/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/040927.mbx C L A S S A C T I O N R E P O R T E R Monday, September 27, 2004, Vol. 6, No. 191 Headlines ALLIED HOLDINGS: Appeals Court Upholds Ruling in OOIDA Lawsuit AMERICAN MEDICAL: Settles FL Suit Over Health Insurance Policies AUSTRALIA: High Court Dismisses Smokers' False Advertising Suit CANADA: Consumers Lodge Ontario Suit V. Defective Bicycle Locks CHARLOTTE RUSSE: Former CA Store Managers Launch Overtime Suit CITIGROUP INC.: Judge Denies Motions To Dismiss Investor Suits COLORADO: Law Firm Lodges Injunction V. Flawed Benefits System COMPUTER ASSOCIATES: Ex-Officials Indicted For Securities Fraud DELTA ENTERPRISE: Recalls 81T Directors' Chairs For Injury Risk FANNIE MAE: Report Reveals GAAP Violations, Accounting Problems FLORIDA: Judge Throws Out Challenge To Provisional-Ballot Law FORD MOTOR: Recalls Explorers, Mountaineers Due To Injury Hazard FORD MOTOR: Recalls 1,689 2004 Ford F150 SUVs Due To Fire Hazard FORD MOTOR: Recalls 214,829 2003-2004 SUVs Due To Fire Hazard FORD MOTOR: Recalls 253,076 2003-2004 SUVs Because of Fire Risk GENERAL ELECTRIC: Settles SEC Action Over Former CEO's Benefits HAWAIIAN AIRLINES: SEC Issues Cease-and-Desist Order V. Ex-CEO HOLLINGER INTERNATIONAL: Law Firm Chair, Torys Face Stock Suit ILLINOIS: SEC Files Settled Stock Manipulation Action V. Traders JANSSEN PHARMACEUTICA: MI Court Upholds Ruling in Propulsid Suit KRYPTONITE: Offers Exchanges For Faulty Locks, Suits Filed in IL LOUISIANA: Prisoners Launch Lawsuit v. Public Defenders' Office MEDQUIST INC.: Hospital Launches RICO Violations Suit in C.D. CA MOBILE BILLBOARDS: SEC Launches GA Lawsuit Over Ponzi Scheme NORVERGENCE INC.: State Instigates Consumer Fraud Investigation ONEOK INC.: Verdict Reached in Trial Over Yaggy Storage Gas Leak ORTHO-MCNEIL: Warned Over Failure To State Topamax Side Effects UNITED STATES: Report Says Health Care Still Needs Improvement WAL-MART STORES: Blacks Launch AK Suit Over Race Bias in Hiring WILSON TRAILERS: Recalls 448 Grain Trailers For Accident Hazard New Securities Fraud Cases FEDERAL NATIONAL: Lerach Coughlin Files Securities Lawsuit in NY FEDERAL NATIONAL: Schiffrin & Barroway Files DC Securities Suit ST. PAUL TRAVELERS: Chitwood & Harley Lodges MN Securities Suit TEAM TELECOM: Glancy Binkow Lodges Securities Fraud Suit in NJ TECO ENERGY: Shepherd Finkelman Files Securities Suit in M.D. FL THORATEC CORPORATION: Marc S. Henzel Files Securities Suit in CA WET SEAL: Schiffrin & Barroway Files Securities Fraud Suit in CA WIRELESS FACILITIES: Murray Frank Files CA Stock Fraud Lawsuit WIRELESS FACILITIES: Spector Rosemna Files Securities Suit in CA WORLD INFORMATION: Schatz & Nobel Files Securities Lawsuit in NY ZIX CORPORATION: Schatz & Nobel Files Securities Suit in N.D. TX ********* ALLIED HOLDINGS: Appeals Court Upholds Ruling in OOIDA Lawsuit -------------------------------------------------------------- The United States Eleventh Circuit Court of Appeals ruled in favor of The Owner-Operator Independent Drivers Association (OOIDA) in its class action against Allied Holdings Inc., stating that owner-operator equipment leases with motor carriers are exempt from compulsory arbitration under the Federal Arbitration Act, Truckinginfo.com reports. In March 2004, the United States District Court for the Northern District of Georgia ruled that the arbitration provisions contained in Allied's owner-operator leases could not be enforced under the Federal Arbitration Act because the lease agreements between truck drivers and motor carriers merely set out the terms of the relationship as established by federal truth-in-leasing regulations. The appeals court upheld this decision. AMERICAN MEDICAL: Settles FL Suit Over Health Insurance Policies ---------------------------------------------------------------- American Medical Security Group, Inc. (NYSE: AMZ) (AMS), and plaintiffs' attorneys reached an agreement to settle a class- action lawsuit -- Addison v. American Medical Security, Inc. and United Wisconsin Life Insurance Company (subsidiaries of AMS) -- pending in the Circuit Court of Palm Beach County, Florida. The agreement is to be presented to the Circuit Court for preliminary approval. The lawsuit, filed in 2002, involves issues relating to discontinuation of health insurance policies in 1998 and a rating methodology formerly used by the company. Under terms of the agreement, there is no admission or implication of liability or wrongdoing on the part of AMS. Also, upon final approval, all claims of participating class members will be dismissed and the litigation terminated in exchange for consideration from AMS. According to AMS, the company has adequate reserves to cover the anticipated cost of the settlement and related expenses. As a result, the agreement is expected to have no material effect on the company's earnings or results of operations. "We believe our actions in the state of Florida have at all times been fair, lawful and in the interest of our customers," said Samuel V. Miller, AMS Chairman, President & Chief Executive Officer. "However, this settlement allows us to remove a considerable distraction and expense from our business." American Medical Security Group, through its operating subsidiaries, markets health-care benefits and insurance products to small businesses, families and individuals. United Wisconsin Life Insurance Company underwrites insurance products of American Medical Security Group. The company serves customers nationwide through partnerships with professional, independent agents and quality health care providers. AUSTRALIA: High Court Dismisses Smokers' False Advertising Suit --------------------------------------------------------------- The Australia Supreme Court dismissed a class action filed against several tobacco companies, seeking compensation for illnesses caused by smoking, the plaintiffs' lawyer said, according to Agence France Presse. Cancer patient Myriam Cauvin filed the suit, alleging the companies deceived smokers through false advertising. Ms. Cauvin, 40, suffered from emphysema and was a lung transplant recipient after smoking regularly since she her early teens, an earlier Class Action Reporter story (September 14,2004) said. Ms. Cauvin wanted compensation of more than 200 million dollars (140 million US) to be paid in to a compensation fund to help pay smokers' medical costs. The suit makes claims under a provision under New South Wales law allowing individuals to sue on behalf of others in cases of false advertising and misleading trade practices. However, Supreme Court Judge Virginia Bell found that the individuals in such cases had to be identified to the court and refused to accept the unqualified term "and other persons" that Ms. Cauvin listed as plaintiffs alongside her own name in the lawsuit. Ms. Cauvin's lawyer Neil Francey told AFP the decision was disappointing and meant the end of more than two years' work. He said the judgment had ramifications for class actions in areas such as asbestos and mobile phone disease, as well as providing a boost for tobacco firms. "The technique of suing on behalf of other people in this way is being denied," Mr. Francey told reporters outside the court, AFP reports. "I imagine they will be breathing a multi-billion dollar sigh of relief." CANADA: Consumers Lodge Ontario Suit V. Defective Bicycle Locks --------------------------------------------------------------- A class action lawsuit has been filed in the Ontario Superior Court against manufacturers and retailers of faulty bicycle locks. Consumers across Canada and around the world learned last week that many U-locks with cylindrical key mechanisms can easily be defeated with the simple twist of a Bic pen. "Although the defect was reported in a specialized trade magazine more than a decade ago, a number of manufacturers, including Kryptonite, continued to market this type of lock as the 'gold standard'" said Sean Dewart, one of the lawyers who launched the class action. "Many of the locks are now nothing more than expensive scrap metal and many bicycle owners are in jeopardy of having their bikes easily stolen. The recall being offered by one single manufacturer to exchange locks beginning in mid-October is completely inadequate. Bicycle owners need reliable locks now, not weeks or months from now. The lawsuit has been commenced to provide meaningful recourse for thousands of consumers." CHARLOTTE RUSSE: Former CA Store Managers Launch Overtime Suit -------------------------------------------------------------- San Diego, California-based fashion retailer Charlotte Russe faces a class action filed in San Diego Superior Court by two of its former store managers, alleging they were improperly denied overtime pay, SignOnSanDiego reports. Plaintiffs Jennel Gonzalez and Cherry Tubig filed the suit, alleging that they were not truly in management positions, because they spent more than half their time performing non- managerial duties, such as stocking shelves, tending the registers and setting up store displays. The suit seeks roughly $12 million, including compensatory wages plus interest, penalties and about $500,000 in attorney's fees, William E. Harris, the plaintiffs' attorney, told SignOnSanDiego. The suit is filed on behalf of all the Company's California store managers who worked from September 15,2000 through September 15,2004. "I'm pretty confident that we can prevail in this case," Mr. Harris said. "The staffing in these stores is very minimal, leaving managers to pitch in with doing work beyond just managing." Charlotte Russe chief financial officer Dan Carter said the company had no comment on the lawsuit, SignOnSanDiego reports. CITIGROUP INC.: Judge Denies Motions To Dismiss Investor Suits -------------------------------------------------------------- The Palm Beach circuit court in Florida denied five motions to dismiss six major investor suits filed over the last 13 months by Citigroup and Citigroup Global Markets (formerly Salomon Smith Barney), after denying similar motions in a separate but similar suit last Thursday. The investors, some of them WorldCom employees, said they had lost their life savings of $600,000 to $2 million by trusting the investment advice of former Smith Barney telecommunications analyst Jack Grubman. "These are not conventional brokerage suits, in which investors are lucky to get pennies on the dollar," said the investors' lawyer, Ted Babbitt, partner in the West Palm Beach trial law firm Babbitt, Johnson, Osborne & Le Clainche, P.A. "These are suits in Florida State Court on behalf of investors who are seeking to recover their life savings and get punitive damages besides. This is against a company with nearly $1.3 trillion in assets that makes $555 a second before taxes, or $100 million every two days. We contend that $100 million is not enough. The only way to keep this from a jury at this point is through summary judgment, and that is extremely rare." The six-count suits include allegations of false information negligently supplied for the guidance of others, outrageous conduct causing severe emotional distress, fraud and violation of Florida's "Blue Sky Laws," which entitle a buyer to damages if a seller is untruthful in giving investment advice. Today's ruling by Circuit Judge Arthur Wroble, Jr., means discovery in these cases can move forward more quickly and that the plaintiff can more easily compel top Citigroup and WorldCom executives to testify in deposition or before a jury to learn the truth about Citigroup's relationship to WorldCom. These decisions could have deep reverberations throughout Wall Street and ultimately help promote greater transparency in America's investment community. The six investors suit are: (1) Danny Boles v. Citigroup, Inc., et al., Fifteenth Judicial Circuit, Palm Beach County, 50 2004 CA 0040 09 MB AG Judge Arthur Wroble (2) Amodio v. Citigroup, Inc., et al., Fifteenth Judicial Circuit, Palm Beach County, Fl., Case No. 502003 CA 008635, Judge Arthur Wroble (3) Holtsberg v. Citigroup et al., Fifteenth Judicial Circuit, Palm Beach County, Fl., Case No. 50 20 04 CA 00008, Judge Arthur Wroble (4) Abad v. Citigroup et al., Fifteenth Judicial Circuit, Palm Beach County, Fl., Case No. 50 2004 CA 0056 02 MB AG, Judge Arthur Wroble (5) Caradonna v. Citigroup et al., Fifteenth Judicial Circuit, Palm Beach County, Fl., 50-2004 CA 0052 29 MB AG, Judge Arthur Wroble (6) Gilman v. Citigroup et al., Fifteenth Judicial Circuit, Palm Beach County, Fl., 50 2004 CA 0049 58 MB AG For more details, on these cases visit http://www.babbitt-johnson.com COLORADO: Law Firm Lodges Injunction V. Flawed Benefits System -------------------------------------------------------------- A Denver-based law firm has filed an injunction to stop the use of a new state computer program designed to streamline the application process for potential welfare recipients, KKTV 11 News reports. The Colorado Center on Law and Policy, which was previously reported in the September 2, 2004 issue of CAR to have initiated a class action lawsuit on behalf of needy Coloradans against the state's new Colorado Benefits Management System (CBMS), claiming that it will deny tens of thousands of the needy access to food stamps, Medicaid and other benefits since it is so error-prone. The new program, which the state claims of being able to reduce paperwork and long lines for benefits applicants by putting programs under one umbrella went online on September 1, 2004 at a reported taxpayer cost of $130 million. According to the Colorado Center on Law and Policy, they filed the preliminary injunction in a bid to stop the system from being used until it's working properly, which has an error rate of about 33 percent. An error rate that clearly contradicts a state agency's estimates placed at between 2 percent and 5 percent. Furthermore, the law firm is also claiming that since the Colorado Department of Human Services began using the new system, some welfare recipients have been unable to get their benefits and others have been kicked out of the system. COMPUTER ASSOCIATES: Ex-Officials Indicted For Securities Fraud --------------------------------------------------------------- Deputy Attorney General James B. Comey, U.S. Attorney Roslynn R. Mauskopf of the Eastern District of New York, and FBI Director Robert Mueller revealed the unsealing of an indictment charging two former executives of Computer Associates International, Inc., for their alleged participation in a long-running, company-wide accounting fraud scheme and subsequent efforts to obstruct the government's investigation. The 10-count indictment, returned last Friday by a federal grand jury in Brooklyn, New York and recently unsealed, charges Sanjay Kumar, the former Chief Executive Officer and Chairman of the Board of Computer Associates International, Inc. (CA), and Stephen Richards, CA's former Head of Worldwide Sales, with securities fraud conspiracy, obstruction of justice and conspiracy to obstruct justice. Richards was also charged with one count of perjury, and Kumar was also charged with one count of making false statements to law enforcement officers. In addition, Stephen Woghin, CA's former General Counsel and Senior Vice President, pleaded guilty this morning to securities fraud conspiracy and obstruction of justice charges for his role in the fraudulent scheme. Woghin entered his plea before U.S. District Judge I. Leo Glasser at the U.S. Courthouse in Brooklyn. The Department of Justice also revealed that CA has been charged and has accepted responsibility for the illegal conduct of its former executives, adopted significant corporate reforms, agreed to continue its cooperation with the government's ongoing investigation, and agreed to pay $225 million to compensate victims of the fraud as part of a deferred prosecution agreement. If CA abides by the terms of the agreement, the United States Attorney's Office has agreed not to prosecute CA. The agreement does not protect any individuals from prosecution. "The defendants are accused of perpetrating a massive accounting fraud that cost public investors hundreds of millions of dollars when it collapsed. Then they allegedly tried to cover up their crimes by lying," said Deputy Attorney General Comey, who chairs the President's Corporate Fraud Task Force. "If proven true, such conduct cannot be tolerated and the Corporate Fraud Task Force's track record shows that it will be met with severe penalties." "For more than two years, former CA executives are allegedly obstructed the government's investigation," said U.S. Attorney Mauskopf, a member of the task force. "However, they failed to prevent the government from getting to the truth. In fact, all they accomplished was getting themselves charged with the additional obstruction of justice crimes, which now carry stiff penalties under Sarbanes-Oxley." According to the indictment, in fiscal year 2000, Kumar and Richards, along with others, allegedly took part in a systemic, company-wide practice of falsely and fraudulently recording and reporting within a fiscal quarter revenue associated with certain license agreements, even though those agreements had not in fact been finalized and signed during that quarter. This practice, sometimes referred to within CA as the "35-day month" or the "three-day window," violated generally accepted accounting principles and resulted in the filing of materially false financial statements. The goal of the 35-day month, according to the indictment, was to permit CA to report that it met or exceeded its projected quarterly revenue and earnings when, in truth, it had not. The indictment alleges instances in which Kumar and Richards personally advanced the goals of the 35-day practice. For example, Kumar, assisted by former CA Chief Financial Officer Ira Zar, kept CA's books open at the end of fiscal periods. In the week following the end of fiscal periods, while the books were held open, Kumar and Richards directed CA sales managers and salespeople to finalize and backdate license agreements. Revenue from those falsely dated license agreements was then improperly recognized in the quarter just ended. Kumar and Richards allegedly met routinely and conferred with each other and with Zar during the week following the end of fiscal periods to determine whether CA had generated sufficient revenue to meet the quarterly projections, and closed CA's books only after they determined that CA had generated enough revenue to meet the quarterly projections. Zar and three other individuals - David Kaplan, former Senior Vice President of Finance and Administration; David Rivard, former Vice President of Finance; and Lloyd Silverstein, former Divisional Senior Vice President in Charge of the Global Sales Organization - have previously pleaded guilty to charges arising out of the CA investigation. The magnitude of the 35-day month accounting fraud scheme was made apparent on April 26, 2004, when CA filed forms with the Securities and Exchange Commission restating certain financial data for the fiscal years 2000 and 2001. The restatement was based on an internal investigation conducted by CA's Audit Committee which found that $2.2 billion of revenue was booked prematurely. In early 2002, the United States Attorney's Office, the FBI and the Northeast Regional Office of the SEC began investigations into CA's accounting practices. In February 2002, CA retained a law firm to represent it in connection with the government investigations. Shortly after being retained, the company's law firm met with Kumar, Richards, Woghin and other CA executives in order to inquire into their knowledge of the practices that were the subject of the government investigations. During these meetings, the defendants and others allegedly failed to disclose, falsely denied and concealed the existence of the 35- day month practice. Kumar, Richards, Woghin and others allegedly presented to the law firm an assortment of false justifications to explain away evidence of the 35-day month practice. The indictment alleges that Kumar, Richards and Woghin knew, and in fact intended, that the company's law firm would present these false justifications to the U.S. Attorney's Office, the SEC and the FBI in an attempt to persuade the government that the 35-day month practice never existed. The indictment further alleges that Kumar frequently instructed Woghin to meet with CA employees prior to their being interviewed by the government or the company's lawyers to coach them on how to answer questions without disclosing the 35-day month practice. The indictment alleges that on Oct. 23, 2003, Richards perjured himself while testifying under oath before the SEC by attempting to conceal the existence of the 35-day month practice and his involvement in it. The indictment also alleges that Kumar, in an interview with the FBI and the U.S. Attorney's Office on Nov. 5, 2003, made materially false statements to conceal the same scheme and his involvement in it. If convicted on all counts, Kumar and Richards each face a maximum prison sentence of 100 years. Woghin faces a maximum prison sentence of 25 years on the charges to which he pleaded guilty. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. Computer Associate's Agreement with the Government In the agreement, which is to be executed as soon as possible, CA has accepted responsibility for its conduct and acknowledged that, as a result of the conduct of certain of its former officers, executives and employees, the company filed multiple materially false and misleading financial reports with the SEC, made other materially false and misleading public statements and omissions in connection with the purchase and sale of CA securities, and obstructed the government's investigations. Under the terms of the agreement, CA has also agreed to pay $225 million for purposes of compensating shareholders for losses arising out of the company's criminal conduct. Last year, CA settled a series of shareholder class action lawsuits through which it agreed to issue up to 5.7 million shares of CA stock and pay cash to compensate CA shareholders at a total cost to CA of approximately $163 million. In addition, pursuant to the agreement, CA has agreed to continue its cooperation and to continue its implementation of numerous remedial steps undertaken to ensure that the fraud at CA does not recur. These remedial steps include: The termination of CA officers and employees who were responsible for the improper accounting, inaccurate financial reporting, and obstruction of justice, as well as those who took steps to obstruct or impede CA's internal investigation; The appointment of new management, including, but not limited to, an Interim Chief Executive Officer, a new Chief Operating and Chief Financial Officer, a new Head of Worldwide Sales, and a new General Counsel; In addition to including former SEC Commissioner Laura Unger on CA's Board of Directors, adding a minimum of two new independent directors, so that no less than two-thirds of the members of CA's board will be independent directors; Establishing a new Compliance Committee, a new Disclosure Committee, enhanced corporate governance procedures, and a comprehensive ethics program; Reorganizing CA's Finance Department, including the appointment of a Corporate Controller, a Chief Accounting Officer, and a Financial Controller for each of CA's primary business functions, and the reorganizing of its Internal Audit Department. Under the agreement, the court will appoint an independent examiner who will be empowered to review CA's compliance with all of the terms and conditions in the agreement. In light of CA's acceptance of responsibility, continued cooperation, remedial measures, and agreement to compensate the victims of its fraud, the United States Attorney's Office has agreed not to prosecute CA for the fraudulent and obstructive conduct of its former officers, executives and employees. However, should CA violate the terms of the executed agreement, or commit any other crimes, it shall be subject to prosecution, including prosecution for the fraud that is the subject of the indictment. The President's Corporate Fraud Task Force was established in July 2002 to coordinate and oversee all federal corporate fraud investigations. In the first two years of Task Force operations, the Department of Justice charged more than 900 defendants in corporate fraud cases and obtained more than 500 convictions. The Task Force works to enhance cooperation among its member agencies and other federal, state and local authorities in connection with the investigation and prosecution of significant financial crimes. The government's case is being prosecuted by Assistant United States Attorneys David Pitofsky, Eric Corngold and Eric Komitee. DELTA ENTERPRISE: Recalls 81T Directors' Chairs For Injury Risk --------------------------------------------------------------- Delta Enterprise Corp., of New York, N.Y. is cooperating with the United States Consumer Product Safety Commission by voluntarily recalling about 81,000 Director's Chair for Children. The chair can inadvertently be misassembled so that the fabric seat can come off the chair's frame and expose metal support rods. If fabric seat comes off the frame, there is a laceration and fall hazard to young children. Delta Enterprise Corp., has received six reports of the fabric seat coming off. In two of these reports, children received lacerations from the exposed metal seat support rod, with one child requiring stitches. There were two additional reports of minor injuries. The product is a child's director-style chair, constructed of tubular metal with a canvas seat and back. The chairs feature popular characters such as "The Wiggles," "Dora the Explorer," "Spongebob Squarepants," and "Disney Princesses." The Model Numbers for these recalled units are TC83536WG, TC83531DO, TC83533PS and TC83532SB. The model number can be found on a label on the leg of the chair. Manufactured in China, the product was sold at discount department and toy stores nationwide from April 2004 through July 2004 for about $10. Consumers are advised to stop using the chair immediately and contact Delta Enterprise Corp., to receive a free repair kit consisting of new assembly instructions and four straps, which will prevent the fabric seat from coming off. Consumer Contact: Call Delta Enterprises toll-free at (877) 660-3777 between 9 a.m. and 5 p.m. ET Monday through Friday or visit their Web site at http://www.deltaenterprise.com/recall.html FANNIE MAE: Report Reveals GAAP Violations, Accounting Problems --------------------------------------------------------------- The Office of Federal Housing Enterprise Oversight (OFHEO) issued a report saying that mortgage giant Fannie Mae had serious accounting problems which could cast doubt on the Company's past earnings reports and even its financial soundness, the Associated Press reports. The OFHEO regulators' report was issued after an eight-month investigation. The report also raised the possibility of deliberate accounting maneuvers designed to bring bigger bonuses to executives. The report states that the Company violated generally accepted accounting principles (GAAP) in its computations for transactions involving derivatives, financial instruments that it uses to hedge against interest-rate and other risk. The company allegedly also used an improper "cookie jar" reserve in accounting for some items, a practice which, according to the SEC, gives an inaccurate picture of a company's financial performance. In at least one instance, the OFHEO regulators found, it appeared that Fannie Mae management put off some accounting for expenses to a future reporting period in order to meet earnings targets that triggered bonuses for executives. Management at Fannie Mae "deliberately developed and adopted" inappropriate accounting policies, supported widespread violations of generally accepted accounting principles, tolerated lax internal controls and failed to properly investigate an employee's concerns about accounting, the report said, AP reports. In a letter to Company directors, OFHEO Director Armando Falcon said the findings warrant "immediate remedial action." In addition, "we must consider the accountability of management and whether we have sufficient confidence in management to fully implement these corrective measures and bring about broad cultural and operational changes," Mr. Falcon wrote in the letter dated Monday, AP reports. "The analysis and findings of this report make it difficult to assert such confidence." The government-sponsored company is the second-largest U.S. financial institution behind Citigroup Inc., and is the second- biggest seller of securities behind the U.S. Treasury. It could be ordered to decrease its financial leverage by raising fresh capital or buying fewer mortgages - potentially making it harder for some buyers to obtain financing for their home purchases. The federal regulators are negotiating an agreement with the Fannie Mae board, which has named a special committee of outside directors to respond to OFHEO's allegations and the preliminary inquiry by the SEC. Fannie Mae spokeswoman Janice Daue declined comment Thursday, according to AP. Credit-rating agency Standard & Poor's said Thursday that it had placed several of its ratings of Fannie Mae, including its "risk-to-the-government" rating, on "CreditWatch Negative" because of the regulators' findings. That means the ratings will either be downgraded a notch or affirmed as they now stand, based on future developments. FLORIDA: Judge Throws Out Challenge To Provisional-Ballot Law ------------------------------------------------------------- Leon County Circuit Judge L. Ralph Smith Jr. rejected a challenge to Florida's provisional ballots by refusing to certify a lawsuit seeking class action status on behalf of the American Civil Liberties Union, the AFL-CIO, and the union representing state and municipal workers, The Palm Beach Post reports. The judge effectively ignored lawyers' arguments that some voters will be so confused by precinct changes caused by hurricanes and redistricting that they won't know where to vote in November. The provisional ballots in question was originally created by Florida lawmakers in the aftermath of the bungled 2000 presidential election in which thousands of voters complained they were turned away from the polls after being inaccurately eliminated from the voting rolls. Under state law, a provisional ballot allows a voter who is not on the precinct list to cast a ballot anyway. The county canvassing board later examines the ballots and determines if the voter was eligible to vote in that precinct. If not, the ballot is rejected and the votes on it remain uncounted. Opponents of the current law want Floridians to be able to cast provisional ballots in any precinct and have the canvassing boards later count only the votes in the races in which that voter was eligible to cast a ballot. At a news conference after Judge Smith's ruling, Alma Gonzalez, an attorney for the union representing state and municipal workers in Tallahassee stated, "We cannot return to the year 2000 where thousands and thousands of voters came to the polls, cast their ballots, only to have them thrown away." Currently the unions are planning to ask the District Court of Appeal to send the case directly to the Florida Supreme Court so a final decision can be issued before the November 2, 2004 presidential election on whether voters must cast provisional ballots in their own precincts as state law requires. FORD MOTOR: Recalls Explorers, Mountaineers Due To Injury Hazard ---------------------------------------------------------------- Ford Motor Company is cooperating with the National Highway Traffic Safety Administration by recalling on September 9,2004, 955,732 sport utility vehicles, specifically 2002-2003 Ford Explorers and 2002-2003 Ford Mountaineers. On certain sport utility vehicles, the liftgate glass strut may become disengaged or the hinge may fracture allowing the glass to fall and possible break. If the hinge should fracture, there is a potential for the glass to fall and ultimately break. Minor injuries could occur. Dealers will have the liftgate glass strut brackets and glass hinges replaced. For the vehicles built from August 1,2000 through March 3,2002, the dealers will replace the hinges and liftgate strut bracket. On vehicles built from March 3,2002 through June 23,2003, the dealers will only replace the hinges. The recall began on September 13,2004. For more details, contact the Company by Phone: 1-800-392-3673 or contact the NHTSA's auto safety hotline: 1-888-DASH-2-DOT (1-888-327-4236). FORD MOTOR: Recalls 1,689 2004 Ford F150 SUVs Due To Fire Hazard ---------------------------------------------------------------- The Ford Motor Company is cooperating with the National Highway Traffic Safety Administration (NHTSA) by voluntarily recalling 1,689 2004 Ford F150 sport utility vehicles, on September 9,2004. On certain trucks equipped with 4.2L, 4.6L and 5.4L gasoline engines, the fuel tank may have a depression at the seam between the top and bottom halves of the tank. If a depression is large enough, fuel may permeate the fuel tank wall, resulting in a fuel odor, illumination of the "service engine soon" indicator light, or a fuel leak. Fuel leakage, in the presence of an ignition source, could result in a fire. Dealers will replace the fuel tank. The recall is expected to begin September 20,2004. For more information, contact the Company by Phone: 1-800-392-3673 or contact the NHTSA auto safety hotline: 1-888-DASH-2-DOT (1-888-327-4236). FORD MOTOR: Recalls 214,829 2003-2004 SUVs Due To Fire Hazard ------------------------------------------------------------- The Ford Motor Company is cooperating with the National Highway Traffic Safety Administration (NHTSA) by recalling 214,829 sport utility vehicles, namely: (1) Ford E150, model 2003-2004 (2) Ford E250, model 2003-2004 (3) Ford E350, model 2003-2004 (4) Ford E450, model 2003-2004 (5) Ford E550, model 2003-2004 On certain vans, an electronic control unit (ECU) diode may have micro cracks or the propensity to crack. If a crack is present, a short between the electrical ground and power circuit in the module may occur. The short may cause and ABS malfunction that may illuminate the ABS warning light, or the short may overheat the module resulting in a burning odor, smoke and fire. This condition may occur while the vehicle is being driven or unattended. Dealers will add a heat shield to the ECU and have the fuse replaced. The recall is expected to begin on October 8,2004. For more details, contact the Company by Phone: 1-800-392-3673 or contact the NHTSA's auto safety hotline: 1-888-DASH-2-DOT (1-888-327-4236). FORD MOTOR: Recalls 253,076 2003-2004 SUVs Because of Fire Risk --------------------------------------------------------------- The Ford Motor Company is cooperating with the National Highway Traffic Safety Administration (NHTSA) by voluntarily recalling 253,076 sport utility vehicles, namely: (1) Ford E150, model 2003-2004 (2) Ford E250, model 2003-2004 (3) Ford E350, model 2003-2004 (4) Ford E450, model 2003-2004 (5) Ford E550, model 2003-2004 On certain vans, the air filter element material process resulted in an air filter paper element that can smolder or burn. This change in filter paper composition combined with the configuration of the air induction system, may allow hot carbon particles to contact the air filter element during certain driving conditions that create hot particles. These hot particles may ignite the air filter element with the potential for air induction system damage or underhood fire. Dealers will inspect and replace the air filter element. The recall is expected to begin October 8,2004. For more details, contact the Company by Phone: 1-800-392-3673 or contact the NHTSA's auto safety hotline: 1-888-DASH-2-DOT (1-888-327-4236). GENERAL ELECTRIC: Settles SEC Action Over Former CEO's Benefits --------------------------------------------------------------- The Securities and Exchange Commission instituted settled enforcement proceedings against General Electric Company. The Commission charged that GE failed to fully describe the substantial benefits it had agreed to provide its former chairman and CEO John F. "Jack" Welch, Jr. under an "employment and post-retirement consulting agreement." GE settled the proceedings by consenting to the entry of an Order that it cease and desist from violating the proxy solicitation and periodic reporting provisions of the federal securities laws. "Shareholders have a clear interest in knowing how public companies compensate there top executives," said Paul R. Berger, Associate Director of the SEC's Division of Enforcement. "Compliance with SEC disclosure rules ensures that shareholders are provided a full and accurate understanding of senior executives' compensation arrangements." The Commission found that in proxy statements and annual reports filed with the Commission from 1997-2002, GE failed to fully and accurately describe the retirement benefits Welch was entitled to receive from the company. In December 1996, GE and Welch entered into an "employment and post-retirement consulting agreement" under which Welch agreed to continue as CEO until he was 65 and serve as a consultant thereafter. In the agreement, Welch received, as his principal form of compensation, lifetime access to the perquisites and benefits he had received as GE's chairman and CEO. GE's proxy statements only referred to Welch's entitlement to ".continued lifetime access to Company facilities and services comparable to those that are currently made available to him by the Company," but did not provide any other specific information about the "facilities and services" Welch would receive in retirement. The agreement itself, which was appended as an exhibit to GE's 1996 annual report, stated that Welch was entitled to receive in retirement "continued access to Company facilities and services comparable to those provided to him prior to his retirement, including access to Company aircraft, cars, office, apartments, and financial planning services," but did not provide further meaningful and complete disclosure of those "facilities and services." Moreover, GE made no other disclosures in its SEC filings that allowed investors to understand the nature and scope of Welch's retirement benefits-specifically, investors could not learn from GE's previously filed proxy statements many of the most significant "facilities and services" Welch had been provided prior to his retirement, including personal use of GE- owned aircraft, personal use of chauffeured limousines and home security systems. The Commission further found that in the first year following Welch's retirement in September 2001, Welch received approximately $2.5 million in benefits under the agreement, which included: (1) access to GE aircraft for unlimited personal use and for business travel; (2) exclusive use of a furnished New York City apartment that, according to GE, in 2003, had a rental value of approximately $50,000 a month and a resale value in excess of $11 million; (3) unrestricted access to a chauffeured limousine driven by professionals trained in security measures; (4) a leased Mercedes Benz; (5) office space in both New York City and in Connecticut; (6) the services of professional estate and tax advisors; (7) the services of a personal assistant; (8) communications systems and networks at Welch's homes, including television, fax, phone and computer systems, with technical support; (9) bodyguard security for various speaking engagements, including a book tour to promote his autobiography Jack: Straight from the Gut; and (10) installation of a security system in one of Welch's homes and continued maintenance of security systems GE previously installed in three of Welch's other homes. The Commission concluded that GE's inadequate disclosures violated Sections 13(a) and 14(a) of the Securities Exchange Act of 1934 and Rules 13a-1, 14a-3 and 14a-9 thereunder. Without admitting or denying the Commission's findings, GE consented to the issuance of the Order, which orders GE to cease and desist from committing or causing any violations and any future violations of the foregoing statutory provisions and rules. HAWAIIAN AIRLINES: SEC Issues Cease-and-Desist Order V. Ex-CEO -------------------------------------------------------------- The Securities and Exchange Commission instituted cease-and- desist proceedings against John W. Adams, the former Chief Executive Officer of Hawaiian Airlines, Inc., and AIP LLC, an entity managed by Adams that held a controlling interest in Hawaiian Airlines. The Commission instituted proceedings against Adams and AIP for their role in Hawaiian's failure to disclose important negative financial information to shareholders in a tender offer from which Adams and AIP each benefited. The Commission finds that during a June 2002 issuer tender offer in which Hawaiian repurchased $25 million in stock from its shareholders, Adams learned that the company's financial condition had significantly deteriorated, but failed to disclose the information to minority shareholders who were deciding whether or not to tender their shares. Minority shareholders who, unlike Adams and AIP, declined to tender their shares, found the value of their stock significantly diminished when the negative financial information was made public. Within nine months after the tender offer, Hawaiian was in bankruptcy. While certain minority shareholders lost their opportunity to realize the benefits of the tender offer, Adams and AIP benefited by more than $17 million by selling their shares to Hawaiian in the tender offer. Adams and AIP have agreed to a settlement in which, among other things, they agree to repay nearly $2.5 million in profits from their sales of Hawaiian stock in the tender offer. In connection with the settlement, Adams and AIP neither admitted nor denied the Commission's findings. The Commission finds that Hawaiian initiated the $25 million self-tender offer in June 2002, shortly after the company received $25 million in payments from the federal government to compensate air carriers for losses related to the attacks of Sept. 11, 2001. Materials provided to shareholders represented that the tender offer was a prudent use of the company's resources, and that the company would remain solvent following completion of the tender offer. According to the Commission, however, Adams was aware that the company was experiencing a significant financial decline, which was not disclosed to shareholders. Among other things, during the pendency of the tender offer Hawaiian revised its financial projections for 2002 from a $12 million operating profit to a $9.3 million operating loss. The Commission also finds that Adams and AIP tendered their shares and received over $17 million of the $25 million paid by Hawaiian for the stock. Had those Hawaiian shareholders who declined to tender their shares been informed that the continued solvency of the company was far less certain than initially represented, a proportionately smaller number of AIP's and Adams' shares would have been purchased by the company. Hence, AIP and Adams profited at the expense of non-tendering shareholders who were unaware of the company's financial decline. The Commission's Order finds that Adams and AIP caused Hawaiian's violations of Section 13(e)(1) of the Securities Exchange Act of 1934 and Rule 13(e)-4(j)(2) thereunder, which require a public company conducting a self-tender offer to disclose promptly any material changes in the information provided to securities holders. Without admitting or denying the Commission's findings, Adams and AIP consented to an order that they cease and desist from causing violations of these provisions, and agreed to pay a total of approximately $2.5 million in disgorgement and prejudgment interest. HOLLINGER INTERNATIONAL: Law Firm Chair, Torys Face Stock Suit -------------------------------------------------------------- The Chairman of Chicago law firm Winston & Strawn's and Canadian firm Torys were named in a shareholder class action filed against Hollinger International, alleging violations of federal securities laws, Legal Week reports. Canadian firm The Merchant Law Group filed the suit, alleging that chairman James Thompson and Torys were liable for failing to disclose the transfer of Hollinger funds, inaccurate financial results and material misrepresentations of sales of Hollinger's assets. Mr. Thompson, the chairman of leading Chicago law firm Winston & Strawn and a former Governor of Illinois between 1977 and 1991, allegedly received substantial political contributions from Hollinger CEO Conrad Black during the class period. The suit alleges that Mr. Thompson was "motivated to assist in the wrongdoing because he received political contributions from Lord Black." Mr. Thompson was chairman of Hollinger's audit committee and sat on its compensation committee. He also allegedly signed many of the company's allegedly false and misleading Securities and Exchange Commission (SEC) filings. The suit named Torys for its role in acting as counsel to Hollinger and other defendants, and providing legal advice to Hollinger and its audit committees. The claim adds, "(Torys') knowingly participated in, and aided and abetted, the individual defendants' breaches of fiduciary duty and their divestiture of hundreds of millions of dollars of the purchase prices from the sales of Hollinger assets." A Torys spokesman said the firm was unable to comment on ongoing litigation. Mr. Thompson was unavailable for comment, Legal Week reports. ILLINOIS: SEC Files Settled Stock Manipulation Action V. Traders ---------------------------------------------------------------- The Securities and Exchange Commission filed a settled market manipulation action in the U.S. District Court for the Northern District of Illinois against three individual day traders, Stanley Awdisho, Michael Kundrat, and Kristopher Smolinski. The Commission's complaint alleges that approximately 75 times between September and December of 1999, Awdisho, Kundrat and Smolinski each manipulated the price of stock options by engaging in a scheme commonly referred to as "small lot baiting." Small lot baiting or "spoofing" involves an order placed by a market participant with the intention of briefly triggering a market movement from which the participant or others may benefit by trading the opposite side of the original manipulative order. The complaint further alleges that to carry out the scheme, Awdisho, Kundrat and Smolinski placed limit orders for a small number of options contracts on one options exchange to artificially raise or lower that exchange's quoted bid or offer. Awdisho, Kundrat and Smolinski then purchased or sold much larger opposite positions on other exchanges that matched the artificially raised or depressed price displayed at the first exchange. After their larger orders were executed, the Awdisho, Kundrat and Smolinski immediately sent an order to cancel the initial bait order. As a result of the scheme, the complaint alleges that Awdisho, Kundrat and Smolinski unfairly profited at least $25,000 by obtaining execution of their larger orders at more favorable prices than otherwise available in the market. Simultaneous with the filing of the Commission's complaint, Awdisho, Kundrat and Smolinski consented, without admitting or denying the allegations of the Complaint, to permanent injunctions against future violations of Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the antimanipulation and antifraud Sections of the Exchange Act. Awdisho and Kundrat also consented to the payment of a $10,000 civil penalty. Smolinski consented to the payment of a $20,000 civil penalty. The action is titled, SEC v. Stanley Awdisho, Michael Kundrat and Kristopher Smolinski, Civil Action No. 04 C 6125, N.D. Ill. (LR-18894). JANSSEN PHARMACEUTICA: MI Court Upholds Ruling in Propulsid Suit ---------------------------------------------------------------- The Mississippi Supreme Court upheld a 2003 by a Jefferson County judge that separate trials were in order for plaintiffs in a lawsuit against the makers of the heartburn drug Propulsid, the Associated Press reports. According to the Supreme Court of the 30 plaintiffs in the Jefferson County case, only two were from Jefferson County and that 10 others live elsewhere in Mississippi, while 18 live out of state. The original ruling by Circuit Judge Lamar Pickard had decreed that separate trials would be held for the non-Jefferson County residents and that those cases would be transferred to courts of the plaintiffs' attorneys choosing. Judge Pickard also ruled that the cases of the two Jefferson County residents would continue as a single case. The suit was filed against Janssen Pharmaceutica Inc. and its parent company, Johnson & Johnson over the heartburn drug Propulsid, which the plaintiffs claimed to have caused heart problems, anxiety attacks and other conditions on patients taking it. In upholding the lower court's decision, the Supreme Court also directed the plaintiffs to provide Pickard with those counties where the other 10 in-state complaints would be filed, which had ruled that it was improper to group the plaintiffs together when their claims did not arise from the same incident. Justice Chuck Easley, writing for the court, said Judge Pickard should dismiss without prejudice the 18 claims filed by out-of- state residents, which meant that the cases could be re-filed but not in Mississippi. The Supreme Court had halted proceedings in Propulsid cases last year until it resolved the issue of venue and class action raised by the attorneys for the drug maker, who have disputed decisions that allowed plaintiffs to join in the lawsuits even if they were from outside the area where the trial was being heard. KRYPTONITE: Offers Exchanges For Faulty Locks, Suits Filed in IL ---------------------------------------------------------------- According to General Manager Steve Down, Canton, Massachusetts- based Kryptonite will be offering free exchanges to anyone who owns one of its U-lock models requiring a circular key, a popular type of lock with city bikers that is vulnerable to picking with a simple ballpoint pen, the Chicago Tribune reports. The offer is more than the what the company had originally indicated to would do earlier this week: Give free upgrades to people who could prove they bought their locks within the last two years and provide discounts for upgrades to others who had the locks longer. Mr. Down further states, Kryptonite felt responsible to offer solutions, not excuses, and to deal with the problem. The move comes after one biker posted a message on the Internet about how easy it was to pick a Kryptonite lock with the shaft of a Bic pen, while others posted videos showing people picking the locks. Kryptonite said the exchange for a more secure lock will be run through local retailers and will start as soon as the company accelerates production of the new locks. Lock owners can visit the company's Web site, www.kryptonite.com , for registration instructions. However, not everyone feels satisfied with Kryptonite's response to customer complaints. Several lawsuits have actually been filed against Kryptonite, including at least two in Cook County that seek class action status and allege consumer fraud or misrepresentation. Chicago lawyer Larry Drury, who filed one of the suits on behalf of Lauren Dubler, who owned a lock but did not have a bike stolen, is seeking a refund for anyone who bought a Kryptonite lock that could have been picked with a pen. Mr. Drury said Kryptonite's latest offer is too vague -- he is concerned about references to current owners and people's current locks -- and does not offer refunds for people who may not want to deal with the company again. He also adds that Kryptonite's exchange offer will not affect their suit in anyway, since they are seeking refunds as the primary remedy. LOUISIANA: Prisoners Launch Lawsuit v. Public Defenders' Office --------------------------------------------------------------- The state of Louisiana faces a class action alleging that the state's public-defender system wasn't doing an adequate job, 2theadvocate News reports. Nine defendants in Lake Charles filed the suit in Calcasieu Parish Court purportedly on behalf of anyone now served by the Public Defender's Office in Calcasieu Parish or anyone who will be part of the system in the future. The suit names as defendants Gov. Kathleen Blanco, the Legislature and state government. According to the suit, 90 percent of people in Calcasieu Parish accused of crimes are poor enough to be declared indigent and entitled to a public defender. However, the $1.4 million budget for the office does not allow it to employ enough lawyers, at high enough salaries, to adequately represent clients. All nine plaintiffs are in the Calcasieu Correctional Center, the parish prison, awaiting trials on charges not specified in the lawsuit. Lead plaintiff John Anderson has no criminal convictions but has been awaiting trial since his arrest in September 2002. Trials have been postponed twice. The other plaintiffs have been in jail anywhere from a year to more than two years. Some do not even know if they have a lawyer representing them, the lawsuit says. The lawsuit is just the opening shot of a war, backed by powerful legal interests, against the state's public-defender system. "We're seeking a declaration that the system is broken and an order requiring it to be fixed," attorney William Jeffress of Washington, D.C., part of the legal team handling the lawsuit, told 2theadvocate News. Instituting more public defenders, and paying them higher salaries, could be one solution. The state board that hands out state money for public defenders got only $7.8 million this year, a third of what the state Supreme Court recommended. Critics say the system also relies too much on unreliable local revenue. Mr. Jeffress said he could not comment on whether, or how much, the lawsuit could increase costs to Louisiana taxpayers to defend poor people accused of crimes. He said, under the current funding, "You can't possibly provide what we think the Constitution requires." Gov. Blanco said she had not yet seen the lawsuit but recognizes the problem. "We're going to have to just tackle it," she told 2theadvocate News. Her chief attorney, executive counsel Terry Ryder, said Gov. Blanco has taken two steps to improve the indigent defense system during her first months in office - by adding $1.5 million in state funds, in a tight budget year, to the public- defender system and by appointing a study group to come up with possible solutions. "I can't yet comment on the lawsuit. But we take the issue seriously," Mr. Ryder said, according to 2theadvocate News. MEDQUIST INC.: Hospital Launches RICO Violations Suit in C.D. CA ---------------------------------------------------------------- MedQuist, Inc. faces a class action filed in the United States District Court for the Central District of California in Los Angeles, alleging 18 claims of fraud, negligence and violations of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, Health Data Management reports. The suit also names as defendants several of the Company's current and former senior executives, including: (1) Ronald Scarpone, executive vice president of marketing and new business development; (2) Michael Clark, senior vice president; (3) John Suender, former executive vice president and chief legal officer; (4) Brian Kearns, former CFO The South Broward Hospital District, doing business as Memorial Healthcare System, filed the suit against the medical transcription technologies and services vendor, alleging MedQuist wrongfully and fraudulently overcharged for transcription services. The suit alleges that the defendants "created a variety of fraudulent schemes to improperly inflate invoices submitted for payment to plaintiff and the class." The Company allegedly billed up to 10 lines per report for invisible characters known as "print strings" that are embedded within the body of each report. According to the lawsuit, "print strings are software characters that instruct the computer where to send the report within the word processing system." The Company also allegedly induced customers to enter into arbitration clauses that limited the discovery of documents and information available, "thereby hiding MedQuist's methods of fraudulently inflating its invoices." The Company also charged clients for its own overhead costs, even though contracts did not call for any payment of overhead by clients, and instructed managers to lie when asked directly about how invoices were calculated, deal aggressively with any client that challenged a bill, and refuse to provide supporting documentation for invoices. Mount Laurel, N.J.-based MedQuist is reviewing the lawsuit and has no immediate comment, according to a spokesperson, AP reports. The law firm of Greenberg Traurig LLP, Santa Monica, California, is representing plaintiffs. MOBILE BILLBOARDS: SEC Launches GA Lawsuit Over Ponzi Scheme ------------------------------------------------------------ The Securities and Exchange Commission filed a complaint in the U.S. District Court for the Northern District of Georgia against Mobile Billboards of America, Inc. (Mobile Billboards), International Payphone Company (International Payphone) itself and doing business as Outdoor Media Industries (Outdoor Media), Reserve Guaranty Trust (Reserve Guaranty), Michael A. Lomas (Lomas) and Michael L. Young (Young). Mobile Billboards is a Delaware corporation with offices in Newbury, Ohio and Bridgeton, Missouri. International Payphone, a Delaware corporation, maintains its principal office in Norcross, Georgia. Outdoor Media is a division of International Payphone and has offices in Newbury, Ohio and Bridgeton, Missouri. Reserve Guaranty, a Delaware statutory trust, is located in Washington, DC. Lomas, who resides in Long Beach, California, is the Chairman of Mobile Billboards. Young is the president and a director of Mobile Billboards and resides in Bridgeton, Missouri. The complaint alleges that from 2001 through the present, defendants Lomas, Young, Mobile Billboards, Outdoor Media and Reserve Guaranty operated a Ponzi scheme involving the sale and leaseback of mobile billboards, selling more than $60.5 million of mobile billboard investments to more than 700 investors nationwide. The complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and Lomas and Young with aiding and abetting violations of Section 15(a) of the Exchange Act,. The complaint seeks, among other relief, disgorgement of all ill- gotten gains with prejudgment interest, and the imposition of civil penalties against defendants. On the same day the complaint was filed, the defendants consented to orders permanently enjoining the defendants from future violations, freezing the assets of defendants, ordering accountings by Lomas and Young, and appointing a Receiver for the assets of Mobile Billboards, International Payphone, itself and doing business as Outdoor Media, and Reserve Guaranty. The Commission thanks the North Carolina Securities Division for its assistance in this matter. The action is titled, SEC v. Mobile Billboards of America, Inc., International Payphone Company (itself and d/b/a Outdoor Media Industries), Reserve Guaranty Trust, Michael A. Lomas and Michael L. Young, Civil Action No. 1:04-CV-2763, NDGA] (LR-18893). NORVERGENCE INC.: State Instigates Consumer Fraud Investigation --------------------------------------------------------------- The state of New Jersey launched a consumer fraud investigation into bankrupt Norvergence, Inc., which left more than 11,000 small business customers burdened with huge debts and litigation, the Associated Press reports. More than two-dozen banks and leasing companies have been asked for documents that detail their business deals with the telecommunications reseller, which filed for Chapter 7 bankruptcy in July. According to Attorney General Peter C. Harvey, who is making sure business people in New Jersey get what he or she pays for, the company left as many as 1,000 small businesses without service and owes its creditors an estimated $30 million. Twenty other states and federal officials are looking into the company, The Record of Bergen County reported. Attorney Michael Green, who has filed a class action lawsuit on behalf of the small business customers, said his clients were promised telephone and Internet service at deep discounts when they signed lease deals with NorVergence. Furthermore Mr. Green stated that his clients also signed long-term deals to lease equipment at prices far above what devices actually cost. NorVergence sold the leases at a discount to the financial services companies, which saw the contracts as an investment. Those companies have demanded payment from the small businesses, in some cases launching lawsuits and contacting credit agencies. The Attorney General's Office has told the leasing companies they must halt any legal action they are taking against former NorVergence customers in New Jersey until the investigation is completed. ONEOK INC.: Verdict Reached in Trial Over Yaggy Storage Gas Leak ---------------------------------------------------------------- A Wyandotte County jury recently reached a verdict in a class action lawsuit that was filed three years ago against energy company, ONEOK, Inc. (NYSE: OKE) arising out of the escape of natural gas from the Yaggy storage field outside of Hutchinson, Kansas. Previously reported in the June 15, 2004 edition of CAR, the class action lawsuit, which was originally filed in Reno County but later moved by District Judge Richard Rome to Wyandotte County, Kansas for either a July or August hearing alleges that the January 2001 gas leaks in ONEOK's Yaggy storage field northwest of Hutchinson is believed to be responsible for a series of explosions that destroyed several businesses and killed two people in Hutchinson. In his ruling to move the case, the Judge Rome stated that intense pretrial publicity would make it hard for Tulsa, Okla.- based ONEOK to get an impartial jury in Reno County. He also pointed out that because landowners are part of the lawsuit and thus disqualified from being jurors, it would be difficult to find "a fair cross-section of the community" to sit on the jury. The lawsuit includes anyone who owns a business or property in the county, with attorneys contending that a gas leak and deadly explosions in 2001 devalued all those properties. While the plaintiffs sought damages in excess of $50 million exclusive of punitive damages, the jury has awarded $5 million in actual damages to the residential class. No damages were awarded to the business class. No punitive damages were awarded. The $5 million is covered by insurance. This trial concludes all litigation related to the Yaggy incident, with the exception of one case, which ONEOK is appealing. ORTHO-MCNEIL: Warned Over Failure To State Topamax Side Effects --------------------------------------------------------------- The Food and Drug Administration warned Ortho-McNeil, a unit of Johnson & Johnson, over the failure of marketing material for its Topamax epilepsy and migraine drug to warn about a possibly dangerous side effect, J&J announced this week, the Associated Press reports. The FDA stated that the marketing materials failed to warn users that they could experience a drop in ability to sweat and an increase in body temperature. The materials also failed to warn users of increased acidity in the body, which can lead to hyperventilation and irregular heartbeats. The FDA further said that children are the most affected by the drug's side effects and that the promotional material and the drug's Web site encourages "the unsafe use of Topamax," and by children in particular. The FDA approved the use of Topamax daily to prevent migraines. It was previously approved for use against epilepsy. It had 2003 sales of more than $1 billion. Ortho-McNeil spokeswoman Lesley Fishman said the company is working with the agency to address its concerns, AP reports. The company has until September 29 to respond to the agency in writing. UNITED STATES: Report Says Health Care Still Needs Improvement -------------------------------------------------------------- The National Committee for Quality Assurance's annual report states that requiring doctors and hospitals to report publicly on their performance and tying that to their pay would dramatically reduce avoidable deaths and costs attributable to poor medical care, the Associated Press reports. The private group works on ways to improve health care quality. The report described a significant gap in quality between the best providers and the national average for treating a range of common conditions that would not be tolerated in almost any sector of the US economy. The report further stated that wild variations in medical care led to 79,000 avoidable deaths and $1.8 billion in additional medical costs last year. Despite the more than 10% increase in health insurance premiums annually, the differences in health care quality persist. "This report underscores that all too often we are not getting good value for that money," said Peter V. Lee, president and chief executive of the Pacific Business Group on Health, a coalition of businesses that provide health insurance to 3 million people, AP reports. The report cites as an example, health care for patients with high blood pressure. Failure to control high blood pressure resulted in up to 26,000 deaths last year that could have been avoided with competent medical care. Better control of blood pressure will lead to 2,500 fewer fatal heart attacks in 2004, the report said. The report further stated that health insurance plans that publicly report their performance showed marked improvement in most areas, including cholesterol management, diabetes care, breast cancer screening and flue shots for adults. Health plans also did a better job of reducing cholesterol levels among patients with diabetes. However, those plans cover only about a quarter of the U.S. population, about 69 million people. "The data we have tell a great story, health care quality is improving consistently and dramatically," said Margaret E. O'Kane, NCQA's president, according to AP. "Why don't we have performance data for the other 75 percent of the U.S. health care system?" Last year's Medicare prescription drug law took a step in this direction by linking a small portion of Medicare payments to hospitals' willingness to submit quality data and conducting trial runs that tie pay to performance for some health care providers. One notable exception to the upward trend in quality was treatment of mental illness, which showed no improvement over 2002. "Patients get the correct care only about 50 percent of the time," the report said, AP states. Harvard Pilgrim Health Care of Massachusetts was the top-rated health plan for both clinical care and member satisfaction, the report said. WAL-MART STORES: Blacks Launch AK Suit Over Race Bias in Hiring --------------------------------------------------------------- Wal-Mart Stores, Inc. faces a class action in the Arkansas federal court, alleging the retail giant discriminated against African-American in 12 Southern states, the Associated Press reports. Plaintiff Daryal T. Nelson filed the suit, alleging that the Company rejects and discourages black applicants for truck- driving jobs at its distribution centers in Arkansas, Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Virginia. The suit had a document from the Equal Employment Opportunity Commission attached it, saying that it found "reasonable cause" to believe that Mr. Nelson, a 22-year veteran of driving trucks, was discriminated against. The EEOC said Wal-Mart hired some white drivers with more serious driving violations and less experience than black applicants. Gus Whitcomb, a spokesman for Wal-Mart, said Wednesday that he couldn't comment on the lawsuit because he hadn't seen it, AP reports. However, he said, "We do not discriminate in our hiring practices." WILSON TRAILERS: Recalls 448 Grain Trailers For Accident Hazard --------------------------------------------------------------- Wilson Trailer Company recalled 448 of its 2004 Grain Trailers on September 9,2004. On certain trailers, the wheel assembly hub spindle nut on each axle may have been installed without a "keeper." The purpose of the keeper is to lock the spindle nut in place and thereby, secure the wheel to the axle. Failure to install the keeper can cause the wheel on the affected axle to come off and cause personal injury to other persons outside the vehicle and property damage. Dealers will inspect and determine if each wheel assembly lacks a keeper. If the keeper is not present, it will be installed. The recall began on September 15,2004. For more details, contact the Wilson Trailer Company by Phone: 1-800-798-2002 or contact the National Highway Traffic Safety Administration's auto safety hotline: 1-888-DASH-2-DOT (1-888-327-4236). New Securities Fraud Cases FEDERAL NATIONAL: Lerach Coughlin Files Securities Lawsuit in NY ---------------------------------------------------------------- The law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP initiated a class action in the United States District Court for the Southern District of New York on behalf of purchasers of Federal National Mortgage Association ("Fannie Mae" or the "Company") (NYSE:FNM) common stock during the period between October 16, 2003 and September 22, 2004 (the "Class Period"). The complaint charges Fannie Mae and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Fannie Mae provides financing for home mortgages in the United States. The Company was chartered by the United States Congress to provide liquidity in the secondary mortgage market to increase the availability and affordability of homeownership for low-, moderate- and middle-income Americans. The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding Fannie Mae's financial results and growth rates. Specifically, the complaint alleges that the Company issued materially false and misleading statements in an effort to separate themselves from the scandal that occurred at the Federal Home Loan Mortgage Corporation ("Freddie Mac"), a similar, but smaller version of its rival - Fannie Mae. In June 2003, Freddie Mac disclosed that it had understated profits by some $4.5 billion for 2000-2002 in an effort to smooth earnings and maintain its image on Wall Street as a steady performer. The accounting crisis brought the ouster of several top Freddie Mac executives, investigations by the Justice Department and the SEC, and a record $125 million fine in a settlement with the Office of Federal Housing Enterprise Oversight ("OFHEO"), the office that regulates both Fannie Mae and Freddie Mac and is responsible for ensuring that they are adequately capitalized and operating safely. Soon thereafter, OFHEO initiated an eight-month investigation of Fannie Mae's accounting practices in which the agency found a pattern of manipulation aimed at smoothing out volatility in profits from quarter to quarter similar to that which occurred at rival Freddie Mac. According to the complaint, the true facts which were known by each of the defendants, but concealed from the investing public during the Class Period, were as follows: (1) that the Company employed accounting practices in violation of GAAP in order to maintain the appearance of stable earnings; (2) that the Company's officers, including the Individual Defendants, committed these violations in order to achieve performance bonuses; (3) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (4) that as a result, the value of the Company's net income and financial results were materially misstated at all relevant times. Then, on September 22, 2004, the Company issued a press release announcing that OFHEO had finished their special examination of Fannie Mae's accounting policies and practices that started approximately a year ago, following the problems at Freddie Mac. The OFHEO report described that Fannie Mae had engaged in improper activities including, but not limited to, the following: (i) applied accounting methods and practices that do not comply with GAAP in accounting for the enterprise's derivatives transactions and hedging activities; (ii) employed an improper 'cookie jar' reserve in accounting for amortization of deferred price adjustments under GAAP; (iii) tolerated related internal control deficiencies; (iv) in at least one instance deferred expenses apparently to achieve bonus compensation targets; and (v) maintained a corporate culture that emphasized stable earnings at the expense of accurate financial disclosures. In addition, the OFHEO's report to the Board stated that "the matters detailed in this report are serious and raise doubts concerning the validity of previously reported financial results, the adequacy of regulatory capital, the quality of management supervision, and the overall safety and soundness of the Enterprise." In reaction to the news of the accounting improprieties, the price of Fannie Mae stock dropped precipitously falling from $75.65 per share on September 22, 2004, to as low as $66.50 per share on September 23, 2004, on extremely heavy volume. For more details, contact Samuel H. Rudman or David A. Rosenfeld of Lerach Coughlin Stoia Geller Rudman & Robbins LLP by Phone: 800-449-4900 by E-mail: wsl@lerachlaw.com or visit their Web site: http://www.lerachlaw.com/cases/fanniemae/ FEDERAL NATIONAL: Schiffrin & Barroway Files DC Securities Suit --------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP initiated a class action lawsuit in the United States District Court for the District of Columbia on behalf of all those who purchased publicly traded securities of the Federal National Mortgage Association (operating as Fannie Mae) (NYSE: FNM) ("Fannie Mae" or the "Company") between October 11, 2000 and September 22, 2004, inclusive (the "Class Period"). The complaint charges Fannie Mae, Franklin D. Raines, J. Timothy Howard, and Leanne G. Spencer with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts known to defendants or recklessly disregarded by them: (1) that the Company applied accounting methods and practices that do not comply with GAAP in accounting for the enterprise's derivatives transactions and hedging activities; (2) that the Company had materially understated its accrued cost-of-access liability by $50-$80 million; (3) that the Company used "cookie jar" accounting wherein Fannie Mae arbitrarily distributed current gains to subsequent quarters in a bid to keep its revenue and earnings growth steady; (4) that the Company deferred expenses to achieve bonus compensation targets; (5) that the Company had insufficient and inadequate internal controls; and (6) that as a result, the value of the Company's net income and financial results was materially understated at all relevant times. On September 22, 2004, Fannie Mae, prior to the opening of the market, disclosed, in brief, the findings of the Office of Federal Housing Enterprise Oversight ("OFHEO") report. The report revealed that Fannie Mae was engaged in inappropriate accounting practices. News of this shocked the market. Shares of Fannie Mae fell $4.96 per share, or 6.56 percent, to close at $70.69 per share on unusually high trading volume. After the market closed on September 22, 2004, OFHEO released the complete report detailing Fannie Mae's inappropriate accounting practices. The market reacted swiftly. The next trading day shares of Fannie Mae fell an additional $3.24 per share, or 4.58 percent, by noon on September 23, 2004. For more details, contact Marc A. Topaz, Esq. or Darren J. Check, Esq. of Schiffrin & Barroway, LLP by Phone: 1-888-299-7706 or 1-610-667-7706 or by E-mail: info@sbclasslaw.com ST. PAUL TRAVELERS: Chitwood & Harley Lodges MN Securities Suit --------------------------------------------------------------- The law firm of Chitwood & Harley LLP initiated a securities fraud class action complaint in the United States District Court for the District of Minnesota on behalf of all Travelers Property Casualty Corp. ("Travelers") Class A and Class B shareholders whose shares of Travelers were automatically exchanged for shares of The St. Paul Travelers Companies, Inc. on or about April 1, 2004 (NYSE: STA - News) ("St. Paul") (the "Class"). The lawsuit was filed against Travelers, St. Paul, St. Paul Travelers and its top executives, CEO Jay Fishman and CFO Jay Benet; St. Paul's former CFO Thomas Bradley; and Travelers' former CEO, Robert Lipps. The action arises out of the merger ("the Merger") between Travelers and St. Paul pursuant to which Travelers shareholders received shares of St. Paul Travelers stock at a predetermined exchange ratio. The merger was approved based on representations contained in a joint Proxy Statement and Registration Statement issued on February 13, 2004. The Complaint alleges that both Travelers and St. Paul negligently failed to disclose in that document that St. Paul utilized a markedly different method for calculating insurance reserves than that utilized by Travelers and that applying Travelers' methodology, as was required, would result in the necessity of having to increase reserves on St. Paul's insurance policies by over $1 billion - approximately 12 percent of the value of St. Paul as determined by the merger consideration. On June 17, 2004, news regarding this issue began to trickle out to shareholders, and St. Paul Travelers stock began to decline, falling from $41.10 on that date to $35.66 on July 23, 2004, the date the size of the needed reserve adjustment - $1.6 billion - was first announced. Thus, in a matter of weeks, St. Paul Travelers shares declined in market value by an astounding $3.66 billion. Defendants St. Paul and St. Paul Travelers (its successors in interest due to the Merger) are alleged to have violated Sections 11 of the Securities Act of 1933, which provides for liability without fault for any material misrepresentations in or omissions from the Registration Statement that harmed shareholders. The Complaint asserts that defendants Fishman and Bradley likewise violated Section 11 by failing to conduct a reasonable investigation into the adequacy of the disclosures in the Registration Statement concerning St. Paul's reserves. All defendants are also charged with violations of Section 14 of the Securities Exchange Act of 1934, which prohibits the solicitation of proxies for a shareholder vote by means of a materially false or misleading proxy statement containing misrepresentations or omissions. For more details, contact Nichole B. Adams, Esq. by Phone: 1-888-873-3999, ext. 4873 by E-mail: nba@classlaw.com or visit their Web site: http://www.classlaw.com TEAM TELECOM: Glancy Binkow Lodges Securities Fraud Suit in NJ --------------------------------------------------------------- The law firm of Glancy Binkow & Goldberg LLP initiated lawsuit was in the United States District Court for the District of New Jersey on behalf of a class (the "Class") consisting of all persons who purchased or otherwise acquired securities of Team Telecom International Ltd. ("TTI" or the "Company")(Nasdaq:TTIL) between May 15, 2001 and November 14, 2002, inclusive (the "Class Period"). The Complaint charges, among others, TTI and certain of the Company's executive officers with violations of federal securities laws. Plaintiff claims that defendants' omissions and material misrepresentations concerning TTI's operations and performance artificially inflated the Company's stock price, inflicting damages on investors. TTI is an Israeli corporation headquartered in Petach Tikvah, Israel, and a provider of network management systems, operations support systems and business support systems for communications service providers. The Complaint alleges that throughout the Class Period TTI engaged in a systematic scheme of accounting fraud to maintain the facade of a steadily growing enterprise. In order to facilitate this appearance, the Company engaged in a series of flagrant violations of generally accepted accounting principals ("GAAP"), including, but not limited to, improperly classifying assets and liabilities, improperly failing to report its subsidiary's earnings on a consolidated basis and prematurely and improperly recognizing revenues. On November 12, 2002, a Company press release announced TTI's third quarter 2002 financial results. The press release announced revenues for the quarter of $10.3 million, compared with $16.0 million for the third quarter of 2001, and an operating loss of $6.8 million for the quarter, versus an operating profit of $3.3 million in the year-ago quarter. Net loss for the quarter was $6.1 million, or a loss of $0.51 per diluted share, versus a net profit of $3.7 million, or $0.32 per diluted share, in the prior year. This news shocked the market, causing TTI shares to plummet more than 28% on the same day the financial results were announced, November 12, 2002, and an additional 7% on heavy trading for the two days following the announcement. For more details, contact Michael Goldberg, Esq. of Glancy Binkow & Goldberg LLP by Mail: 1801 Avenue of the Stars, Suite 311, Los Angeles, CA 90067 by Phone: (310) 201-9150 or (888) 773-9224 or by E-mail: info@glancylaw.com TECO ENERGY: Shepherd Finkelman Files Securities Suit in M.D. FL ---------------------------------------------------------------- The law firm of Shepherd, Finkelman, Miller & Shah, LLC initiated a lawsuit seeking class action status in the United States District Court for the Middle District of Florida on behalf of all persons (the "Class") who purchased the securities of TECO Energy, Inc. (NYSE: TE - News; "TECO") between October 30, 2001 and February 4, 2003 (the "Class Period"), including anyone who purchased in the October 10, 2002 or June 5, 2002 equity offerings or the January 10, 2002, May 8, 2002 or January 10, 2002 debt offerings. The Complaint alleges that, during the Class Period, Defendants, TECO, Robert D. Fagan, and Gordon L. Gillette, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Specifically, the Complaint alleges that: (1) TECO is a holding company for regulated utilities and other unregulated businesses; (2) TECO owns no operating assets but holds all of the common stock of Tampa Electric Company directly or indirectly; (3) Defendants concealed problems with several independent power plant construction ventures for which TECO would ultimately be fully responsible, including the Company's full exposure to the bankruptcy of Enron Corporation, causing TECO shares to trade at artificially inflated levels and permitting defendants to sell over $4.2 million of their own personally held stock and to raise over $792 million selling equity securities in the capital markets during the Class Period; (4) as a result of a series of events in late 2002 and early 2003, the complex financing scheme that the Company had developed began to unravel as several large projects and their liabilities were "put" to TECO, thereby moving hundreds of millions of dollars of off- balance sheet debt onto TECO's balance sheet and resulting in the Company taking over a billion dollars in impairment charges; and (5) these events and the others described in the Complaint caused the price of TECO's common stock to plummet from a Class Period high of over $28 per share on April 23, 2002 to below $13 per share on February 4, 2003, erasing hundreds of millions of dollars in market capitalization. For more details, contact Scott R. Shepherd, Esq. or James E. Miller, Esq. by Phone: 877/891-9880 or 866/540-5505 by E-mail: sshepherd@classactioncounsel.com or jmiller@classactioncounsel.com or visit their Web site: http://www.classactioncounsel.com THORATEC CORPORATION: Marc S. Henzel Files Securities Suit in CA ---------------------------------------------------------------- The law offices of Marc S. Henzel initiated a class action lawsuit was filed in the United States District Court for the Northern District of California on behalf of purc hasers of Thoratec Corporation (NASDAQ:THOR) publicly traded securities during the period between April 28, 2004 and June 29, 2004 (the "Class Period"). The complaint charges Thoratec and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Thoratec is the leading supplier of implantable heart pumps and left ventricular assist devices. The Company manufactures these circulatory support products for use by patients with congestive heart failure, including "end-stage" patients. Traditionally these products have been used in such patients as a "bridge to transplant," for patients awaiting a heart transplant. In contrast, "Destination Therapy," or permanent support, is the Company's flagship new treatment option for patients with end-stage heart failure The Company claims that its HeartMate XVE ("HeartMate") is an approved ventricular assist device designed to provide permanent support for these patients. The Complaint alleges that during the Class Period, defendants made a number of false and misleading statements regarding expected sales and the market for the HeartMate as a "Destination Therapy" treatment for end- stage heart failure patients. As a result of these statements, Thoratec's stock traded at artificially inflated levels and defendants were able to complete a $143.7 million note offering. According to the complaint, during the Class Period defendants knew but concealed from the investing public the following adverse material facts: (1) even as the Company estimated that as many as 100,000 patients per year in the U.S. could be helped by their new Destination Therapy treatment option, the actual "true" market for the product was far less than claimed, as it was severely constrained by limited reimbursement dollars available under Medicare and Medicaid service guidelines; (2) although the defendants claimed that there were approximately 900 hospital centers in the U.S. qualified for the practice of Destination Therapy and implantation of the HeartMate, in fact less than 75 centers have been designated as Medicare-approved for Destination Therapy; (3) Medicare had rigid preset reimbursement guidelines and schedules for Destination Therapy that could only translate into a serious negative impact on the Company's FY2004 sales projections for the HeartMate; (4) cardiothorasic surgeons were rejecting and/or not accepting the HeartMate as a viable device for Destination Therapy patients because of issues with the device's reliability in a long-term setting; (5) the demand for the Company's Destination Therapy implants was not growing at the rate claimed; (6) the Company's Destination Therapy implant estimate for FY2004 of between 300 to 500 pumps was grossly overstated and was internally projected to be a fraction of this estimate; (7) the Company's FY2004 projections of $190-$200 million were overstated by tens of millions of dollars; (8) not only were CMS reimbursement charges delaying the number of implants, implantation centers and medical professionals had delayed any significant expansion of the existing implant programs until after October 1, 2004 (the expected date of the availability of a significant increase in the CMS reimbursement rate); and (9) sales of the HeartMate implants would be depressed until Q4 2004, and as a result, the Company's earnings shortfall experienced in Q1 2004 (versus Q4 2003 and Q1 2003) would not be made up for nearly one year, until Q1 2005, at best. On June 29, 2004, after the market closed, Thoratec released its preliminary results for the quarter ended June 30, 2004. These results were much worse than previous forecasts. On this news the price of Thoratec stock dropped precipitously to $10.74 per share, a drop of more than 25% from the previous day's close, on extraordinarily heavy volume of over 11 million shares. For more details, contact Marc S. Henzel, Esq. of the law offices of Marc S. Henzel by Mail: 273 Montgomery Ave, Suite 202 Bala Cynwyd, PA 19004-2808 by Phone: (888) 643-6735 or (610) 660-8000 by Fax: (610) 660-8080 by E-mail: Mhenzel182@aol.com or visit their Web site: http://members.aol.com/mhenzel182 WET SEAL: Schiffrin & Barroway Files Securities Fraud Suit in CA ---------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP initiated a class action lawsuit in the United States District Court for the Central District of California on behalf of all securities purchasers of The Wet Seal, Inc. (Nasdaq: WTSLA) ("Wet Seal" or the "Company") from January 7, 2004 through August 19, 2004 inclusive (the "Class Period"). The complaint charges Wet Seal, Peter D. Whitford, Joseph E. Deckop, and Irving Teitelbaum with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts, which were known to defendants or recklessly disregarded by them: (1) that the Company's strategic initiatives plan was not strengthening the Company's corporate standing. In fact, the Company's strategic initiatives plan was a complete and total disaster that was leading the Company into financial ruin; (2) that demand for the Company's products was based on deep-discounting and that without deep-discounting its products, demand for such was at an all time low; and (3) that as a result of the above, the Company's projections, outlooks, and positive statements, were lacking in any reasonable basis when made. On August 19, 2004, Wet Seal, after the market closed, shocked the market by reporting that net loss from continuing operations of $3.20 per share for the second quarter ended July 31, 2004. Following this post-market announcement, shares of Wet Seal shed $1.25 per share, or 59.52 percent, to close at $0.85 per share on unusually high trading volume on August 20, 2004. For more details, contact Marc A. Topaz, Esq. or Darren J. Check, Esq. of Schiffrin & Barroway, LLP by Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone: 1-888-299-7706 or 1-610-667-7706 or by E-mail: info@sbclasslaw.com WIRELESS FACILITIES: Murray Frank Files CA Stock Fraud Lawsuit -------------------------------------------------------------- The law firm of Murray, Frank & Sailer LLP initiated a class action lawsuit in the United States District Court for the Southern District of California on behalf of all purchasers of the common stock of Wireless Facilities Inc. (Nasdaq:WFII) ("Wireless" or the "Company") from April 26, 2000 through August 4, 2004, inclusive (the "Class Period"). The complaint charges Wireless, Masood Tayebi, Terry Ashwill, Daniel Stokely, Eric DeMarco, and Thomas Munro with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts known to defendants or recklessly disregarded by them: (1) that the Company had materially underreported its burgeoning foreign tax burden; (2) that as a consequence of the foregoing, the Company materially inflated its net income or loss by 3-8 percent or $10-12 million; (3) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (4) that as result of the above, the Company's financial results were materially inflated at all relevant times. On August 4, 2004, Wireless reported results for the second quarter of fiscal year 2004. In addition, the Company announced that it intends to restate its financial statements filed on Form 10-K for the years 2001 through 2003 to accrue for certain foreign tax contingencies. News of this shocked the market. Shares of Wireless fell as much as, 30% and reached at one point on August 5, 2004, its 52 week low of $4.61 per share on unusually heavy trading volume. At the end of the trading day, shares of Wireless fell $1.96 per share or 28.08 percent to close at $5.02 per share. For more details, contact Eric J. Belfi or Aaron D. Patton of Murray, Frank & Sailer LLP by Phone: (800) 497-8076 or (212) 682-1818 by Fax: (212) 682-1892 or by E-mail: info@murrayfrank.com WIRELESS FACILITIES: Spector Rosemna Files Securities Suit in CA ---------------------------------------------------------------- The law firm of Spector, Roseman & Kodroff, P.C. initiated a securities class action lawsuit in the United States District Court for the Southern District of California, on behalf of purchasers of the common stock of Wireless Facilities, Inc. ("Wireless" or the "Company") (Nasdaq: WFIIE) between April 26, 2000 through August 4, 2004, inclusive (the "Class Period"). Included in the class are those persons who acquired shares of Wireless through its acquisitions of Questus, Davis Bay, Defense Systems, High Technology Solutions, Telia Academy and Telia Contracting. The Complaint alleges that defendants violated the federal securities laws by issuing materially false and misleading statements contained in press releases and filings with the Securities and Exchange Commission during the Class Period. Specifically, the Complaint alleges that Wireless, an independent provider of outsourced communications and security for the wireless communications industry, and certain of its officers and directors issued materially false statements concerning the company's financial condition. It further alleges that Wireless failed to disclose and misrepresented the following material adverse facts: (1) that Wireless had materially under-reported its burgeoning foreign tax burden; (2) that as a consequence of the foregoing, Wireless materially inflated its net income by 3% to 8% or $10- 12 million; and (3) that Wireless lacked adequate internal controls and was therefore unable to ascertain its true financial condition. On August 4, 2004, Wireless reported results for the second quarter of fiscal 2004. It also announced that it intends to restate its financial results filed on Form 10-K for the years 2001 through 2003 to accrue for certain foreign tax contingencies. On this news, shares of Wireless plummeted to $5.02 per share, representing a decline of approximately 28%. For more details, contact Robert M. Roseman by Phone: 888-844-5862 by E-mail: classaction@srk-law.com or visit their Web site: http://www.srk-law.com WORLD INFORMATION: Schatz & Nobel Files Securities Lawsuit in NY ---------------------------------------------------------------- The law firm of Schatz & Nobel, P.C. initiated a lawsuit seeking class action status in the United States District Court for the Southern District of New York on behalf of all persons who purchased the securities of World Information Technology Inc. (OTC: WRLT) ("World Information Technology") between January 3, 2003 and March 16, 2004 (the "Class Period"). The Complaint alleges that during the Class Period World Information Technology reported artificially inflated sales, accounts receivable and net income. The truth was partially revealed when their outside auditor, Beckstead & Watts, LLP, resigned in January, 2004. Then, on March 16, 2004, the Securities and Exchange Commission temporarily suspended trading of World Information Technology securities due to the inaccuracy and incompleteness of its financial statements. For more details, contact Wayne T. Boulton of Schatz & Nobel, P.C. by Phone: (800) 797-5499 by E-mail: sn06106@aol.com or visit their Web site: http://www.snlaw.net ZIX CORPORATION: Schatz & Nobel Files Securities Suit in N.D. TX ---------------------------------------------------------------- The law firm of Schatz & Nobel, P.C. initiated a lawsuit seeking class action status in the United States District Court for the Northern District of Texas on behalf of all persons who purchased the securities of Zix Corporation (Nasdaq: ZIXI) ("Zix") between October 30, 2003 and May 4, 2004 (the "Class Period"). The Complaint alleges that Zix disseminated materially false and misleading statements regarding its business and prospects. In particular, the Complaint alleges that Zix concealed the fact that it was experiencing sluggish doctor adoption to "e- prescribing." The Complaint further alleges that claims that Zix would achieve 1,000 deployed active doctors by the end of Q4 2003 was false and misleading because physicians would be required to reconfigure their patient data, obtain wireless coverage and implement a wireless network, severely undercutting physician acceptance and deployment. Furthermore, the Complaint alleges that Zix's claim that it had 4,000 deployments already on order was false because, at the time of claim, the physicians' sites had not been surveyed to evaluate wireless/LANseeds. Finally, the Complaint alleges that new offerings from Zix's Elron acquisition were delayed as a result of integration problems. On May 4, 2004, Zix announced its results for Q1 2004 which included a larger than expected loss. On this news, Zix shares fell from an opening of $14.25 per share on May 4, 2004 to close at $8.89 per share on May 6, 2004. For more details, contact Nancy Kulesa or Wayne T. Boulton by Phone: (800) 797-5499 by E-mail: sn06106@aol.com or visit their Web site: http://www.snlaw.net ********* A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the Class Action Reporter. Submissions via e-mail to carconf@beard.com are encouraged. Each Friday's edition of the CAR includes a section featuring news on asbestos-related litigation and profiles of target asbestos defendants that, according to independent researches, collectively face billions of dollars in asbestos-related liabilities. ********* 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., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Glenn Ruel Se�orin, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2004. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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