first used, resulting in
users receiving less than one month of free use.
The plaintiff is seeking class certification and unspecified
compensatory damages. The plaintiff filed an amended complaint.
Juno's motion to dismiss the complaint for failure to state a claim has
been argued and is currently pending before the court.
UNITED ONLINE: Demurrer to Nationwide Action Granted, Denied in Part
--------------------------------------------------------------------
On January 8, 2002, plaintiffs Dorothy Steff, John Kozarevich, Rachel
Ward and Lori Anderson filed a nationwide class action lawsuit against
United Online, NetZero and Juno in Superior Court for the State of
California, Los Angeles County, Case No. BC265993.
The plaintiffs allege unlawful, unfair or deceptive business practices
in violation of California Business and Professional Code section 17200
et seq. and violation of California Civil Code section 1750 et seq.
(Consumer Legal Remedies Act).
The plaintiffs allege that defendants used marketing and promotional
materials to mislead or deceive the alleged class members regarding
their billable Internet access services. The plaintiffs filed a Notice
of Violation of the Consumers Legal Remedies Act and are seeking
injunctive relief, restitution, disgorgement of profits, the
establishment of a constructive trust and attorneys' fees.
"We filed a demurrer to the complaint, which the court granted in part
and denied in part. The plaintiffs filed an amended complaint on
August 23, 2002, naming only United Online and NetZero as defendants.
Our response to the amended complaint was due on September 30, 2002,"
the company said in its latest SEC disclosure.
VENTURE CATALYST: Case in S.D. CA Remanded to San Diego Superior Court
----------------------------------------------------------------------
On May 30, 2002, a purported class action lawsuit was filed against
Venture Catalyst Incorporated and the following of directors:
(i) Stephen Dirks,
(ii) Andrew Laub,
(iii) Jana McKeag,
(iv) Cornelius E. Smyth and
(v) L. Donald Speer, II.
The lawsuit primarily seeks to enjoin the company's merger with Speer
Casino Marketing.
The complaint was filed in the Superior Court of the State of
California in the County of San Diego by Jay Fink, an individual
claiming to be a shareholder.
In the complaint, the plaintiff alleges, among other things, that:
(i) The defendants are attempting to complete a management-led
buyout at a grossly inadequate and unfair price and their
efforts provide certain insiders and directors with
preferential treatment at the expense of, and which is unfair
to, the public shareholders;
(ii) In pursuing the plan to cash out the public shareholders for
grossly inadequate consideration, each of the defendants have
violated applicable law by directly breaching and/or aiding \
the other defendants in breach of their fiduciary duties of
loyalty, due care, independence, good faith and fair dealing;
and
(iii) Instead of attempting to obtain the highest price reasonably
available for the company, the defendants spent a substantial
effort tailoring the structural terms of the merger to meet
the specific needs of Mr. Speer.
The plaintiff asks the court to:
(i) Declare that the action is properly maintainable as a class
action lawsuit;
(ii) Declare that the merger agreement was entered into in breach
of the fiduciary duties of the defendants and is therefore
unlawful and unenforceable;
(iii) Enjoin the consummation of the merger unless and until certain
procedures are adopted and implemented to obtain the highest
possible price for the shareholders;
(iv) Direct the individual defendants to exercise their fiduciary
duties to obtain a transaction which is in the best interests
of the shareholders until the process for the sale or auction
of the company is completed and the highest possible price is
obtained;
(v) Rescind the merger transaction;
(vi) Establish a constructive trust, in favor of the plaintiff,
upon any benefits improperly received by the defendants as a
result of their wrongful conduct; and
(vii) Award the plaintiff its costs and disbursements in the
lawsuit.
On June 26, 2002, a second purported class action lawsuit was filed
against the company and the following directors:
(i) Stephen Dirks,
(ii) Andrew Laub,
(iii) Jana McKeag,
(iv) Cornelius E. Smyth and
(v) L. Donald Speer, II.
The complaint was filed in the Superior Court of the State of
California in the County of San Diego by Virgina Riutta, an individual
claiming to be a shareholder. The lawsuit primarily seeks to enjoin
the company's merger with Speer Casino Marketing and makes
substantially identical allegations to the purported class action filed
by Jay Fink and described above.
On June 28, 2002, the lawsuit filed by Jay Fink was removed from San
Diego County Superior Court to the United States District Court for the
Southern District of California, pursuant to, among other things, the
Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C.
& 78p.
On July 19, 2002, the lawsuit filed by Virgina Riutta was removed from
San Diego County Superior Court to U.S. District Court, pursuant to,
among other things, the SLUSA. On July 31, 2002, Jay Fink and Virgina
Riutta moved to remand their respective actions back to San Diego
County Superior Court.
"On August 30, 2002, we and the directors filed a consolidated
opposition to their motions. On September 9, 2002, Jay Fink and Virgina
Riutta filed their replies in support of the remand motions," the
company said in its latest SEC disclosure.
The hearings on both motions were held on September 18, 2002. On
September 23, 2002, the Court issued an order granting the motions for
remand but denying the request for attorneys' fees.
"Our Board of Directors believes that it and the Special Committee of
our Board of Directors have met and will continue to meet, their
respective fiduciary obligations," the company said in its SEC report.
"Our Board of Directors believes that each of the lawsuits described
above is without merit and intends to vigorously defend each action."
Venture Catalyst Incorporated (VCAT) provides gaming consulting and
infrastructure and technology integration services in the California
Native American gaming market. It offers comprehensive gaming and
hospitality consulting services, financial advisory services, public
and governmental relations, strategic planning, technology solutions,
and professional and technical expertise.
VCAT is a Utah corporation formerly known as Inland Entertainment
Corporation and Inland Casino Corporation, and is a successor to a
Delaware corporation organized in June 1994, also known as Inland
Casino Corporation (ICC II), which was formed to consolidate various
gaming related entities then owned by the shareholders of ICC II.
* Asbestos Alert *
ASBESTOS ALERT: IMO Industries, Units Face 4,500 Asbestos Claims
----------------------------------------------------------------
Imo Industries Inc. says it and one of its subsidiaries are two of a
large number of defendants in a number of lawsuits brought in various
United States jurisdictions by approximately 4,500 claimants who allege
injury caused by exposure to asbestos.
Although neither the company nor any of its subsidiaries has ever been
a producer or direct supplier of asbestos, it is alleged that the
industrial and marine products sold by the company and the subsidiary
named in such complaints contained asbestos components.
Suits against the company and its subsidiary have been tendered to its
insurers, who are defending under their stated reservation of rights.
In addition, the company and the subsidiary are named in cases,
involving approximately 40,000 claimants, which were "administratively
dismissed" by the U.S. District Court for the Eastern District of
Pennsylvania.
Cases that have been "administratively dismissed" may be reinstated
only upon a showing to the Court that:
(1) there is satisfactory evidence of an asbestos-related injury;
and
(2) there is probative evidence that the plaintiff was exposed to
products or equipment supplied by each individual defendant in
the case.
The company believes that it has adequate insurance coverage or has
established appropriate reserves to cover potential liabilities related
to these cases.
COMPANY SNAPSHOT
Imo Industries Inc.
997 Lenox Drive, Suite 111
Lawrenceville, New Jersey
Telephone: +1 609 8967600
Fax: +1 609 8967688
Revenue : $77,301,000
Net Income : $3,557,000
Assets : $374,401,000
Liabilities : $246,587,000
No. of Asbestos Claims : 4,500
(As of September 30, 2000)
Description: Imo Industries Inc, a multinational manufacturer of a
broad range of industrial products operates through five segments -
power transmission, pumps, instrumentation, morse controls and roltra-
morse. The power transmission segment designs and manufactures
electronic adjustable-speed motor drives, gears and speed reducers. The
pumps segment makes a broad range of rotary pumps, including a
proprietary line of two and three-screw pumps. The morse controls
segment manufactures push-pull cable and remote control systems. Pumps
accounted for 36% of 1997 revenues; morse controls, 35% and power
transmission, 29%.
ASBESTOS ALERT: Chubb Books $195.5 Million in Asbestos Liabilities
------------------------------------------------------------------
The Chubb Corporation sums up its asbestos liability for unpaid claims
and claim adjustment expenses, net of reinsurance recoverable, to
$195.5 million, as of December 31, 2001 as compared to $230.0 million
and $205.6 million during 2000 and 1999, respectively.
The company records around 1,000 asbestos claims outstanding at
December 31, 2001, lower than last year's 1,100 and 1999's
1,600.
Asbestos remains the most significant and difficult mass tort for the
insurance industry in terms of claims volume and dollar exposure as
companies file for bankruptcy as a result of the influx of asbestos-
related liabilities.
A growing number of asbestos claims are being presented as non-products
claims, such as those by installers of asbestos products and by
property owners who allegedly had asbestos on their property. These
exposures typically have no aggregate limits so it creates potentially
greater exposure. In an effort to seek additional insurance coverage,
some insured are presenting new asbestos claims as non-products
premises or operations claims, or attempting to reclassify old products
claims.
The focus of asbestos litigation beyond asbestos manufacturers and
distributors to installers and premises owners has created conflicts
among insureds, primary insurers and excess insurers, primarily
involving questions on allocation of indemnity and expense costs and
exhaustion of policy limits, generating costly coverage litigation with
the potentially inconsistent results.
COMPANY SNAPSHOT
The Chubb Corporation (NYSE: CB)
15 Mountain View Rd.
Warren, NJ 07061-1615
Phone: 908-903-2000
Fax: 908-903-3402
Website: http://www.chubb.com
No. of Employees : 12,600
Revenue : $7,754,000,000
Net Income : $111,500,000
Assets : $29,449,000,000
Liabilities : $22,923,700,000
No of Asbestos Claims : 1,000
(For the year ended December 31, 2001)
Description: The Chubb Corporation is best known for comprehensive
homeowners insurance for the demographic that owns yachts (the company
insures those, too). It also offers property/casualty insurance to
companies. Products include niche coverage and specialty lines (most
notably its lucrative executive protection business). The company also
develops properties in Florida and New Jersey through its Real Estate
Group. Chubb was hit hard by the attacks on the World Trade Center and
the fall of Enron, estimating to pay out almost $900 million in claims.
ASBESTOS ALERT: Lincoln Asbestos Cases on the Upside to 24,680
--------------------------------------------------------------
Lincoln Electric Holdings, Inc. faces around 24,680 plaintiffs in
asbestos-related lawsuits. As of December 31, 2001, a net increase of
900 claims swamped the company.
The asbestos claimants seek payment of unspecified sums for alleged
asbestos-induced bodily injuries and property damages.
Lincoln has been named co-defendant in other similar cases that have
been resolved over the last 5 years involving 9,738 claimants. About
9,662 of those claims were dismissed, eight were tried to defense
verdicts and 68 were decided in favor of the company following summary
judgment motions.
COMPANY SNAPSHOT
Lincoln Electric Holdings Inc.
22801 St. Clair Ave.
Cleveland, OH 44117
Phone: 216-481-8100
Fax: 216-486-1751
http://www.lincolnelectric.com
Employees : 5,791
Revenue : $978,900,000
Total Net Income : $83,600,000
Total Assets : $781,300,000
Total Liabilities : $282,800,000
(For the year ended December 31, 2001)
Description: Lincoln Electric Holdings Inc. is a leading manufacturer
of arc-welding and cutting products and welding supplies, its products
include arc-welding power sources, automated wire-feeding systems, and
consumable electrodes for arc-welding. Lincoln also makes coated
manual electrodes, solid electrodes produced in coil form, and cored
electrodes produced in solid form. Welding products account for about
99% of revenues.
Lincoln operates manufacturing facilities in 18 countries. David
Lincoln, son of founder John Lincoln, owns about 15% of the company.
ASBESTOS ALERT: Pfizer Battles 169,000 Asbestos Claims
------------------------------------------------------
Pfizer Inc. reports a total of about 169,000 claims pending in state
and federal courts, naming it and The Quigley Corp., or both, and
numerous others as defendants, seeking damages for alleged asbestos
exposure.
The number of claims overstates the number of claimants, around
118,000, because many claimants name both Pfizer and Quigley. In
addition, a total of about 63,000 claimants have named American Optical
as a defendant.
Pfizer believes that the vast majority of plaintiffs do not have any
impairing medical condition. For those claimants who do, it is
confident that it has meritorious defenses and is defending these cases
vigorously.
Since the inception of this litigation, Pfizer and Quigley have closed,
through settlement for varying amounts or through litigation, in excess
of 185,000 asbestos suits or claims. In the same period, American
Optical has closed in excess of 40,000 such suits or claims.
In the 1960s, Pfizer acquired two businesses, the Gibsonburg
Lime Products Company (GLPC) and Quigley, which both had limited sales
of minor products that contained small amounts of chrysotile asbestos
and that now form the basis for the Company's asbestos litigation.
Between 1967 and 1982, Warner-Lambert owned American Optical
Corporation, which manufactured and sold respiratory protective devices
and asbestos safety clothing.
COMPANY SNAPSHOT
Pfizer Inc (NYSE: PFE)
235 E. 42nd St.
New York, NY 10017-5755
Phone: 212-573-2323
Fax: 212-573-7851
http://www.pfizer.com
Employees : 90,000
Revenue : $32,259,000,000
Total Net Income : $7,788,000,000
Total Assets : $39,153,000,000
Total Liabilities : $20,860,000,000
(For the year ended December 31, 2001)
Description: Pfizer is a big name in the drug industry. The firm plans
to buy Pharmacia, maker of Xanax; the two druggernauts already
collaborate to sell arthritis drug Celebrex. Pfizer's 2000 merger with
Warner-Lambert ensconced it as one of the world's top five drugmakers.
The company's products include impotence therapy Viagra, cardiovascular
drug Norvasc, and cholesterol-lowering Lipitor, and such consumer
brands as Visine, BenGay, Listerine, Dentyne, Efferdent, and Zantac
(sold under the Warner-Lambert name). Pfizer also makes animal health
products. It may sell off its confectionary and shaving products
subsidiaries.
ASBESTOS ALERT: Con Edison Discloses Asbestos-Cost Estimates
-------------------------------------------------------------
Consolidated Edison Inc. reports that at December 31, 2001 it had
accrued $132.2 million as its best estimate of its subsidiaries'
liability for sites as to which they have received process or notice
alleging that hazardous substances generated by them were deposited.
Con Edison's utility subsidiaries are permitted under current rate
agreements to defer for subsequent recovery through rates certain site
investigation and remediation costs with respect to hazardous waste. At
December 31, 2001, $62.6 million of such costs had been deferred as
regulatory assets.
Workers' compensation administrative proceedings have been commenced in
which current and former employees claim benefits, alleging disability
from exposure to asbestos. At December 31, 2001, Con Edison had accrued
a $136.7 million provision for its utility subsidiaries' liability for
workers' compensation claims, including those related to asbestos
exposure. Of that amount, $62.1 million was deferred as a regulatory
asset. Other legal proceedings have commenced, wherein non-employee
contractors claim benefits based upon alleged disability from exposure
to asbestos. At December 31, 2001, Con Edison of New York had accrued a
$4 million provision as its best estimate of the utility subsidiaries'
liability for these alleged claims and deferred a like amount as a
regulatory asset.
Numerous suits have been brought in New York State and Federal courts
against Con Edison of New York and many other defendants for death and
injuries allegedly caused by exposure to asbestos at various Con Edison
of New York premises. Many of the suits have been disposed of without
any payment by Con Edison of New York, or for immaterial amounts. The
amounts specified in the remaining suits, including the Moran v.
Vacarro suit, total billions of dollars, but Con Edison of New York
believes that these amounts are greatly exaggerated, as were the claims
already disposed of.
In 1988, Con Edison of New York was served with a complaint and an
amended complaint in an action in the New York State Supreme Court, New
York County, in which approximately 188 Con Edison of New York
employees and their union alleged that the employees were exposed to
dangerous levels of asbestos as a result of alleged intentional conduct
of supervisory employees.
Each of the employee plaintiffs sought $1 million in punitive damages,
$1 million in damages for mental distress, unspecified additional
compensatory damages, and to enjoin Con Edison of New York from
violating EPA regulations and exposing employees to asbestos without
first taking certain safety measures.
In 1990, the complaint was amended to add the spouses of 131 plaintiffs
as additional plaintiffs and to remove the union as a plaintiff. Each
spouse seeks medical monitoring, $1 million for emotional distress and
$1 million for punitive damages.
In 1995, the court dismissed the claims of the employee plaintiffs,
leaving employee spouses as the only plaintiffs.
Hazardous substances, such as asbestos, polychlorinated biphenyls
(PCBs) and coal tar, have been used or generated in the course of
operations of Con Edison's utility subsidiaries and may be present in
their facilities and equipment.
COMPANY SNAPSHOT
Consolidated Edison Inc. (NYSE: ED)
4 Irving Place
New York, NY 10003
Phone: 212-460-4600
Fax: 212-982-7816
Web site: http://www.conedison.com
Employees : 13,953
Revenue : $9,634,000,000
Net Income (Loss) : $695,80,000
Assets : $16,996,100,000
Liabilities : $11,080,200,000
No. Of Asbestos Claims : 131
Estimated Asbestos Liabilities : $273,000,000
(For the year ended December 31, 2001)
Description: Con Edison Inc. is the holding company of Consolidated
Edison Co. of New York, distributes electricity to more than 3.1
million customers in New York City and natural gas to 1.1 million
customers. Con Edison also markets retail and wholesale energy, is
building a fiber-optic network in its territory, and operates
independent power plants.
ASBESTOS ALERT: CSR Faces Asbestos Lawsuits in US and Australia
---------------------------------------------------------------
CSR Ltd. reports that claimants alleging personal injuries due to
exposure to asbestos have named it and several CSR GROUP entities as
defendants in litigation in Australia and the United States. Claimants
generally seek compensatory and punitive damages.
Australia Asbestos Litigation
The involvement of CSR and its subsidiaries in asbestos litigation in
Australia arises from the mining of raw asbestos fiber by one of CSR's
subsidiaries, as well as the sale by CSR and by certain of its
subsidiaries of asbestos-containing products.
Claimants include former employees, contractors and carriers of raw
fiber, and users of asbestos products. The first claim naming CSR or a
subsidiary as a defendant in Australia was asserted in 1976. As at
March 31, 2002, CSR and its subsidiaries had been named in
approximately such 1,700 claims, of which, 141 were commenced in 1997,
87 in 1998, 72 in 1999, 28 from January 1 to March 31, 2000, 140 during
fiscal 2001, and 121 during fiscal 2002.
At March 31, 2002, approximately 988 Australian claims had been settled
and a further 170 had been dismissed voluntarily or by a successful CSR
defense and the total costs of settlements and judgments were
approximately A$82 million and legal and related fees totaled
approximately A$42 million. There has been a single punitive damages
award, in the Rabenalt case, which was against a subsidiary in the
amount of A$250,000. It was entered in 1989.
At March 31, 2002, there were approximately 558 asbestos claims pending
against CSR and its subsidiaries in Australia.
U.S. Asbestos Litigation
The involvement of CSR and its subsidiaries in asbestos litigation in
the United States arises from sales of asbestos fiber mined by an
Australian subsidiary of CSR and sold by CSR acting as its subsidiary's
sales agent. The last such sale occurred in 1966. Prior to 1990, the
vast majority of the asbestos claims against CSR were commenced by or
on behalf of employees of Johns Manville Corporation, the principal
purchaser of asbestos fiber sold by CSR as sales agent for its
subsidiary.
Plaintiffs generally claimed exposure to such fiber during the course
of their employment at the Johns Manville plants where the fiber was
used in the manufacture of certain asbestos cement pipes. In the early
stages of the litigation, settlements by CSR of U.S. asbestos claims
for the most part involved Johns Manville Plant-worker Claims.
CSR has entered into a number of global settlements of such claims with
various claimants' counsel. Beginning in late 1990, CSR began to be
named as a defendant in U.S. lawsuits brought by persons alleging
occupational exposure to finished asbestos products, particularly
specialty gasket material and asbestos cement pipe.
CSR has defended itself from the claims, saying:
(1) there is no evidence that asbestos fiber supplied by CSR was
incorporated into the particular products to which these
claimants were allegedly exposed;
(2) there is no personal jurisdiction over CSR;
(3) CSR did not owe a duty to warn users of finished products
manufactured by Johns Manville, a sophisticated and
knowledgeable asbestos company in its own right, of the
potential consequences under certain circumstances of the
inhalation of asbestos fiber; and
(4) any alleged failure by CSR to warn Johns Manville of such
potential consequences was not the cause of claimants'
injuries.
CSR believes that the primary reason for its inclusion in the claims is
the bankruptcy in 1982 of John Manville and the consequent
unavailability of a full remedy against Johns Manville for injuries
allegedly caused by its products.
The first U.S. asbestos claims naming CSR or a subsidiary as a
defendant were asserted in 1980. As at March 31, 2002, CSR and its
subsidiaries had been named in approximately 3,000 plant-worker claims
and approximately 128,000 finished product claims.
Of the approximately 3,000 plant-worker claims, 48 were asserted in
1997, 23 in 1998, 25 in 1999, 0 from January 1 to March 31, 2000 28
during Fiscal Year 2001, and 39 during Fiscal Year 2002.
As at March 31, 2002 approximately 2,848 plant-worker claims had been
settled or decided and 150 were pending. As at March 31, 2002 the total
of the cost of settlements and judgments was approximately A$77
million. Of the approximately 128,000 finished product claims, 4,655
were asserted in 1997, 9,829 in 1998, 4,120 in 1999, 172 from January 1
to March 31, 2000, 1,359 in fiscal 2001 and 14,165 in fiscal 2002.
As at March 31, 2002, approximately 125,384 finished product claims had
been settled or decided and 2,121 were pending. As at March 31, 2002
the total of the cost, both paid and committed, of settlements and
judgments was approximately A$57 million. The total defense costs,
relating both to plant-worker claims and finished product claims, was
approximately A$44 million.
The only judgments entered to date against CSR in the US asbestos
litigation occurred in August 1993 in the Abrams case in Mississippi.
That case involved Johns Manville Finished Product Claims by nine
shipyard workers claiming exposure to Johns Manville gasket material
allegedly containing fiber supplied by CSR as sales agent.
In that case, a jury verdict was entered against CSR in favor of four
of the former shipyard workers for compensatory damages totaling
US$2,150,000 and punitive damages totaling US$215,000. In addition to
deciding the claims of the nine shipyard workers, the jury in Abrams
also decided certain common issues with respect to approximately 6,700
of the approximately 16,000 claims then pending against CSR in
Mississippi.
The jury found that the Johns Manville gasket material had been used at
the shipyard where the claimants were employed; that CSR may be liable
for injuries caused by such material; and that punitive damages in the
amount of 10 percent of compensatory damages were appropriate against
CSR. CSR has reached settlements of all claims made in Mississippi with
various claimants' attorneys. While the attorneys' clients have the
right to opt out of the settlement, it is CSR's belief that relatively
few, if any, claimants will choose to do so, and none has done so to
date. An integral part of the settlement agreement provided for and
resulted in the shipyard worker specific and common issues verdicts
being vacated.
Although claims have been brought against CSR in 34 states, the bulk of
the claims have been Finished Product Claims in four particular states:
Mississippi (16 percent), West Virginia (19 percent), Texas (26
percent) and Ohio (20 percent), each as at March 31, 2002. Each of
these states permits so-called "mass trials" of claimants' claims.
Although CSR does not believe these or other Johns Manville Finished
Product Claims are meritorious, given their large number; the risk of
adverse rulings, particularly in mass trial states; and the costs of
defending the claims, CSR in July 1995 and May, 1996, settled a total
of 17,056 West Virginia claims for US$6,329,900; in March, 1996,
settled 32,100 Texas claims for US$10,572,694; in April, 1996, settled
18,319 Mississippi claims for US$13,300,000, and in March and April
1997 and in August 1999 settled 14,735 Ohio claims for US$2,397,550.
CSR has continued to move to settle such claims where the prevailing
circumstances cause it to believe that it is commercially advantageous
to do so.
CSR has entered into a number of agreements with various claimants'
counsel pursuant to which the parties will attempt to resolve the
counsels' future claims on an agreed upon basis prior to litigation.
At March 31, 2002, there were approximately 2,271 asbestos claims
pending against CSR in the United States.
Insurance Issues
On March 3, 1995, in settlement of litigation commenced by CSR and for
the assumption by CSR of certain indemnity and other obligations, CSR
received an undissected lump sum payment of A$100 million in full and
final settlement of all present and future claims CSR has or may have
had against certain insurers issuing liability policies to it from 1955
to at least 1978.
Subsequent to the settlement of these coverage and damages claims, CSR
and its subsidiary Rinker Materials commenced litigation in the United
States District Court for the District of New Jersey against other
insurers that issued policies to CSR from approximately 1979 to 1986,
seeking, among other things, coverage for US asbestos claims against
them and damages. Some of the insurers then commenced their own
litigation against CSR and Rinker Materials in the Supreme Court of New
South Wales, seeking, among other things, a declaration that the
insurers have no obligation to provide any such coverage. The Supreme
Court of New South Wales issued a preliminary injunction barring CSR
and Rinker Materials from prosecuting the U.S. coverage suit without
further order of the Supreme Court of New South Wales.
CSR and Rinker Materials successfully appealed to the High Court of
Australia against that injunction. The High Court lifted the injunction
and ordered that the proceedings commenced in New South Wales be stayed
pending the outcome of the U.S. coverage suit.
On April 24, 2001, the New Jersey court denied motions brought by the
insurers to stay or dismiss the US action. Discovery is continuing and
no trial date has yet been set.
COMPANY SNAPSHOT
CSR Ltd (OTC: CSRLY)
9 Help St., Level 1
Chatswood, New South Wales 2067
Australia
Phone: +61-2-9235-8000
Fax: +61-2-9235-8044
Web site: http://www.csr.com.au
Employees : 16,057
Revenue : $3,725,600,000
Net Income (Loss) : $294,800,000
Assets : $4,240,900,000
Liabilities : $2,051,600,000
No. Of Asbestos Claims : *2,829
(For the year ended March 31, 2001)
(*As of March 31, 2002)
Description: CSR Ltd is a maker of construction and building materials.
It also refines sugar (about 10% of sales), but it plans to sell that
business. Most of its revenue comes from materials such as concrete
pipe, plasterboard, pre-mixed concrete, roof tile, cement, and clay
brick. CSR has also sold its timber operations and divested a large
chunk of its aluminum business. The company is focused on increasing
its presence in the United States, mainly through acquisitions such as
its planned purchase of aggregates producer Kiewit Materials Co. CSR
operates about 650 plants in Asia, Australia, New Zealand and North
America.
ASBESTOS ALERT: GPC Sees Lower Than $1 Billion Asbestos Costs
-------------------------------------------------------------
Georgia-Pacific Corp. reports that at December 31, 2001, it had either
settled, had dismissed or was in the process of settling a total of
approximately 235,000 asbestos claims. Substantially all of the amounts
it has paid to date for settled claims, and anticipates paying for
pending claims, have been covered by product liability insurance.
In the late fall of 2001, the company retained National Economic
Research Associates (NERA) and Peterson Consulting, nationally
recognized consultants in asbestos liability and insurance, to project
the amount, net of insurance, that the company would pay for its
asbestos-related liabilities and defense costs through 2011.
Based upon its analysis, NERA projected that the company's total,
undiscounted asbestos liabilities, including defense costs, over the
next 10 years will be less than $1 billion (including payments related
to the approximately 62,200 claims currently pending).
The company's asbestos liabilities relate primarily to joint systems
products manufactured by Bestwall Gypsum Co. that contained asbestos
fiber. Georgia-Pacific acquired Bestwall in 1965, and discontinued
using asbestos in the manufacture of these products in 1977. In
addition, Fort James Corporation, a wholly owned subsidiary of the
Georgia-Pacific, currently is defending approximately 1,000 asbestos
premises liability claims.
COMPANY SNAPSHOT
Georgia-Pacific Corp. (NYSE: GP)
133 Peachtree Street, N.E.,
Atlanta, Georgia 30303
Tel.: (404) 652-4000
Web site: http://www.metlife.com
Employees : 71,000
Revenues : $25,020,000,000
Net Income (Loss) : $(407,000,000)
Total Assets : $26,364,000,000
Total Liabilities : $21,459,000,000
Number of Asbestos claims : 62,200
(For the year ended December 29, 2001)
Description: Georgia-Pacific operates in four business segments: tissue
products and tableware; building products (including plywood, lumber,
wallboard); pulp and paper; and packaging. The corporation is in the
process of spinning off everything but building products into a
separate consumer products company. Georgia-Pacific used asbestos from
1965 to 1977 in joint compound and similar products used with its
drywall.
ASBESTOS ALERT: Bankrupt Grace Faces 65,656 Asbestos Cases
----------------------------------------------------------
W.R. Grace & Co. reports that it was a defendant in 65,656 asbestos-
related lawsuits on April 2, 2001, the date it filed for Chapter 11
bankruptcy. Sixteen of such lawsuits involve claims for property
damage, eight relating to Grace's former attic insulation product (one
of which has since been dismissed) and eight relating to a number of
former asbestos-containing products (two of which also involve the
attic insulation product). The remainder of such lawsuits involves
129,191 claims for bodily injury.
At year-end 2000, Grace was a defendant in 61,395 lawsuits, 15
involving claims for property damage, and the remainder involving
124,907 claims for bodily injury.
Through December 31, 2001, 141 asbestos property damage cases were
dismissed without payment of any damages or settlement amounts;
judgments were entered in favor of Grace in nine cases (excluding cases
settled following appeals of judgments in favor of Grace); judgments
were entered in favor of the plaintiffs in seven cases for a total of
$60.3 million (none of which is on appeal); and 207 property damage
cases were settled for a total of $696.8 million.
On April 2, 2001, Grace and 61 of its United States subsidiaries and
affiliates filed voluntary petitions for reorganization under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware.
The filing was made in response to a sharply increasing number of
asbestos-related bodily injury claims.
Prior to 2000, Grace was able to settle asbestos-related claims through
direct negotiations. The filing of claims had stabilized, and annual
cash flows were manageable and fairly predictable. In 2000, the
litigation environment changed with an unexpected 81% increase in
bodily injury claims, which Grace believes was due to a surge in
unmeritorious claims. Trends in claims filing and settlement demands
showed no signs of returning to historic levels and were exacerbated by
the Chapter 11 filings of several co-defendants in asbestos bodily
injury litigation. These trends greatly increased the risk that Grace
would not be able to resolve its pending and future asbestos claims
under the state court system.
Grace concluded that a federal court-supervised Chapter 11 filing
provides the best forum available to achieve predictability and
fairness in the claims settlement process. By filing under Chapter 11,
Grace expects to be able both to obtain a comprehensive resolution of
the claims against it and preserve the inherent value of its
businesses.
As a consequence of the filing, pending litigation against Grace is
generally stayed (subject to certain exceptions in the case of
governmental authorities), and no party may take any action to realize
its pre-petition claims except pursuant to order of the Bankruptcy
Court. Grace intends to address all of its pending and future asbestos-
related claims and all other pre-petition claims in a plan of
reorganization. The formulation and implementation of a plan of
reorganization could take a significant period of time. Since the
filing, all motions necessary to conduct normal business activities
have been approved by the Bankruptcy Court.
Purported Class Action
In February 2000 a purported class action lawsuit was filed in the U.S.
District Court for the Eastern District of Massachusetts against the
Company (Lindholm v. W. R. Grace & Co.) on behalf of all owners of
homes containing Zonolite(R) attic insulation, a product previously
sold by Grace that may contain trace amounts of asbestos. The action
seeks damages and equitable relief, including the removal, replacement
or disposal of all such insulation. Since Lindholm was filed, nine
additional purported class action lawsuits have been filed against
Grace in various state and federal courts asserting similar claims and
seeking damages similar to those in Lindholm. One of the purported
federal class actions has been consolidated with Lindholm. As a result
of the Chapter 11 filing, all of these cases have been transferred to
the U.S. Bankruptcy Court for the District of Delaware. While Grace has
not completed its investigation of the claims described in these
lawsuits, Grace believes that this product was and continues to be safe
for its intended purpose and poses little or no threat to human health.
At this time, Grace is not able to assess the extent of any possible
liability related to this matter.
Cases Dismissal
Cumulatively through April 2, 2001, 16,354 bodily injury lawsuits
involving 35,720 claims were dismissed without payment of any damages
or settlement amounts (primarily on the basis that Grace products were
not involved), and 55,489 lawsuits involving 163,698 claims were
disposed of for a total of $645.6 million.
Based on Grace's experience and trends in asbestos bodily injury
litigation, Grace has endeavored to reasonably forecast the number and
ultimate cost of all present and future bodily injury claims expected
to be asserted, based on measures governed by generally accepted
accounting principles relating to probable and estimable liabilities.
Grace has accrued $996.3 million at December 31, 2001 as its estimate
of the cost to resolve all asbestos-related bodily injury cases and
claims pending as well as those expected to be filed in the future, and
all property damage cases for which sufficient information is available
to form a reasonable estimate of the cost to resolve. This estimate has
been made based on historical facts and circumstances prior to April 2,
2001. However, due to the Chapter 11 filing and the uncertainties of
asbestos-related litigation, Grace's ultimate liability for asbestos-
related litigation could differ materially from the recorded liability.
Insurance Policies
Grace previously purchased insurance policies with respect to its
asbestos-related lawsuits and claims. Grace has settled with and has
been paid by all of its primary insurance carriers with respect to both
property damage and bodily injury cases and claims. Grace has also
settled with its excess insurance carriers that wrote policies
available for property damage cases; those settlements involve amounts
paid and to be paid to Grace. Grace believes that certain of these
settlements may cover attic insulation claims as well as other property
damage claims. In addition, Grace believes that additional coverage for
attic insulation claims may exist under excess insurance policies not
subject to settlement agreements. Grace has settled with excess
insurance carriers that wrote policies available for bodily injury
claims in layers of insurance that Grace believes may be reached based
on its current estimates. Insurance coverage for asbestos-related
liabilities has not been commercially available since 1985.
Pursuant to settlements with primary-level and excess-level insurance
carriers with respect to asbestos-related claims, Grace received
payments totaling $895.4 million prior to 1999, as well as payments
totaling $73.1 million in 1999, $85.6 million in 2000, and $78.8
million in 2001. Under certain settlements, Grace expects to receive
additional amounts from insurance carriers in the future and has
recorded a receivable of $293.4 million to reflect the amounts expected
to be recovered in the future, based on projected payments equal to the
amount of the recorded asbestos-related liability.
During 2000, the number of bodily injury claims made against Grace
increased significantly compared with 1999 and prior year claim levels,
with a total of 48,786 bodily injury claims being received in 2000,
versus 26,941 claims in 1999. This trend continued in the first quarter
of 2001, when Grace received 16,411 bodily injury claims. Also, costs
to resolve asbestos litigation were higher than expected for bodily
injury and certain property damage claims.
In addition, five significant codefendant companies in bodily injury
litigation had petitioned for reorganization under Chapter 11. These
developments and events caused an environment that increased the risk
of more claims being filed against Grace than previously projected,
with higher settlement demands and trial risks. These developments and
events also raised substantial doubt whether Grace would be able to
manage its asbestos liabilities over the long term under the existing
state court system. As a result, following a thorough review of the
strategic and operating issues associated with continuing to defend
asbestos litigation through the court system versus voluntarily seeking
a resolution of such litigation through reorganization under Chapter
11, Grace filed for protection under Chapter 11 on April 2, 2001.
Property Damage case activity for 2001 and 2000:
2001 2000
----- -----
Cases outstanding, beginning of year 15 11
New cases filed 1 8
Settlements (4)
Dismissals (1) -
-
Judgments -- -
-
Cases outstanding, end of year 15 15
Bodily injury claim activity for 2001 (through the Filing Date)
and 2000:
April 2, December 31,
2001 2000
-------- ------------
Claims outstanding, beginning of year 124,907 105,670
New claims 16,411 48,786
Settlements (11,841) (26,950)
Dismissals (286) (2,598)
Judgments -- (1)
Claims outstanding, end of period 129,191 124,907
The total asbestos-related liability balances as of December 31, 2001
and 2000 were $996.3 million and $1,105.9 million, respectively.
Grace adjusted its recorded insurance receivable in the fourth quarter
of 2000 by $85.6 million to reflect the additional amounts expected to
be recovered in respect of the adjusted asbestos-related liability. The
net amount of the adjustments recorded during the fourth quarter of
2000 ($208 million after insurance recovery) reflects adverse
experience in the latter part of 2000 versus certain underlying
assumptions used to estimate Grace's liability for asbestos-related
litigation. After the 2000 adjustment, Grace's recorded liability for
asbestos-related litigation was $1,105.9 million gross and $733.9
million net of insurance recovery.
Estimated Liability for Asbestos-Related Litigation
2001 2000
----- ----
Asbestos-related liability
expected to be satisfied
within one year $5,100,000 $178,400,000
Asbestos-related liability
expected to be satisfied
after one year $991,200,000 $927,500,000
Total asbestos-related
liability $996,300,000 $1,105,900,000
Asbestos Insurance
Grace previously purchased insurance policies with respect to its
asbestos-related lawsuits and claims. Grace has settled with and has
been paid by all of its primary insurance carriers with respect to both
property damage and bodily injury cases and claims. Grace has also
settled with its excess insurance carriers that wrote policies
available for property damage cases; those settlements involve amounts
paid and to be paid to Grace. Grace believes that certain of these
settlements may cover attic insulation claims as well as other property
damage claims. In addition, Grace believes that additional coverage for
attic insulation claims may exist under excess insurance policies not
subject to settlement agreements. Grace has settled with excess
insurance carriers that wrote policies available for bodily injury
claims in layers of insurance that Grace believes may be reached based
on its current estimates. Insurance coverage for asbestos-related
liabilities has not been commercially available since 1985.
The asbestos-related insurance asset represents amounts expected to be
received from carriers under settlement agreements for defense and
disposition costs to be paid by Grace. Estimated insurance
reimbursements are based on the recorded amount of the liability and
are considered by management to be collectible.
Activity in Grace's notes receivable from insurance carriers and
asbestos-related insurance receivable during 2001 and 2000:
Estimated Insurance Recovery on Asbestos-Related Liabilities
2001 2000
(In millions)
NOTES RECEIVABLE
Notes receivable from insurance
carriers, beginning of year, net of
discount of $0.2 (2000 - $0.8) $2.7 $5.3
Proceeds received under
asbestos-related insurance (2.9) (3.2)
settlements ........................
Current year amortization of discount. 0.2 0.6
--------------------------------------------------------------
Notes receivable from insurance
carriers, end of year, (2000 - net -- 2.7
of discount of $0.2)................
--------------------------------------------------------------
INSURANCE RECEIVABLE
Asbestos-related insurance
receivable, beginning of year ...... 369.3 366.1
Proceeds received under
asbestos-related insurance (75.9) (82.4)
settlements ........................
Increase in asbestos-related
insurance receivable ............... -- 85.6
--------------------------------------------------------------
Asbestos-related insurance
receivable, end of year ............ 293.4 369.3
--------------------------------------------------------------
Total amounts due from insurance
carriers............................ 293.4 372.0
Expected to be realized within one
year ............................... (9.7) (83.8)
--------------------------------------------------------------
Expected to be realized after one year
.............................. $283.7 $288.2
ASBESTOS ALERT: ConRail Faces 524 Asbestos Lawsuits
---------------------------------------------------
ConRail Inc. reports that it has been named as a defendant in lawsuits
filed by persons alleging:
(1) personal injury or death caused by exposure to asbestos in
connection with railroad employment;
(2) complete or partial loss of hearing caused by exposure to excessive
noise in the course of railroad employment;
(3) repetitive motion injury in connection with railroad employment;
and
(4) personal injury or death caused by exposure to deleterious
substances (mixed dusts, fumes, chemicals, etc.)
As of December 31, 1997, Conrail was a defendant in 524 pending
asbestos suits, 971 pending hearing loss suits, 2,857 repetitive motion
injury suits and 215 pending deleterious substance suits, and had
notice of 1,183 potential asbestosis claims, 1,265 potential hearing
loss claims, 587 potential repetitive motion injury claims and 24
deleterious substance claims.
COMPANY SNAPSHOT
ConRail Inc.
2001 Market St., 16th Fl.
Philadelphia, PA 19103
Phone: 215-209-2000
Fax: 215-209-4068
Web site: http://www.conrail.com
Employees : Unknown
Revenue : $903,000,000
Net Income (Loss) : $174,000,000
Assets : $8,082,000,000
Liabilities : $3,977,000,000
No. Of Asbestos Claims : 524
(For the year ended December 31, 2001)
Description: Conrail is the holding company for Consolidated
Rail, a freight railroad in the heavily industrialized
Northeast. Most of its former lines and facilities have been divided
between its joint owners, rail operators CSX (42%) and Norfolk Southern
(58%), following an agreement that took effect in 1999. Conrail
continues to manage and operate some lines and facilities in the
Philadelphia and Detroit metropolitan areas and in much of New Jersey.
To serve customers along those lines, both CSX and Norfolk Southern pay
a fee to Conrail for line access; Conrail acts as the local switching
and terminal management agent.
ASBESTOS ALERT: Cooper May Press Claims in Federal-Mogul Bankruptcy
-------------------------------------------------------------------
Cooper Industries Ltd is indemnified for liabilities of Abex by Federal
Mogul. From August 28, 1998 through December 31, 2001, a total of
75,152 Abex Claims were filed, of which 16,974 claims have been
resolved leaving 58,178 Abex Claims pending at December 31, 2001, that
are the responsibility of Federal-Mogul.
In October 1998, Cooper sold its Automotive Products business to
Federal-Mogul Corporation. These discontinued businesses (including the
Abex product line obtained from Pneumo-Abex Corporation in 1994) were
operated through subsidiary companies, and the stock of those
subsidiaries was sold to Federal-Mogul pursuant to a Purchase and Sale
Agreement dated August 17, 1998.
On October 1, 2001, Federal-Mogul and several of its affiliates filed a
Chapter 11 bankruptcy petition and indicated that Federal-Mogul may not
honor the indemnification obligations to Cooper. As of the date of this
filing, Federal-Mogul had not yet made a decision whether to reject the
1998 Agreement, which includes the indemnification to Cooper. If
Federal-Mogul rejects the 1998 Agreement, Cooper will be relieved of
its future obligations under the 1998 Agreement, including specific
indemnities relating to payment of taxes and certain obligations
regarding insurance for its former Automotive Products businesses. To
the extent Cooper is obligated to Pneumo for any asbestos-related
claims arising from the Abex product line, Cooper has rights, confirmed
by Pneumo, to significant insurance for such claims.
Since August 28, 1998, the average indemnity payment for resolved Abex
Claims was $908 million before insurance. A total of $25.5 million was
spent on defense costs for the period August 28, 1998 through December
31, 2001. Historically, existing insurance coverage has provided 50% to
80% of the total defense and indemnity payments for Abex Claims. Since
the October 1, 2001 bankruptcy filing by Federal-Mogul through December
31, 2001, a total of 3,541 Abex Claims have been filed.
With the assistance of independent advisors, Cooper has completed a
thorough analysis of its potential exposure for asbestos liabilities in
the event Federal-Mogul rejects the 1998 Agreement. At this time, the
manner in which this issue ultimately will be resolved is not known.
Based on Cooper's analysis of its contingent liability exposure
resulting from Federal-Mogul's bankruptcy, Cooper concluded that an
additional fourth-quarter 2001 discontinued-operations provision of $30
million after-tax, or $.32 per share, was appropriate to reflect the
potential net financial impact of this issue. This conclusion is based
on a review of the Abex claims history, existing insurance coverage,
the contractual indemnities and other facts determined to date.
Cooper is preserving its rights as a creditor for breach of Federal-
Mogul's indemnification to Cooper and its rights against all Federal-
Mogul subsidiaries. Cooper intends to take all actions to seek a
resolution of the indemnification issues and future handling of the
Abex-related claims within the Federal-Mogul bankruptcy proceedings.
COMPANY SNAPSHOT
Cooper Industries, Ltd. (NYSE: CBE)
600 Travis, Ste. 5800
Houston, TX 77002
Phone: 713-209-8400
Fax: 713-209-8995
http://www.cooperindustries.com
Revenues : $4,209,500,000
Net Income : $231,300,000
Total assets : $4,611,400,000
Total Liabilities : $2,588,200,000
Employees : 30,500
(For the year ended December 31, 2001)
Description: Cooper Industries, Ltd. makes electrical products, tools,
hardware, and metal support products. The company's electrical products
(more than 80% of sales) include electrical and circuit-protection
devices, residential and industrial lighting, and electrical power and
distribution products for use by utility companies. Cooper's tool
offerings include such venerable brands as Crescent wrenches and
pliers, Apex impact sockets, Plumb hammers, and Weller wielding
supplies. Cooper's metal support products (B-Line) include conduits and
cable trays.
ASBESTOS LITIGATION: Asbestos Leads ACandS to Seek Court Protection
-------------------------------------------------------------------
Deluged by asbestos personal-injury lawsuits, ACandS Inc. filed for
bankruptcy reorganization Monday.
The commercial- and industrial-insulation contractor filed for Chapter
11 bankruptcy in Wilmington, Del., to resolve more than 250,000 claims
seeking more than $1 billion in damages.
ACandS, based at 120 N. Lime St., had warned in April that bankruptcy
was "likely," due to the torrent of lawsuits.
The people filing the lawsuits typically allege their health was
damaged or imperiled decades ago from being at an ACandS work site,
where the company was installing asbestos insulation.
"Our objective is to move through this fairly rapidly," AcandS
president and general counsel James E. Hipolit said today. "Our hope is
the process will take significantly less than a year."
Mr. Hipolit said ACandS has been talking to unofficial representatives
of the "vast majority" of asbestos claimants since late last year, and
already has reached agreement with them on much of the reorganization
plan.
The bankruptcy process requires plans to be approved by claimants,
creditors and the court.
ACandS is the second Lancaster-based firm to file for bankruptcy due to
asbestos lawsuits. ACandS' former owner, Armstrong World Industries,
did so in 2000.
ACandS and Armstrong are among the 50-plus companies nationwide that
have been pushed into reorganization by asbestos lawsuits.
Unlike Armstrong, which continues to operate as usual, ACandS last year
transferred its day-to-day businesses and nearly all of its employees
to sister companies, which have assumed ACandS' operations.
ACandS cut back its own work force to a handful of employees who are
handling the asbestos issue and related insurance issues.
Several factors pushed ACandS in Chapter 11, the company said.
With many other asbestos-related firms filing for bankruptcy in the
past two years, claimants focused on firms that have not filed,
triggering a massive increase in the volume of claims against ACandS.
As a result, ACandS, previously a "minor" defendant because it only
installed asbestos materials made and sold by other firms, evolved into
a "target" defendant.
Not only did the volume of claims surge, so did the size of jury
awards, a situation that was worsened by the way courts in some states
tried asbestos cases, limiting ACandS' ability to present an effective
defense.
Another key factor was an ongoing dispute between ACandS and its
insurance carrier, Travelers. ACandS believes it's entitled to more
coverage; Travelers has stopped making payments to ACandS.
Due to the asbestos lawsuits, as well as a desire to regionalize its
contracting business, ACandS' current owner, Irex Corp., last year
transferred the company's operations to eight sister companies across
North America.
Irex, also based at 120 N. Lime St., has 45 employees here. The
bankruptcy filing will not affect the operations of the other Irex
subsidiaries, according to Hipolit.
ACandS was formed by Armstrong World Industries in 1958 as a subsidiary
named Armstrong Contracting and Supply Co. It became an independent
firm in 1969, later creating Irex as its parent firm.
ACandS installed insulation on piping, ductwork and equipment at power
plants, office buildings, refineries and other commercial and
industrial locations.
From its inception until 1974, some materials used by ACandS contained
asbestos, said Hipolit.
Under its reorganization plan, ACandS intends to create a trust that
would pay claims. The claims would be funded by the company's cash and
insurance proceeds.
The plan would be expected to resolve not just asbestos claims filed
against ACandS, but any asbestos-related issues involving Irex or other
Irex subsidiaries, said ACandS.
ASBESTOS LITIGATION: Lawmakers Weigh Asbestos-Claims Resolution
---------------------------------------------------------------
U.S. Senate lawmakers signaled that they are willing to consider
legislation to halt the growth of asbestos injury claims and a related
surge in corporate bankruptcies, the Washington Post reported.
Lawmakers such as Senator Patrick Leahy, a Vermont Democrat and
chairman of the Senate Judiciary Committee, indicated they would
support a limited bill to improve victims' chances of receiving fair
compensation, the newspaper said.
In the past several years, the number of asbestos claims has grown
rapidly, including tens of thousands of people who are not now
disabled, the newspaper aid.
The new claims have reduced payments from trusts, set up by companies
in bankruptcy protection, to as little as 5 cents on the dollar, and
plaintiffs are increasingly turning to still-solvent companies, forcing
them into bankruptcy, the newspaper said.
ASBESTOS LITIGATION: Asbestos Reserves Come Short By $120 Billion
-----------------------------------------------------------------
U.S. property-casualty insurance companies have an almost $120 billion
shortfall in reserves to pay claims after numerous asbestos claims and
a decade of poor underwriting, a study by Morgan Stanley analyst Alice
Schroeder shows.
The shortfall means that insurance rates will likely increase past some
analysts' estimates of 2004 and insurers will have to take charges to
boost reserves, the study said. The shortfall is equivalent to about 80
percent of the premiums commercial insurers collect each year.
"No matter how you size it up, the estimated deficiency is big, but we
are not predicting the onset of Armageddon," Schroeder, a property-
casualty insurance analyst, said.
Commercial insurers account for about 82 percent of the total
shortfall, while sellers of personal-lines insurance, make up 4.2
percent.
Schroeder said $64 billion is related to inadequate reserving from 1992
to 2001, $55 billion is from asbestos and other environmental reserves
and the remainder is from Sept. 11 losses that insurers haven't yet set
aside as reserves.
New Securities Fraud Cases
CONCORD EFS: Scott + Scott Commences Securities Suit in W.D. Tennessee
----------------------------------------------------------------------
Scott + Scott LLC filed recently a class action lawsuit in the United
States District Court for the Western District of Tennessee on behalf
of purchasers of the securities of Concord EFS, Inc. (Nasdaq: CEFT)
common stock during the period between October 30, 2001, and September
4, 2002.
The complaint charges Concord and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. Concord is an
electronic transaction processor.
The complaint alleges that during the Class Period, Concord and its top
officers issued false and misleading statements and concealed the truth
about the Company's results and business in order to allow Concord
stock to trade at artificially inflated levels.
Defendants repeatedly misrepresented the strength of Concord's
operating performance and its ability to post 30%-35% earnings per
share growth in order to prop up the price of Concord stock so that
defendants could complete acquisitions using Concord's stock as
currency and sell off 5.4 million of their own Concord shares at prices
as high $32.07 per share, for over $160 million in proceeds.
The truth, however was that the Company's business was not growing as
represented, but rather was suffering from increased costs and
declining margins. The "record" growth and profits defendants reported
were phony, resulting from the inclusion of nonoperating gains in its
results and the exclusion of operating expenses from its reported
results.
These manipulations allowed Concord to report favorable results despite
the fact that its business operations were not as strong as
represented. Then, on September 5, 2002, Concord shocked the market
with news that its CEO was stepping down and that its 2002 and 2003
earnings would be much lower than represented. On this news, Concord's
stock dropped to $12.60 per share. Concord's stock price has fallen
more than 60% from its Class Period high of more than $35 per share.
Plaintiff seeks to recover damages on behalf of all purchasers of
Concord common stock during the Class Period.
For more information, contact Scott + Scott attorneys Neil Rothstein
(nrothstein@scott-scott.com) or David R. Scott (drscott@scott-
scott.com) by Phone: 800/404-7770
ELECTRONIC DATA: Cohen Milstein Commences Securities Suit in E.D. Texas
-----------------------------------------------------------------------
Cohen, Milstein, Hausfeld & Toll, P.L.L.C. lodged lately a securities
fraud class action lawsuit in the U.S. District Court for the Eastern
District of Texas on behalf of its client and other persons who
purchased the securities of Electronic Data Systems Corp. (NYSE:EDS)
during the period from April 22, 2002 through September 24, 2002.
The suit names the Company, its Chief Executive Officer Richard H.
Brown and its Chief Financial Officer James E. Daley as defendants.
The Complaint 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 April 22, 2002 and September 24, 2002, thereby
artificially inflating the price of EDS securities.
According to the complaint, defendants, among others:
(i) failed to disclose that EDS's backbone revenue from its
Information Solutions IT outsourcing business is highly
susceptible to interruption due to terms in EDS's service
contracts that enable EDS customers to unilaterally suspend
discretionary spending on IT outsourcing,
(ii) affirmatively misrepresented the predictability of EDS's
future cash flows by touting the anticipated revenue that EDS
would supposedly receive from its IT outsourcing service
contracts with customers without disclosing that payments
under such contracts were not guaranteed, and
(iii) failed to disclose that EDS faced significant potential
threats to its liquidity if its share price fell because of
put-option and other obligations that ultimately obligated EDS
to in effect buy back a total of 5.44 million shares of EDS
stock at fixed prices averaging over $60.00 per share.
The complaint alleges that after Wall Street began to learn about the
foregoing on September 18, 2002 after executives of EDS warned that a
lack of new revenues would wipe out more than $0.60 per share of its Q3
earnings target of $0.74, the price of EDS stock plummeted to a 52-week
low of $20, down from a class period high of $72.45.
The complaint alleges that after further revelations regarding EDS's
put-option and other liabilities emerged in the wake of the foregoing
disclosures, EDS's share price tumbled even further, reaching an
intraday low of $10.09 on September 24, 2002.
For more details, contact Daniel S. Sommers, Esq. (dsommers@cmht.com),
R. Joseph Barton, Esq. (jbarton@cmht.com) or Mary Ann Fink
(mfink@cmht.com) by Phone: 888-240-0775 or 202-408-4600 by Fax:
202-408-4699 or by Mail: 1100 New York Avenue, NW, West Tower, Suite
500 Washington, DC 20005
ESS TECHNOLOGY: Scott + Scott Lodges Securities Fraud Suit in N.D. CA
---------------------------------------------------------------------
Scott + Scott LLC commenced recently a class action lawsuit in the
United States District Court for the Northern District of California on
behalf of purchasers of ESS Technology Inc. (Nasdaq: ESST) publicly
traded securities during the period between Jan. 23, 2002 and Sept. 12,
2002.
The complaint charges ESS Technology and certain of its officers and
directors with violations of the Securities Exchange Act of 1934. The
complaint alleges that defendants disseminated false and misleading
statements concerning the Company's operations and its prospects for
2002.
Taking advantage of the inflation in ESS stock, certain of ESS's
officers sold $1.8 million worth of their own ESS stock at artificially
inflated prices of as much as $25.78 per share, while the Company
itself sold $45.5 million worth of its own stock. Plaintiffs seek to
recover damages on behalf of all purchasers of ESS Technology publicly
traded securities during the Class Period.
For more information, contact Scott + Scott attorneys Neil Rothstein
(nrothstein@scott-scott.com) or David R. Scott (drscott@scott-
scott.com) by Phone: 800-404-7770
FLEMING COMPANIES: Schiffrin & Barroway Files Securities Suit in TX
-------------------------------------------------------------------
Schiffrin & Barroway, LLP commenced recently a class action suit
against Fleming Companies, Inc. (NYSE:FLM) for misleading investors
about its business and financial condition.
The complaint was filed in the U.S. District Court for the Eastern
District of Texas, Texarkana Division (502-CV-190). Plaintiff seeks
damages for violations of the federal securities laws on behalf of all
investors who purchased Fleming Companies, Inc. securities between
February 27, 2002 and July 30, 2002.
The complaint alleges that the Texas-based Fleming Companies, Inc.,
beginning in early 2002, the issued numerous positive statements
regarding Fleming's "price-impact" retail supermarket division. These
statements were made despite the fact that the defendants knew, or
recklessly disregarded, that the performance of Fleming's "price-
impact" retail supermarket division was, in the words of the
defendants, "disappointing."
These statements falsely portrayed Fleming's business prospects and
artificially inflated and maintained the price of Fleming common stock.
The defendants capitalized on their false and misleading statements by:
(1) lowering the interest rate and extending the maturity on $250
million of Fleming's debt;
(2) raising over $155 million through the June 13, 2002 sale of 8
million shares of Fleming common stock at $19.40 per share;
(3) raising an additional $200 million through the June 13, 2002
sale of Fleming Notes due 2010; and
(4) using the proceeds of the June 13, 2002 securities sales to
complete the purchase of Core-Mark International, Inc. and
Head Distributing for $330 million in cash -- acquisitions
described by the defendants as "key" to Fleming's
implementation of its strategic transformation into an
efficient, national, multi-tier supply chain for consumer
packaged goods.
Then, approximately six weeks after defendants sold $355 million worth
of Fleming securities, Fleming announced after the close of trading on
July 30, 2002 in an abrupt departure to the repeated and positive
statements made by the defendants during the Class Period, that its
"price-impact" retail supermarket division was not only performing
poorly, but performing so poorly that Fleming was considering
abandoning this line of business entirely.
The price of Fleming common stock dramatically declined on this
announcement, falling from $15.21 on July 30, 2002 to $13.75 on July
31, 2002, on huge trading volume of 3.9 million shares, and continued
to decline over the next two heavy trading days to a 52-week low of
$10.76 on August 2, 2002. Since then, the price of Fleming common stock
has never recovered, and currently trades well below the $19.40 price
at which Fleming sold 8 million shares to unsuspecting investors on
June 13, 2002.
For more information, contact Schiffrin & Barroway through Marc A.
Topaz, Esq. or Stuart L. Berman, Esq. by Phone: 888-299-7706 (toll
free) or 610-822-2221 by Fax: 610-822-0002 by e-mail:
info@sbclasslaw.com or visit the firm's Web site:
http://www.sbclasslaw.com
SALOMON SMITH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
---------------------------------------------------------------------
Schiffrin & Barroway, LLP commenced recently a class action suit
against Level 3 Communications, Inc. (Nasdaq:LVLT) for misleading
investors about its business and financial condition.
The complaint was filed in the U.S. District Court for the Southern
District of New York (02-CV-7052). Plaintiff seeks damages for
violations of the federal securities laws on behalf of all investors
who purchased Level 3 Communications, Inc. securities between January
4, 1999 and June 18, 2001.
The complaint alleges that Salomon Smith Barney Inc., Jack Grubman and
Morgan Stanley Dean Witter & Co., Inc. urged investors to purchase
Level 3 stock when they knew or should have known that such purchases
were not a good investment.
Specifically, the complaint alleges that defendants issued "Buy"
recommendations about Level 3 without any rational economic basis;
failed to disclose that they were issuing "Buy" recommendations to
obtain investment banking business; and concealed significant, material
conflicts of interest that prevented them from providing independent
objective analysis.
For more information, contact Schiffrin & Barroway through Marc A.
Topaz, Esq. or Stuart L. Berman, Esq. by Phone: 888-299-7706 (toll
free) or 610-822-2221 by Fax: 610-822-0002 by e-mail:
info@sbclasslaw.com or visit the firm's Web site:
http://www.sbclasslaw.com
VODAFONE GROUP: Scott + Scott Commences Securities Suit in S.D. NY
------------------------------------------------------------------
Scott + Scott LLC filed recently a class action lawsuit on behalf of
purchasers of the securities of Vodafone Group plc (NYSE:VOD) between
March 7, 2001 and May 28, 2002, inclusive. The suit is pending in the
U.S. District Court for the Southern District of New York.
The Complaint alleges that defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market between March 7, 2001 and May 28, 2002, thereby artificially
inflating the price of Vodafone securities.
The complaint alleges that, throughout the Class Period, defendants
issued numerous statements, which highlighted the Company's strong
financial performance and growth and reassured investors that Vodafone
maintained a "solid balance sheet."
As alleged in the complaint, these statements were materially false and
misleading because they failed to disclose and/or misrepresented the
following adverse facts, among others:
(a) that the Company was improperly delaying the write-down of
billions of dollars of goodwill and impaired assets, thereby
artificially inflating the Company's reported financial
results. In fact, despite defendants' claims that the Company
had a "solid balance sheet," when the Company finally did
write-off the value of its impaired assets and goodwill,
Vodafone obliterated all profits for 2001 and 2002;
(b) that the Company had grossly overpaid for the numerous
acquisitions it had made in prior years; and
(c) based on the foregoing, defendants' representation that the
Company would continue to maintain its "record of delivering
outstanding performance" was lacking in a reasonable basis.
On May 28, 2002, the last day of the Class Period, the Company
announced its financial results for the fiscal year 2002, the period
ending March 31, 2002, which included massive write downs for goodwill
of approximately GBP13.47 billion and exceptional items and operating
costs of GBP5.4 billion and exceptional non-operating costs of GBP865
million. At the end of the Class Period, the price of Vodafone ADRs
closed at $15.19 per ADR, as compared to a Class Period high of $33.26
per ADR.
For more details, contact Scott + Scott, LLC through Neil Rothstein by
Phone: 800/404-7770 or by e-mail: nrothstein@scott-scott.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-
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Information contained herein is obtained from sources believed to be
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