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C L A S S A C T I O N R E P O R T E R
Wednesday, October 16, 2002, Vol. 4, No. 205
Headlines
3COM CORPORATION: CA Court Grants Demurrer To Suit, With Leave To Amend
BULLDOGS RUGBY: Faces Possible Fraud Suit Due To Salary Cap Scandal
CITIGROUP INC.: Faces Lawsuit Over Close Relationship With Worldcom
CUTTER & BUCK: False Earnings Reports Alleged in Securities Suits in WA
CUTTER & BUCK: Agrees To Settle Saipan Workers Suit V. Garment Firms
FIRESTONE STEELTEX: Attorneys To Send Warnings About Defective Tires
HOLOCAUST LITIGATION: Journalist Reveals Link Between IBM and Auschwitz
MENORAH GARDENS: FL State Agency Reveals Identity of Discarded Body
NANOPHASE TECHNOLOGIES: Fighting Securities Suit Allegations in N.D. IL
OREGON: Portland School District Faces Lawsuit For Fired Custodians
POLO RALPH: Salespersons Commence Lawsuit Over "Wardrobing" Practice
RURAL METRO: Plaintiffs Move For Class Certification in Securities Suit
SAIPAN WORKERS: Garment Firms Expresses Support for Suit Settlement
STEWART TITLE: Reaches Settlement in CA Suit Against Title Companies
TYSON FOODS: Moves For Arbitration of Swine Producers Suit in Arkansas
WILLIAMS COMPANIES: Charged by Ex-Workers' of Inflating Profits in Suit
*A Year After: Powerhouse Enron Corporation Now a Shadow of Former Self
New Securities Fraud Cases
AVISTA CORPORATION: Cauley Geller Commences Securities Suit in E.D. WA
AVISTA CORPORATION: Schiffrin & Barroway Lodges Securities Suit in WA
KPNQWEST N.V.: Marcus Perres Commences Securities Fraud Suit in S.D. NY
MERRILL LYNCH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
MERRILL LYNCH: Finkelstein Thompson Commences Securities Suit in NY
QUADRAMED CORPORATION: Cauley Geller Commences Securities Suit in CA
SALOMON SMITH: Rabin & Peckel Commences Securities Fraud Suit in NY
SALOMON SMITH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
SCHERING-PLOUGH: Brian Felgoise Files Securities Suit in New Jersey
*********
3COM CORPORATION: CA Court Grants Demurrer To Suit, With Leave To Amend
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California Superior Court granted 3Com Corporation's demurrer to the
amended shareholder derivative and class action pending against it and
its directors and officers.
The suit alleges that the Company's directors and officers made
misrepresentations and/or omissions and breached their fiduciary duties
to the Company in connection with the adjustment of employee and
director stock options in connection with the separation of 3Com and
Palm Inc. It is unclear whether the plaintiff is seeking recovery
from the Company or if the Company was named solely as a nominal
defendant, against whom the plaintiff seeks no recovery.
On November 29, 2001, the court granted the defendants' demurrer with
leave to amend. The plaintiff then amended the suit, to which
defendants again demurred. On July 9, 2002, the Superior Court again
granted the defendants' demurrer to the suit with leave to amend.
BULLDOGS RUGBY: Faces Possible Fraud Suit Due To Salary Cap Scandal
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The Bulldogs Rugby League Club faces a possible class action, charging
it with misleading and deceptive conduct and breach duty, ABC News
Online reports. Disgruntled punters are considering the suit, when
they lost money after the club revealed massive salary cap breaches.
The punters had waged money either on the Bulldogs winning the minor
premiership or on any team, other than Canterbury, winning the wooden
spoon. However, after the club revealed their salary cap violations,
the National Rugby League stepped in and stripped the Bulldogs of 37
competition points. This resulted in the club ending up at the bottom
of the competition standings.
The punters want the court to consider allowing a class action to
proceed over money lost when the club was relegated to last place. The
Bulldogs want the court to strike out the application. The case returns
to court on November 14.
CITIGROUP INC.: Faces Lawsuit Over Close Relationship With Worldcom
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Citigroup, Inc. faces a shareholder lawsuit filed in the United States
District Court in Manhattan, New York over its relationship with fallen
telecommunications giant Worldcom, Inc, the Associated Press reports.
The suit, filed by state Comptroller, H. Carl McCall, alleges Citigroup
officials turned a blind eye to the Company's fraudulent records, in
order to protect multi-million dollar loans to the Company's former
chief executive officer Bernard Ebbers. Mr. McCall is the sole trustee
of the state and local government pension fund, which was appointed
lead plaintiff in a securities class action over the collapse of
Worldcom stock.
The suit's allegations refer to the US$679 million in loans made by
Citigroup subsidiary Travelers Insurance to a company controlled by Mr.
Ebbers called Joshua Timberlands. Joshua Timberlands allegedly was
nothing more than a shell corporation established to hide the
connection to Mr. Ebbers. Mr. Ebbers allegedly used the money to buy
460,000 acres in Alabama, Tennessee and Mississippi for his personal
use, the lawsuit charges.
The loans were secured by WorldCom stock - giving Citigroup a huge
financial incentive to keep the share price high, according to the
lawsuit, the Associated Press reports. However, the Company started
losing money in late 2001, and officials started to conceal over $7
billion in its books to make the company appear profitable.
"This scheme was simple to perpetrate and even easier to discover," the
lawsuit charges, "had the gatekeepers for the investing public - the
auditors, underwriters and ostensibly independent research analysts -
not averted their eyes."
The Company's accounting fraud increased as 2002 came, but a top
analyst at Citigroup's Salomon Smith Barney unit continued to classify
WorldCom as a great investment. "Citigroup, Salomon's parent, was on
the hook for huge loans, whose value rode on the strength of WorldCom's
stock - powerful incentive to make sure public perception of the
company, and its share price, did not suffer," according to the
complaint.
"This web of wrongdoing is astounding and deeply disturbing," Mr.
McCall told AP. "Participants in these schemes appear to lack any
ethical compass and are guided only by greed."
Mr. Ebbers' civil attorney, David Kaufman, told AP, "I haven't even
seen the complaint, so I'm not going to comment." Citigroup's offices
were closed for the Columbus Day holiday and a message left for a
spokeswoman was not immediately returned.
CUTTER & BUCK: False Earnings Reports Alleged in Securities Suits in WA
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Cutter & Buck, Inc. faces several securities class action pending in
the United States District Court for the Western District of
Washington, on behalf of persons who purchased the Company's common
stock from June 23,2000 to August 12, 2002. The suits name as
defendants the Company and:
(1) Harvey N. Jones and
(2) Stephen S. Lowber
The suits uniformly alleges liability under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder on the grounds that the defendants caused the Company to
falsely report its results for fiscal years 2000-2002 through improper
revenue recognition.
Management cannot give any assurance relating to the final outcome of
the litigation
CUTTER & BUCK: Agrees To Settle Saipan Workers Suit V. Garment Firms
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Cutter & Buck, Inc. has agreed to settle a class action relating to
labor issues in Saipan against it and several other garment
manufacturers.
According to an earlier Class Action Reporter story, two similar suits
were filed, one in San Francisco Superior Court and the other in the
United States District Court in Hawaii. The suits generally alleged
that the Company and other garment manufacturers and retailers
asserting claims that the Saipan factories engaged in unlawful
practices relating to the recruitment and employment of foreign
workers.
The defendants include both companies selling goods purchased from
factories located on the island of Saipan and the factories themselves.
This complaint alleges claims under Racketeer Influenced and Corrupt
Organizations (RICO) Act, the Alien Tort Claims Act, federal anti-
peonage and indentured servitude statutes and state and international
law.
The Company has entered into a settlement of the claims against it,
which is still subject to court approval. The court granted
preliminary approval of the settlement in May 2002, and a hearing as to
whether to grant final approval of the settlement is currently
scheduled to occur on January 23, 2003.
FIRESTONE STEELTEX: Attorneys To Send Warnings About Defective Tires
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Attorneys who filed the national class action against
Bridgestone/Firestone, Inc. and Bridgestone Corporation for the alleged
defects in the Firestone Steeltex tires series are in the process of
issuing warnings to government entities nationally and internationally
as well as consumers and retail outlets that sell the tires.
Additionally, evidence of tire defects is being collected, which will
be presented to the US Department of Transportation (DOT) in mid-
November.
According to Joseph L. Lisoni, of the Pasadena, CA-based law firm of
Lisoni & Lisoni, which filed the lawsuit in conjunction with The Law
Offices of Steven E. Weinberger, the primary goal of the lawsuit is to
force Bridgestone/Firestone to recall the Steeltex R4S, R4SII and A/T
tire brands. If that fails, he stressed the DOT's National Highway
Traffic Safety Administration (NHTSA) must reopen its investigation of
the tire series, which it suspended on April 9, 2002.
Noting that Bridgestone/Firestone has adamantly refused to recall the
tire series and that the NHTSA shows no signs of reopening the
investigation, Mr. Lisoni reported that a major effort has been
undertaken to warn Steeltex tire owners and retailers of the tires of
the alleged defects as well as government officials and entities that
have responsibility for public safety.
Mr. Lisoni remarked, "As the litigation process can be long, we do not
want to sit idly by while people whose vehicular and personal safety
depends on these tires may be severely injured on any given day. We
are receiving reports on a daily basis from people who have experienced
defects, accidents and injuries from damaged Steeltex tires. It is
clear Firestone won't initiate a recall and the NHTSA wants more
evidence to warrant reopening its investigation. This we intend to
give them."
When the class action was filed on August 13, 2002, Mr. Lisoni promised
to deliver sufficient evidence to reopen the government investigation
in 90 days. In a September 5, 2000 letter to US Secretary of
Transportation Norman Y. Mineta and Dr. Jeffrey W. Runge, NHTSA
Administrator, lawsuit attorneys urged the NHTSA to reopen its
investigation and barring that, said that they would deliver the
complaints, supporting documentation and defective tires they had
amassed to the NHTSA in Washington, D.C. on November 14.
Mr. Lisoni reported that attorneys have sent letters to over 50,000
owners of Steeltex tires warning them of potential defects in the tires
and requesting information on any problems. As a result, attorneys
have received a steady stream of telephone calls, letters and e-mails
from citizens all over the country reporting defects, accidents and
injuries. By November 14, "we expect to present truckloads of
documentation and defective tires to the NHTSA," he pointed out.
As to warning government entities and seeking their assistance, Mr.
Lisoni said letters were mailed to the attorneys general of all 50
states and many have responded, indicating they would have their
Departments of Transportation investigate the situation. Letters were
also sent to the United Nations representatives of many foreign
nations. As many Steeltex tires are on new and old vehicles that go
overseas, it was important that they be aware of the potential for
defects. He added, "At least two deaths have been linked to a
Firestone Steeltex R4S tire manufactured in Mexico."
Mr. Lisoni reported a major effort was initiated to alert retail
outlets that sold Steeltex tires of the potential serious consequences
to public safety should the tires they sell be defective as well as the
legal ramifications to the stores themselves. The stores and their
sales people were advised that they "may be held liable for any
property damage or personal injury which results from their failure if
you don't warn the customer of the known or suspected problems with the
subject tire."
According to Mr. Lisoni, 847 outlets of Sears received the letters as
well as 480 Big O tire stores, 600 Firestone dealers, over 600 Pep Boys
stores, and over 800 independent discount tire stores. While some
individual contacts from the stores were received by the attorneys, he
said that responses mainly came from legal counsel for the chains.
Sears, Pep Boys and Firestone all requested the attorneys to "cease and
desist" from contacting their stores. "We believe the message got
across to those interacting with the public and we hope it will have
some positive effect on a one-on-one basis," he emphasized.
For more information, contact Joseph J. Lisoni by Phone: 626-440-1333
by E-mail: lisoni@earthlaink.net or visit the Website:
http://www.firestonesteeltexclassaction.com.
HOLOCAUST LITIGATION: Journalist Reveals Link Between IBM and Auschwitz
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Journalist Edwin Black has built a case against IBM Corporation, saying
he has discovered role the Company's technology played in assisting the
Nazis' "Final Solution" for Europe's Jews, the Jewish Telegraph Agency
reports. Until now, there had been no direct link to Auschwitz, the
most infamous concentration camp and killing center.
A recent discover, however, showed that IBM-made Hollerith equipment,
such as punch-card machines, sorters and tabulators, were used in
Auschwitz's slave labor section. Auschwitz researchers told Mr. Black
the IBM machines were used to identify people with certain skills,
primarily those needed for construction of buildings in the part of the
camp complex known as Auschwitz II, the JTA reports.
A Company spokeswoman says it has been known for decades that the Nazis
used the company's technology, however Mr. Black, in an update to his
book "IBM and the Holocaust," argues that the new finding is
significant. "The infamous Auschwitz tattoo began as an IBM number,"
he wrote.
In 1943, camp prisoners were given five-digit Hollerith numbers, which
later were tattooed on their forearms. The numbers were intended to
track living inmates, but with so many prisoners dying in the camp, a
different, Auschwitz-specific identification system was used later, the
JTA states. With the use of IBM technology, Mr. Black has argued,
Hitler was able "to automate his persecution of the Jews."
Nazi Germany became IBM's most important customer outside the United
States, Mr. Black argues. IBM and the Nazis jointly designed - and IBM
produced - technological solutions to help exterminate Jews and other
enemies of the Nazi regime, he says.
"The Nazis were efficient, but they used American innovation," Black
said.
IBM says it "categorically condemns any actions" which aided the Nazis.
"The Nazi regime used equipment manufactured by IBM's German
subsidiary; that has been well-known for decades," said Carol Makovich,
a spokeswoman for IBM.
A class-action lawsuit against IBM for its aid to the Nazis was
withdrawn last year following German complaints that the lawsuit
impeded restitution payments to Holocaust victims.
MENORAH GARDENS: FL State Agency Reveals Identity of Discarded Body
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The Florida Division of Law Enforcement (FDEL) said that DNA testing on
remains found in the woods next to Menorah Gardens confirmed that they
belonged to someone who was buried there about 20 years ago, and whose
body was later removed to make way for another casket, the Florida Sun-
Sentinel reports.
This is the first conclusive evidence of the charges against Menorah
Gardens in the ongoing trial for the class action filed on behalf of an
estimated 1,400 people who had relatives buried in the cemetery. In
November 2001, federal investigators discovered crushed burial vaults,
and human remains dumped in the woods near the cemetery grounds.
This led to the filing of the suit, which alleges that the Company dug
and dumped dead bodies in the woods, buried them in wrong graves or
buried them in vaults on top or each other, instead of side by side as
the families requested, according to an earlier Class Action Reporter
story.
The DNA tests confirmed that the remains belonged to Col. Hyman Cohen,
based on DNA taken from his sister. Gravediggers have testified that
Mr. Cohen, who was buried next to his wife, was dug up with a backhoe
to make room for another man's wife, according to an AP report. His
remains were found in a 50-square-acre which the FDLE searched in
April.
"Obviously, my sister and I are both pretty angry about the whole
thing," Sheldon Cohen, Col. Cohen's son, told AP after the DNA results
were announced in court. "It's all about money, at least on their
part."
FDEL legal adviser Jackie Boswell said the state is still awaiting
results of tests performed on the other bones in the area. James Born,
the FDLE supervisor in Fort Lauderdale, said he could not say how many
sets of remains were found there due to the ongoing criminal
investigation. "We're not talking about a mass grave," he said.
The Company maintains the incident was isolated and there was no mass
desecration of graves, AP reports.
NANOPHASE TECHNOLOGIES: Fighting Securities Suit Allegations in N.D. IL
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Nanophase Technologies Corporation announced that it is determined to
vigorously contest a pending class action filed against it, several of
its officers and one of its directors. The initial complaint, filed in
November 2001 by an individual who bought 200 shares of the Company's
common stock on October 11, 2001, was expanded into a 40-page amended
complaint filed in March 2002.
The amended complaint alleges that defendants made certain supposedly
fraudulent misrepresentations between April 5, 2001 and October 24,
2001 concerning both the Company's relationship with Celox, a British
company who purchased a single order of nanocrystalline materials from
the Company, and the Company's booking of revenue from that order.
In April 2002, the defendants moved to dismiss the amended complaint on
grounds that the plaintiff had not sufficiently pleaded his purported
claims for defendants' supposed violation of the Federal Securities
Exchange Act of 1934.
On October 9, 2002, the United States District Court for the Northern
District of Illinois denied defendants' motion, under the legal
standard applicable to this type of motion, which requires the court to
"assume all facts in the complaint to be true, construe the allegations
liberally, and view the allegations in a light most favorable to the
plaintiff." Under this standard, the Court made clear that it was
deciding only "whether the plaintiff has stated a claim, not whether
the plaintiff will prevail on the merits."
Joseph Cross, the Company's president and CEO, stated, "We recognize
the unfortunate shadow of suspicion cast on all public companies by a
few huge corporations' highly publicized wrongdoing. We also recognize
that the climate created by such suspicion makes it even more difficult
for courts to dismiss lawsuits without first hearing any evidence. We
believe that the Company handled all matters in this situation with
total integrity and in complete compliance with accounting standards
and reporting requirements, which has been affirmed by our legal
counsel and external auditor."
He continued, "Nanophase firmly believes that as this cases progresses,
the evidence will show that the plaintiff's claims are entirely without
merit. Accordingly, Nanophase is resolved both to vigorously contest
the plaintiff's supposed claims and to prevent such groundless
allegations from disturbing the Company's ongoing technological and
business developments."
OREGON: Portland School District Faces Lawsuit For Fired Custodians
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The Portland City School District faces a class action filed in
Multnomah County Circuit Court by nearly one-third of the custodians
axed by the district last summer, when it outsourced cleaning duties,
cleanfax.com reports.
The suit alleges that state law gives a civil service board
jurisdiction over the hiring and firing of custodians, the Portland
Oregonian reports. The civil service board, which was created by the
Legislature, ruled earlier this summer that the school district
unlawfully terminated one group of custodians, but a judge upheld the
layoffs.
It's the second lawsuit that challenges the legality of the mass
termination, which the schools implemented in an effort to save
millions and help overcome budget shortfall, according to cleanfax.com.
A lawsuit filed in July on behalf of Portland parents contends that the
contract workers hired to replace custodians would place children in
jeopardy, The Oregonian reported.
POLO RALPH: Salespersons Commence Lawsuit Over "Wardrobing" Practice
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Prominent clothes retailer Polo Ralph Lauren (RL) faces a class action
filed by its sales staff in San Francisco court, relating to the
alleged widespread industry practice called "wardrobing" or requiring
employees to purchase and wear the same brand of clothes that they
sell, Reuters reports.
The suit alleges that the Company's wardrobe requirements violate
California laws requiring employers to pay for "distinctive" uniforms
employees must wear on the job. The suit further asserts that the
Company required such purchases and inspected its sales team to ensure
they were wearing the latest fashions.
The suit said that not only did Polo require such purchases, sometimes
even deducting the cost of clothing as a "payroll advance" from
employee paychecks, but it also inspected its sales team to ensure they
are wearing the latest fashions.
Lead plaintiff Toni Young said that the practice has been a nightmare
for her and other sales staff, as they were required to spend hundreds
of their own money to buy Polo products, just to fit the Company's
brand image.
Ms. Young alleges she has spent more than US$35,000 on Polo Ralph
Lauren clothing and accessories since joining the Company in 1997. She
estimates that some $7,000 out of a total salary of $22,000 is required
just to comply with the practice.
"We are forced to buy the top of the line Ralph Lauren pieces, that can
range from $995 to $3,000 for a jacket. That's a pretty penny," Ms.
Young told Reuters. "I didn't find out about this until well after I
started . it's pretty much sprung on all employees. They tell you at
the last minute." Ms. Young, who is African American, said the Company
had treated her badly and has also sued for alleged racial
discrimination.
A spokesman for the Company was not immediately available for comment,
Reuters states.
RURAL METRO: Plaintiffs Move For Class Certification in Securities Suit
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Decision for class certification for the securities suits pending
against Rural/Metro Corporation is not expected until February 2003.
Two suits were initially filed against the Company and:
(1) Warren S. Rustand, former Chairman of the Board and Chief
Executive Officer,
(2) James H. Bolin, former Vice Chairman of the Board, and
(3) Robert E. Ramsey, Jr., former Executive Vice President and
former Director
One of the suits was filed in Pima County, Arizona Superior Court and
the other was filed in the United States District Court for the
District of Arizona. The two suits, which contain virtually identical
allegations, were brought on behalf of persons who purchased the
Company's publicly traded securities including its common stock between
April 28, 1997 and June 11, 1998.
The state court suit seeks unspecified damages under the Arizona
Securities Act, the Arizona Consumer Fraud Act, and under Arizona
common law fraud, while the federal suit seeks unspecified damages
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as amended.
The complaints in both actions allege that between April 28, 1997 and
June 11, 1998, the defendants issued certain false and misleading
statements regarding certain aspects of the Company's financial status
and that these statements allegedly caused the Company's common stock
to be traded at artificially inflated prices.
The complaints also allege that Mr. Bolin and Mr. Ramsey sold stock
during this period, allegedly taking advantage of inside information
that the stock prices were artificially inflated.
In May 1999, the Arizona state court granted the Company's request for
a stay of the state action until the federal action is finally
resolved. The Company and the individual defendants then moved to
dismiss the federal action.
In January 2001, the federal court granted the motion to dismiss, but
granted the plaintiffs leave to replead. In March 2001, the plaintiffs
filed a second amended complaint, which the Company and the individual
defendants moved to dismiss.
In March 2002, the court granted the motions to dismiss of Mr. Ramsey
and Mr. Bolin with leave to replead and denied the motions to dismiss
of Mr. Rustand and the Company. The result is that Mr. Ramsey and Mr.
Bolin have been dismissed from the federal suit although the court has
permitted plaintiffs leave to file another complaint against those
individuals. The Company and Mr. Rustand remain defendants.
The parties have commenced discovery. During discovery, the parties
conduct investigation through formal processes such as depositions,
subpoenas and requests for production of documents. This phase is
currently expected to run through early November 2003. In addition,
plaintiffs have moved to certify the class in the federal suit. A
decision on class certification is not expected before February 2003.
SAIPAN WORKERS: Garment Firms Expresses Support for Suit Settlement
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The Saipan Garment Manufacturers Association has reiterated its
commitment to workplace safety as it expressed pleasure over the recent
settlement reached in the class actions before the US District Court,
the Saipan Tribune reports.
Two suits were filed against several garment manufacturers and
retailers who had factories in Saipan, alleging that their workers
worked in substandard conditions, and were deprived of what was due to
them. Several companies later reached a settlement that did not
involve an admission of guilt on the part of the defendants and would
require court approval, SGMA executive director Richard A. Pierce
pointed out.
"I would echo the remarks of a lead attorney for Milberg & Weiss, that
these settlements open a new chapter in Saipan, for workers and
factories alike," Mr. Pierce told the Saipan Tribune. "We are
delighted with the outcome and look forward to swift court approval."
Mr. Pierce said SGMA abhors labor practices in locations where there
are no safeguards for factory employees, "and this is why we welcome
any oversight of our factories, and why we have installed our own
affirmative plans for oversight.We have concentrated on workplace
safety, and we have been successful. The US Department of Labor-
Occupational Safety & Health Administration has given the SGMA
membership excellent reports on our factory's workers' safety and work
environment."
STEWART TITLE: Reaches Settlement in CA Suit Against Title Companies
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Stewart Title of California reached its settlement of a class action
jointly brought by the California Attorney General and the State
Controller against all title insurers doing business in California.
The Company is among the first major title companies in California to
finalize a settlement with the Attorney General.
The lawsuit, which was begun in May 1999, sought to recover millions of
dollars in allegedly unearned fees collected by many title companies,
as well as interest and other economic benefits earned on escrow
deposits.
Under the terms of the settlement, the Company has agreed to pay $2.425
million in cash to a fund to reimburse certain of its past customers,
either in the form of automatic payments or in response to submitted
claims. As part of the settlement, the Company has modified its
collection of certain fees and streamlined the prompt delivery of funds
from escrows. The total amount of the settlement with all the title
insurers is $50 million.
"We are pleased to be among the very first California title companies
to enter into a settlement with the State Attorney General," said Allan
Wasserman, president, Stewart Title of California. "It is our goal to
make certain that as much of the settlement fund is returned to
consumers as quickly as possible."
"The settlement is the product of many months of cooperative meetings
and discussions between the company and state lawyers. We believe it
is important that title companies doing business in California
cooperate with regulators to ensure that the interests of escrow
customers remain protected. Stewart Title will work to do this and at
the same time remain competitive," added Mr. Wasserman.
The complaint against the title companies also included claims by the
State Controller to recover money left in dormant escrow accounts.
Stewart is not paying any money to the Controller under the terms of
the settlement.
TYSON FOODS: Moves For Arbitration of Swine Producers Suit in Arkansas
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Tyson Foods, Inc. filed a motion for arbitration of a class action
filed by Arkansas swine producers, over the Company's plans of shutting
down its pork operations, the Hope Star reports. The motion was filed
in Pope County Circuit Court.
"We believe arbitration is typically a quicker, less expensive forum
for parties to achieve resolution of disputes by submitting
controversies to an informed, objective third party," senior litigation
counsel Ruth Ann Wisener said in a statement after the filing.
However, local swine producers assert that they have not been notified
of the motion. The Company also asked the court to appoint an arbiter
under the provisions of existing contracts, but local producers say
they were not aware of such a clause in their contracts.
"Bob and I don't have an arbitration clause in our old contract," Debra
Fisher of Spring Hill told the Hope Star. "We haven't had much contact
with them in the last couple of weeks."
Ms. Fisher said the Company has continued to supply feed and some
requested supplies to their operation, but she is uncertain what will
happen after an Oct. 15 deadline under which Tyson's offer for partial
payment on inventory expires. She said the company's offer of a
partial shut-down cost payment of about $27,000 is insufficient to
cover costs that can average as much as $50,000 to close down waste
treatment lagoons on swine farms, the Hope Star reports.
"That's not a total shut down cost; it's just a partial payment if you
shut down," she said.
WILLIAMS COMPANIES: Charged by Ex-Workers' of Inflating Profits in Suit
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Former employees of the Energy Marketing and Trading (EM&T) unit at
Williams Companies, Inc. claim the Company inflated the value of
transactions and the profits generated, according to a class action
filed recently in the United States District Court in Tulsa, the Tulsa
World reports.
Employees who stepped forward to question the practice were demoted by
the Company, according to Thomas Seymour, a Tulsa attorney, who filed
the amended class action on behalf of Company shareholders, who
purchased company stock between July 24, 2000, and July 22, 2002.
Among other things, the Company manipulated the data used to determine
the value of long-term energy contracts, Mr. Seymour contends. The
lawsuit states that to project the value of long-term energy prices,
the Company uses "forward curves" to determine future energy prices and
other market conditions. The data is entered into a complex
quantitative model that determines the mark-to-market value of the
long-term transaction.
However, the forward curves established by executives were unrealistic
and inflated the mark-to-market value of the Company's trading
portfolio, the lawsuit states. "The forward curves consistently
reflected a significant swing upward at the end of the valuation
period," the lawsuit states. "The shape of these curves had a material
impact on reported profits" by the Company.
The use of unrealistic curves inflated the trading unit's profits by
$150 million in 2000, claims one unidentified employee who performed a
detailed analysis of the company's forward curves. "He determined that
there was an unjustifiable inflation of the forward curves throughout
2000," the lawsuit states. "The manipulation of the forward curves
continued in 2001 and resulted in the inflation of EM&T profit by
approximately $100 million."
In one instance, a Company trading executive altered projections to
inflate the value of a long-term deal with five electric co-ops in
Georgia, a former employee claims. The deal was originally projected
to produce $400 million to $450 million. The new projections, however,
boosted the deal's value to between $550 million to $600 million.
"The sole purpose of the `rerun' with new `parameters' was to inflate
revenue and profits," the shareholder suit states.
William Koures, a senior quantitative analyst for Williams, developed a
new set of forward curves and presented them to company officials in
March 2001. However, the new curves would have reduced the value of
the Company's long-term contracts and were, therefore, rejected, the
lawsuit states. Mr. Koures was demoted and later left the company.
Other employees confronted executives about the alleged impropriety,
including Rabinder Koul and Pui Tak Khan. Mr. Koul was demoted and Mr.
Khan left the company earlier this year because of the alleged
manipulation, the lawsuit states.
William Hobbs, chief executive officer of energy trading, played "the
key role in manipulating EM&T's reported financial results at the end
of each quarter and year," the lawsuit states.
The new allegations of the amended complaint are based in part on
interviews with former EM&T employees, who were not identified in the
lawsuit.
*A Year After: Powerhouse Enron Corporation Now a Shadow of Former Self
-----------------------------------------------------------------------
Former chairman Kenneth Lay's corner office is vacant, the building
that once housed more than 7,000 workers now quieter with only 2,000
workers staying at half empty floors, and although the Starbucks in the
lobby remains open, few are seen enjoying a cup of coffee. This is the
way it is at Enron Corporation, a year after it collapsed spectacularly
in the nation's largest bankruptcy filing, the Associated Press
reports.
What's left of the former Fortune 500 company is an image of fraud and
corporate malfeasance that started when it revealed a $618 million loss
and eliminated $1.2 billion of shareholder equity in October last year.
The revelation was only the tip of the iceberg, as further developments
revealed an elaborate scheme to cook the Company's books that quickened
the Company's downfall.
"It would have been unthinkable to imagine the events that were about
to take place," John Abraham, a former executive with the company's
broadband unit, told AP. The Company admitted that its financial
statements had been wrong for years, in what became the first in a
string of corporate and accounting scandals involving companies such as
Adelphia Communications, Global Crossing and WorldCom. The Company
then filed for bankruptcy in December, six weeks after its financial
maneuvers were disclosed.
"Enron started to open the Pandora's box of all sorts of other evils,
and Enron was certainly the mother of all other frauds," John Olson, of
Sanders Morris Harris, whose skepticism of Enron, rare among analysts
before the October earnings release, drew the Company's ire, AP
reports.
Now, only four directors work for the Company, none of whom were around
for the financial magic tricks that led to Enron's collapse. Interim
chief executive Stephen Cooper, a restructuring expert, uses former CEO
Jeffrey Skilling's office, which faces Enron's smaller twin building.
Intended to showcase its once-envied trading operation, the bankrupt
company last week sold the tower for less than half its $240 million
construction cost, AP reports. "It's not the same company,"
spokeswoman Karen Denne said.
The Company faced numerous criminal charges and litigation, including
class actions. Included in the investigations was Enron's former
auditor, Arthur Andersen LLP, who was convicted of obstruction of
justice for shredding and doctoring Enron-related documents. Andersen
is to be sentenced Wednesday. David Duncan, Andersen's former top Enron
auditor who pleaded guilty to obstruction, has an Oct. 25 sentencing
date.
Former Enron chief financial officer Andrew Fastow, as well as three
London bankers, are charged with creating or investing in partnerships
to scam Enron shareholders while they pocketed millions. Fastow, who
said he was following orders, is free on $5 million bond, the
Associated Press reports.
Former federal prosecutor Robert Mintz, now a partner at McCarter &
English in Newark, N.J., said the public may be frustrated at the pace
of the probe, particularly in contrast to the speediness of criminal
charges filed against former WorldCom and Adelphia executives.
"The reality is that the stakes here for the government are enormous,"
Mr. Mitz told AP. "Prosecutors have to be immune from the pressure
that politicians and the public in general may bring on them. It's the
federal prosecutors who are standing in court who have to prove those
cases."
New Securities Fraud Cases
AVISTA CORPORATION: Cauley Geller Commences Securities Suit in E.D. WA
----------------------------------------------------------------------
Cauley Geller Bowman & Coates, LLP initiated a securities class action
in the United States District Court for the Eastern District of
Washington on behalf of purchasers of Avista Corporation (NYSE: AVA)
publicly traded securities during the period between November 23, 1999
and August 13, 2002, inclusive.
The complaint charges the Company and certain of its officers and
directors with issuing false and misleading statements concerning its
business and financial condition. Specifically, the complaint alleges
that defendants made misstatements of material facts and omitted to
state material facts in their public statements and elsewhere,
including failing to disclose that:
(1) the Company was engaged in highly risky energy trading
activities with Enron and PG&E involving so-called "Ricochet"
or "megawatt laundering" trades in which Avista acted as a
middleman between Enron and PG&E so that Enron could evade
California's caps on electric power prices and charge
California artificially high prices for electricity,
(2) that the Company routinely acted as a middleman between
affiliates such as Enron and PG&E in order to facilitate
transactions to proceed which would have been prohibited under
federal rules if the affiliates had engaged in them without an
intermediary, and
(3) that the Company was and is exposed to substantial contingent
legal liabilities as a result of the foregoing, including the
threatened revocation of its license to trade electric power
on the wholesale markets, or market-based rate authority, by
the Federal Energy Regulatory Commission.
The complaint alleges that on August 14, 2002, after the Federal Energy
Regulatory Commission announced that it may take formal enforcement
action on charges that the Company helped manipulate California power
prices during 2000, Company stock tumbled 11.85 percent, and on
September 17, 2002 Company stock traded at as low as $11.10 per share,
down from its class period high of $67.55.
For more details, contact Jackie Addison, Heather Gann or Sue Null by
Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944
by E-mail: info@cauleygeller.com or visit the firm's Website:
http://www.cauleygeller.com
AVISTA CORPORATION: Schiffrin & Barroway Lodges Securities Suit in WA
---------------------------------------------------------------------
Schiffrin & Barroway, LLP initiated a securities class action in the
United States District Court for the Eastern District of Washington on
behalf of all purchasers of the common stock of Avista Corp. (NYSE:
AVA) from November 23, 1999 through August 13, 2002, inclusive.
The complaint charges the Company and certain of its officers and
directors with issuing false and misleading statements concerning its
business and financial condition. Specifically, the complaint alleges
that defendants made misstatements of material facts and omitted to
state material facts in their public statements and elsewhere,
including failing to disclose that:
(1) the Company was engaged in highly risky energy trading
activities with Enron and PG&E involving so-called "Ricochet"
or "megawatt laundering" trades in which it acted as a
middleman between Enron and PG&E so that Enron could evade
California's caps on electric power prices and charge
California artificially high prices for electricity,
(2) the Company routinely acted as a middleman between affiliates
such as Enron and PG&E in order to facilitate transactions to
proceed which would have been prohibited under federal rules
if the affiliates had engaged in them without an intermediary,
and
(3) the Company was and is exposed to substantial contingent legal
liabilities as a result of the foregoing, including the
threatened revocation of its license to trade electric power
on the wholesale markets, or market-based rate authority, by
the Federal Energy Regulatory Commission.
The complaint alleges that on August 14, 2002, after the Federal Energy
Regulatory Commission announced that it may take formal enforcement
action on charges that the Company helped manipulate California power
prices during 2000, Company stock tumbled 11.85 percent, and on
September 17, 2002 Company stock traded at as low as $11.10 per share,
down from its class period high of $67.55.
For more information, contact Marc A. Topaz or Stuart L. Berman by
Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone:
888-299-7706 (toll free) or 610-667-7706 or by E-mail:
info@sbclasslaw.com
KPNQWEST N.V.: Marcus Perres Commences Securities Fraud Suit in S.D. NY
-----------------------------------------------------------------------
Marcus Perres Canaple & Wigoda filed a securities class action against
the United States District Court for the Southern District of New York
on behalf of shareholders who purchased securities of KPNQwest N.V.
between November 9, 1999 and April 24, 2002, inclusive.
The suit charges the Company and Chief Financial Officer, Willem
Ackermans, with violations of federal securities laws. Among other
things, plaintiff claims that defendants' omissions and misleading
statements concerning the Company's operations and revenue caused its
stock price to become artificially inflated, inflicting damages on
investors.
For more details, contact Michael J. Boxerman by Mail: 19 S. LaSalle
St., Suite 1500, Chicago, IL 60603 or by Phone: 312-641-2233
MERRILL LYNCH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
---------------------------------------------------------------------
Schiffrin & Barroway, LLP initiated a securities class action in the
U.S. District Court for the Southern District of New York, claiming
that Merrill Lynch & Co., Inc. and Henry Blodget misled shareholders
about Exodus Communications, Inc.'s business and financial condition.
Plaintiff seeks damages for violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 on behalf of all investors who
bought Exodus Communications, Inc. securities between December 8, 1999
and June 19, 2001.
The complaint alleges that the New York-based Merrill Lynch & Co., Inc.
and Henry Blodget urged investors to purchase Exodus stock when
defendants knew or recklessly disregarded that such purchases were not
a good investment. Specifically, the complaint alleges that
defendants:
(1) issued "Buy" recommendations about Exodus without any rational
economic basis;
(2) failed to disclose that they were issuing "Buy"
recommendations to obtain investment banking business; and
(3) concealed significant, material conflicts of interest that
prevented them from providing independent objective analysis.
Between March 24, 2000 and September 26, 2001, Company stock dropped
from approximately $173.32 per share to less than $1 dollar per share.
During this time period, Merrill Lynch repeatedly reiterated its Near-
Term Buy/Long-Term Buy recommendation.
After the Nasdaq suspended trading in Exodus common stock on April 26,
2001, Exodus voluntarily de-listed from Nasdaq and filed for Chapter 11
bankruptcy shortly thereafter.
For more details, contact Marc A. Topaz or Stuart L. Berman by Phone:
888-299-7706 (toll free), 610-822-2221 by E-mail: info@sbclasslaw.com
or visit the firm's Website: http://www.sbclasslaw.com
MERRILL LYNCH: Finkelstein Thompson Commences Securities Suit in NY
-------------------------------------------------------------------
Finkelstein, Thompson & Loughran initiated a securities class action
lawsuit against Merrill Lynch & Co., Inc. and the former head of its
Internet group, Henry Blodget, on behalf of purchasers of LookSmart,
Ltd. (Nasdaq: LOOK) securities between May 25, 2000 through April 27,
2001, inclusive.
The suit, filed in the United States District Court for the Southern
District of New York, alleges that Merrill Lynch and its well-known
Internet stock analyst Henry Blodget violated the federal securities
laws by knowingly issuing false and misleading analyst reports
regarding LookSmart during the class period.
Based on e-mails and other internal Merrill Lynch communications, which
were made public as a result of the investigation conducted by the New
York State Attorney General, the suit alleges that the defendants
failed to disclose a significant conflict of interest between their
investment banking and research departments.
Specifically, the Complaint alleges that Henry Blodget and other
Merrill Lynch analysts issued very favorable analyst reports regarding
LookSmart to the public when they allegedly knew that the positive
recommendations were unwarranted and false.
The suit further alleges that, unbeknownst to the investing public,
Merrill Lynch's buy recommendations and price targets for these
companies were driven by its efforts to attract lucrative investment
banking business rather than by the companies' fundamental merits.
For more details, contact Adam T. Savett by Phone: 202-337-8000 or by
E-mail: ats@ftllaw.com or visit the firm's Website:
http://www.ftllaw.com
QUADRAMED CORPORATION: Cauley Geller Commences Securities Suit in CA
--------------------------------------------------------------------
Cauley Geller Bowman & Coates, LLP initiated a securities class action
in the United States District Court for the Northern District of
California on behalf of purchasers of QuadraMed Corporation (Nasdaq:
QMDCE) publicly traded securities during the period between May 11,
2000 and August 11, 2002, inclusive.
The complaint charges the Company and certain of its officers and
directors with violations of the Securities Exchange Act of 1934. The
Company is a healthcare information and technology company that
provides software solutions and consulting services to hospitals and
medical providers to meet their medical records, business and
compliance needs.
On August 12, 2002, the Company issued a press release entitled,
"QuadraMed to File For Extension For Form 10- Q." The press release
stated in part: "QuadraMed Corporation announced today that it will
file with the U.S. Securities and Exchange Commission (SEC) for an
automatic 5-day extension of the deadline for submitting its second
quarter 2002 Quarterly Report on Form 10-Q. The Company will use the
additional five calendar days to complete a restatement of its
consolidated financial statements for the fiscal years ended December
31, 2000, 2001, and for the interim period ended March 31, 2002."
For more details, contact Jackie Addison, Sue Null or Heather Gann by
Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944
by E-mail: info@cauleygeller.com or visit the firm's Website:
http://www.cauleygeller.com
SALOMON SMITH: Rabin & Peckel Commences Securities Fraud Suit in NY
--------------------------------------------------------------------
Rabin & Peckel LLP initiated a securities class action in the United
States District Court for the Southern District of New York, on behalf
of all persons or entities who purchased or otherwise acquired
securities of AT&T Corporation (NYSE:T) between November 29, 1999 and
October 27, 2000, both dates inclusive. Jack Grubman and Salomon Smith
Barney, Inc. are named as defendants in the complaint.
The complaint charges that Jack Grubman and Salomon Smith Barney, Inc.
with violations of the Securities Exchange Act of 1934. Specifically,
the complaint alleges that defendants:
(1) issued and maintained "Buy" recommendations on AT&T securities
without any rational economic basis;
(2) failed to disclose that they were issuing and maintaining
"Buy" recommendations to obtain investment banking business;
and
(3) concealed significant, material conflicts of interest that
prevented them from providing independent objective analysis.
For more details, contact Eric J. Belfi or Sharon Lee by Phone:
800-497-8076 or 212-682-1818 by Fax: 212-682-1892 by E-mail:
email@rabinlaw.com or visit the firm's Website: http://www.rabinlaw.com
SALOMON SMITH: Schiffrin & Barroway Lodges Securities Suit in S.D. NY
---------------------------------------------------------------------
Schiffrin & Barroway, LLP initiated a securities class action in the US
District Court for the Southern District of New York (02-CV-7052)
claims that Salomon Smith Barney, Inc., Jack Grubman and Morgan Stanley
Dean Witter & Co., Inc. misled shareholders about Level 3
Communications, Inc.'s business and financial condition.
Plaintiff seeks damages for violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 on behalf of all investors who
bought Level 3 Communications, Inc. (Nasdaq:LVLT) 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:
(1) issued "Buy" recommendations about Level 3 without any
rational economic basis;
(2) failed to disclose that they were issuing "Buy"
recommendations to obtain investment banking business; and
(3) concealed significant, material conflicts of interest that
prevented them from providing independent objective analysis.
For more details, contact Marc A. Topaz or Stuart L. Berman by Phone:
888-299-7706 (toll free), 610-822-2221 by E-mail: info@sbclasslaw.com
or visit the firm's Website: http://www.sbclasslaw.com
SCHERING-PLOUGH: Brian Felgoise Files Securities Suit in New Jersey
-------------------------------------------------------------------
The Law Offices of Brian M. Felgoise, PC initiated a securities class
action on behalf of shareholders who acquired Shering-Plough
Corporation (NYSE:SGP) securities between October 1, 2002 and October
3, 2002, inclusive, in the United States District Court for the
District of New Jersey, against the Company and certain key officers
and directors.
The action charges that defendants violated the federal securities laws
by issuing a series of materially false and misleading statements to
the market throughout the class period which statements had the effect
of artificially inflating the market price of the Company's securities.
For more details, contact Brian M. Felgoise by Mail: 230 South Broad
Street, Suite 404, Philadelphia, Pennsylvania, 19102 by Phone
215-735-6810 or by E-mail: BrianFLaw@yahoo.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.
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