/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/050127.mbx C L A S S A C T I O N R E P O R T E R Thursday, January 27, 2005, Vol. 7, No. 19 Headlines AMERICA ONLINE: Ex-Execs Plead Not Guilty To VA Stock Fraud Suit ARIZONA: State Deadline For English Lesson Funding Set Again CALIFORNIA: Low-Income Residents Sue Over Denied Medical Care CATHOLIC CHURCH: NY Diocese Acts V. 17 Priests on Abuse Charges CITY MORTGAGE: TX Court Hands Down $3.5M Consumer Fraud Judgment DOLLAR TREE: CA Court Approves $7 Mil Overtime Suit Settlement FRANCE: Commerce Head Advises V. Adoption of Class Action System HUFFY CORPORATION: Law Firms Lodge Securities Fraud Suits in OH ILLINOIS: Insurer Group Asks High Court To Adopt Suit Standards ILLINOIS: Court Approves Settlement For $200 Mil Lottery Scam INDIANA: ICLU Lodges Suit Over 5-Month Pendleton Prison Lockdown MARSH & MCLENNAN: Bonsignore & Brewer Lodges Lawsuit V. Insurers MCDONALD'S CORPORATION: Court Partly Reinstates Obesity Lawsuit MERRILL LYNCH: Woman Lodges CA Suit Over Variable Annuity Sales MIDLAND NATIONAL: Faces CA Suit Over Annuity Payment Schedules NATIONAL RESEARCH: MI Joins Settlement of Student Privacy Suit NEW YORK: Goldman Sachs, Morgan Stanley Pay $80M To Settle Suits NICOR INC.: Directors Okays Settlement Of IL Derivative Action ROWAN REGIONAL: Patient Launches Lawsuit Over Overcharging in NC SOUTH KOREA: Government, Uri Party To Pass Class Action Bill STANLEY MEDICAL: Widow Launches Lawsuit Over Brain Harvest in ME UNITED STATES: Insurers Seen As Beneficiaries of Tort Reform UNITED STATES: Senate Bill To Curb Various Wireless Lawsuits UNITED STATES: Tort Reform Bill Gains Momentum in Senate Floor VIOXX: Merck Withdraws Researcher From Study Critical of Vioxx New Securities Fraud Cases 51JOB INC.: Marc Henzel Lodges Securities Fraud Suit in S.D. NY AMERICAN BUSINESS: Squitieri & Fearon Lodges PA Securities Suit AUTOBYTEL INC.: Marc Henzel Commences Securities Suit in C.D. CA CONEXANT SYSTEMS: Chitwood Harley Lodges Securities Suit in NJ CONEXANT SYSTEMS: Wolf Haldenstein Lodges Securities Suit in NJ HUFFY CORPORATION: Marc Henzel Lodges Securities Suit in S.D. OH HUFFY CORPORATION: Schatz & Nobel Lodges Securities Suit in OH OFFICEMAX INC.: Marc Henzel Lodges Securities Suit in N.D. IL OSI PHARMACEUTICALS: Schoengold Sporn Lodges NY Securities Suit PHARMOS CORPORATION: Marc Henzel Lodges Securities Lawsuit in NJ PHARMOS CORPORATION: Schatz & Nobel Lodges Securities Suit in NJ SHURGARD STORAGE: Marc Henzel Lodges Securities Suit in W.D. WA SIPEX CORPORATION: Marc Henzel Lodges Securities Suit in N.D. CA TRAVELZOO: Marc Henzel Lodges Securities Fraud Suit in S.D. NY ********* AMERICA ONLINE: Ex-Execs Plead Not Guilty To VA Stock Fraud Suit ---------------------------------------------------------------- Two former executives at America Online and four PurchasePro executives pleaded innocent to stock fraud and other charges filed against them in the United States District Court in Alexandria, Virginia, the Associated Press reports. The suit names as defendants: (1) Kent Wakeford, 36, of New York, former executive director at AOL's business affairs unit, (2) John Tuli, 37, of Weston, Massachusetts, a former vice president in AOL's NetBusiness unit, (3) PurchasePro founder, Charles "Junior" Johnson, 43, of Las Vegas; (4) Christopher Benyo, 43, of Greer, S.C., a former PurchasePro senior vice president of marketing; (5) Joseph Michael Kennedy, 51, of Morristown, N.J., a former PurchasePro chief technology officer, and (6) Scott Wiegand, 36, a former PurchasePro general counsel. Six other former PurchasePro executives have previously pleaded guilty in the case. The six men requested a jury trial, which was set for August 15. Normally a trial date would have been set in March to ensure defendants' right to a speedy trial. However, U.S. District Judge Walter Kelley approved a request from prosecutors to push the trial date back to August, citing the case's complexity. Prosecutors said the case involves hundreds of complicated financial transactions and that they will present 45 to 50 witnesses at trial, which is expected to last five to eight weeks, AP reports. The suit alleges that in March and April 2001, the defendants conspired to falsely inflate quarterly revenue at PurchasePro so the company could meet revenue goals set by Wall Street analysts and create an appearance of success to investors and shareholders. The suit specifically alleges that PurchasePro gave AOL a stake in its company in exchange for AOL's help in selling PurchasePro's core product, a so-called "marketplace license" that was supposed to facilitate business-to-business transactions. When AOL was unable to sell the licenses, it cut secret side deals with companies to induce them to buy the licenses, and the executives engaged in various forms of deception to make it appear that the licenses had been sold in the first quarter of 2001, so PurchasePro could meet its quarterly revenue goals, according to the indictment, AP reports. The indictment cites e-mails sent between Wakeford and Johnson, the two principal figures in the alleged conspiracy, as evidence of the fraud. In one e-mail, Johnson expresses to Wakeford his displeasure that AOL is not living up to its end of the bargain and that AOL will leave him stuck "spinning a story for the street" about why PurchasePro's revenue came up short. "I expect AOL to step up to the plate and deliver for me like I have every time I have been asked," Johnson wrote. "I pray this can be resolved because I enjoy the relationship and that is why I sold my soul." ARIZONA: State Deadline For English Lesson Funding Set Again ------------------------------------------------------------ A federal judge in Tucson, Arizona has ordered the Legislature to act by the end of its 2005 session to increase funding to teach students English, the Associated Press reports. US District Judge Raner Collins said the Legislature has until April 30th or the end of the current regular session, whichever comes later, to comply with another judge's 2000 order for funding English-language learning programs. Legislative leaders have set an informal April 15th target for ending the session, however recent regular sessions have lasted into May and June. Judge Collins' order came one day after a hearing during which an attorney for parents in a class-action lawsuit asked him to set the deadline. A lawyer for state officials had asked Judge Collins to not set a deadline, since according to legislative leaders in a letter presented to him, they originally intended to have committees review a cost study being prepared for the state. CALIFORNIA: Low-Income Residents Sue Over Denied Medical Care ------------------------------------------------------------- A class action lawsuit has been initiated against the San Diego County Board of Supervisors and other agencies alleging that the County Medical Services denied medical services to low-income residents, which according to the five plaintiffs is a violation of California law, the Associated Press reports. According to the class action suit, the county of San Diego denies life-saving care to any resident whose monthly income exceeds $802 without considering the applicant's ability to pay a portion of the medical expenses. It specifically names the San Diego County Board of Supervisors, the San Diego County Health and Human Services Agency, the agency that administers the CMS program, Jean M. Shepard, director of the San Diego County HHSA and those responsible for administration of the CMS program throughout San Diego County. CATHOLIC CHURCH: NY Diocese Acts V. 17 Priests on Abuse Charges --------------------------------------------------------------- The Diocese of Rockville Centre on Long Island, New York defrocked eight priests and permanently suspended nine for sexual abuse allegations, the Associated Press reports. The diocese informed parishioners in a three-page letter that enumerated the status of the clergy abuse cases against 23 priests. Besides the 17 priests disciplined, Bishop William F. Murphy reported that three others await canonical trials, two more have been cleared and proceedings against another have been deferred, AP reports. Several victims' rights groups criticized the bishop, saying the identities of the disciplined priests should be made public. Diocese spokesman Sean Dolan told AP the names of those priests convicted on criminal charges have been disclosed. However, releasing the names of the suspended priests could violate their privacy because they have not been proven guilty. CITY MORTGAGE: TX Court Hands Down $3.5M Consumer Fraud Judgment ---------------------------------------------------------------- Texas Attorney General Greg Abbott hailed a $3.5 million judgment against a Texas-based business for bilking hundreds of Hispanic homeowners out of tens of thousands of dollars before its owners fled the United States. State District Judge Adolph Canales also issued a permanent injunction against City Mortgage Services, Inc. (not affiliated with CitiBank, CitiMortgage or Plano-based City Mortgage Group) and its principals, Gustavo Duarte and Alfredo Mendez, preventing the company from defrauding any more consumers with its "debt-reduction service." "This judgment shows Texas is serious about cracking down on brazen schemes that target the Hispanic community," said Attorney General Abbott. "Home ownership is one of our most cherished dreams, and I will not tolerate City Mortgage or any other fraudulent operation exploiting those aspirations for dishonest gain." The judge found City Mortgage violated the Texas Deceptive Trade Practices Act and the Texas Home Solicitation Act, and ordered the defendants to pay $3.3 million in civil penalties and $210,000 in restitution for the consumers. City Mortgage, which had offices in Austin, Dallas, Fort Worth and Houston, dispatched teams of door-to-door salespeople throughout Hispanic neighborhoods, touting the company's "debt- reduction service." City Mortgage promised consumers it would save them thousands of dollars by withdrawing money from their accounts and then forwarding to their mortgage company a larger monthly amount than their regular mortgage payment, thus reducing the number of years it took to pay off the loan. The company, which charged families between $700 and $1,000 to sign up for the service, failed to forward hundreds of payments and instead pocketed the money. City Mortgage shut down abruptly in 2004, leaving consumers owing their mortgage companies substantial amounts of money in missed payments and late fees. The owners fled the country and are being sought. The judge's order also found City Mortgage failed to inform consumers its service was something the homeowners could do themselves by dealing directly with their mortgage companies. Consumers who believe they have been victimized by City Mortgage or similar operations should contact the Office of the Attorney General at 1-800-252-8011. Assistance is available in English and Spanish. DOLLAR TREE: CA Court Approves $7 Mil Overtime Suit Settlement -------------------------------------------------------------- The Orange County California Superior Court granted preliminary approval to the settlement of the overtime class action filed against Dollar Tree Stores, Inc. (DLTR) by its California employees, Dow Jones Newswires reports. Former employee Michael Williams filed the lawsuit on behalf of managerial store associates of Dollar Tree and 98 Cents Clearance Centers employed in California from July 11, 1997 through December 11, 2004. The suit alleges that the Company's store managers and assistant managers in California should have been classified as non-exempt, hourly employees under California law. The suit further alleges that these employees should have received overtime compensation and should have taken rest and meal period breaks. The suit asks the court to certify the case as a class action on behalf of all California store employees who were misclassified as exempt, salaried employees, were denied rest and meal period breaks, or were required to work off the clock and, among other things, award overtime compensation to these employees and compensatory and punitive damages, an earlier Class Action Reporter story (September 14,2004) reports. The Company is required to pay $7.6 million to settle the suit. The Company said the settlement is still contingent on final court approval and other conditions and that it doesn't expect the settlement to have a material impact on its results of operations or financial condition in either its fourth quarter ending Jan. 29, 2005, or its current fiscal year or in future periods, Dow Jones Newswires reports. Dollar Tree said it decided to settle the suit after considering defense costs, potential damages should the plaintiffs prevail, and the continued diversion of management resources. Also, Dollar Tree Stores said if more than 10 class members opt out of the settlement, it can elect to revoke the settlement agreement. FRANCE: Commerce Head Advises V. Adoption of Class Action System ---------------------------------------------------------------- The president of the U.S. Chamber of Commerce warned France not to introduce U.S.-style class action lawsuits, saying they would damage the economy and shift money from "good companies to lawyers," the Financial Times reports. Thomas Donohue, whose organization represents numerous U.S. companies and associations, advised his hosts not to adopt legislation allowing groups of workers, shareholders, or consumers to pursue collective suits against companies, saying the system would be open to abuse. He also accused US law firms, who he did not name, of seeking to promote the culture of class action lawsuits abroad just as the Bush administration was making life tougher for them back home. In a press conference in Paris, he states, "We are closing down some of the unproductive and unfortunate practices that sprung up in the US, but these law firms are looking at the more productive companies in France and are going into the export business. Do not be fooled," the Financial Times reports. As previously reported in the January 10, 2005 edition of the Class Action Reporter, France's president, Jacques Chirac, shocked business leaders by announcing that he had instructed his government to introduce class action lawsuits, a move that was welcomed by French consumer groups, but fiercely criticized by big companies. According to the consumer groups, introduction of collective lawsuits would help redress the balance of economic power, currently weighted in favor of producers, since unlike the United States, France has few powerful consumer champions or shareholder rights groups and independent pension funds capable of taking on powerful companies. The government stressed though that it would learn from the American's experience and prevent any abuses of the system by unscrupulous lawyers. However, Ernest-Antoine SeilliSre, president of Medef, the French employers' federation which hosted Mr. Donohue, echoed the US Chamber of Commerce head's warnings, saying class action lawsuits could have "catastrophic consequences" and added "We are very active in trying to limit these measures," FT.com reports. HUFFY CORPORATION: Law Firms Lodge Securities Fraud Suits in OH --------------------------------------------------------------- After a second firm publicly made its intention to sue the company for alleged securities fraud violation, Huffy Corporation is now facing a pair of class-action lawsuits, the American City Business Journals reports. According to Lerach Coughlin Stoia Geller Rudman and Robbins LLP, it had filed a lawsuit against Huffy in the U.S. District Court for the Southern District of Ohio just sometime after Schatz and Nobel P.C., of Connecticut, announced it had done the same against the Miamisburg-based Huffy. Both lawsuits seek to represent those who bought Huffy stock between April 16, 2002, and August 13, 2004 and are also both seeking class-action status. The firms contend that following its purchase of McCalla Co. and Gen-X Sports Inc., federal securities law was breached by "false or misleading statements" from Huffy regarding the company's growth and long-term prospects. August 13 of last year is being used as the cutoff period for the lawsuits because that is the day Huffy announced it was making accounting adjustments of between $3.5 million and $5 million for customer deductions, credits and reserves for inventory valuation and doubtful account receivables for Huffy Sports Canada. That day, company stock declined from 58 cents per share to 35 cents per share. Three days later, Huffy said it was being delisted from the New York Stock Exchange and, in October, the company filed for Chapter 11 bankruptcy reorganization. Huffy's stock now trades on the Pink Sheets, and it continues daily operations. ILLINOIS: Insurer Group Asks High Court To Adopt Suit Standards --------------------------------------------------------------- Property Casualty Insurance Association of America is requesting the Illinois Supreme Court to enact a rule that would set standards for class-action lawsuit certifications that are in line with federal requirements and those in most other states, the Insurance Journal reports. In a written statement to the court, the Des Plaines, Illinois- based national insurance trade association expressed it support for the adoption of proposed Rule 225, which would tighten class-action requirements by requiring a court to find that the class action be "superior" to other methods of adjudicating the controversy and would require there be some reason for the class action to be filed in Illinois. The Rules Committee of the Illinois Supreme Court heard comments at a public hearing on the proposal, which is supported by several business organizations including the Illinois State Chamber of Commerce, the Illinois Business Roundtable, the Illinois Manufacturers' Association, and other companies and individuals. Greg LaCost, senior counsel and regional manager for PCI, told the Insurance Journal, "Rule 225 is a reasonable yet significant proposal. It does not seek to change the law in any radical way, but would codify the 'best practices' currently followed in many Illinois courts already. The rule would put Illinois class- action certification standards in line with Federal Rule 23 and rules of 38 other states." Mr. LaCost pointed out that Many Illinois courts do not certify classes that substantially involved residents and laws of other states, but rulings of non-conforming courts make the codification necessary to ensure fair and consistent treatment of class actions throughout the state. He also noted that "a class-action suit can be a valuable and appropriate litigation tool in many circumstances, but adopting this rule will prevent the forum shopping that can result in the so-called 'judicial hellholes' described by the American Tort Reform Association. Rulings of nonconforming courts make this codification necessary to ensure fair and consistent treatment of class actions throughout the state." ILLINOIS: Court Approves Settlement For $200 Mil Lottery Scam ------------------------------------------------------------- Madison County Circuit Judge Philip J. Kardis granted final approval to one of the country's most notorious class-action suits, perhaps ending its four-year odyssey through the courts, The St. Louis Post-Dispatch reports. The judge approved a settlement against Canadian con man James Blair Down, who was accused of bilking 400,000 people out of an estimated $200 million in a lottery scam in the 1990s. It calls for Mr. Down to pay $10 million. His victims would get full reimbursement if they have a receipt, canceled check or other proof of loss. Those without proof, but whose names are in a database that Mr. Down maintained, will get $100 to $200. Judge Kardis though delayed ruling on attorney's fees, one of the lawsuit's most contentious points. Jody Pope of New York, a lawyer representing a group of plaintiffs opposed to the settlement, challenged a proposed settlement that would have paid $1.5 million to plaintiffs counsel Stephen Tillery and Robert Forbes. Mr. also contended that the settlement was easy on Mr. Down by grossly underestimating his assets. Mr. Down, who now lives in Canada, pleaded guilty in 1998 of conspiring to mail gambling materials. He served a six-month prison term and paid about $12 million in restitution. Mr. Pope unsuccessfully moved to have Judge Kardis removed from the case, claiming that connections among the judge, Mr. Forbes and Mr. Forbes' wife, Linda Forbes, prejudiced the proceedings citing that before Judge Kardis was appointed to the bench in 1989, he was a partner with Mr. Forbes in the personal injury firm of Kardis & Forbes. Linda Forbes now serves as Judge Kardis' court reporter. The case began in 2000 when the South Carolina law firm of Ness, Motley filed suit in Madison County in 2000 on behalf of an Irish restitution company, Interclaim Holdings. The suit appeared to be a routine lawsuit in a county that has become a national leader in class-action filings, but the case quickly began generating controversy. Shortly after filing the suit, Ness, Motley negotiated a deal with Mr. Down, cutting out Interclaim. Under that settlement, conditionally approved in November 2001 in Madison County, Mr. Down was to pay the plaintiffs' lawyers $2 million and his 400,000 victims would split $6 million. But the victims would probably never claim anywhere near that amount because of a complicated claim form. Interclaim then sued Ness, Motley in federal court in Chicago over its handling of the case. Last summer a jury ordered the firm to pay $36 million, which has been upheld on appeal. This November 2001 settlement, since thrown out, prompted Lester Brickman, a law professor at Cardozo Law School in New York and a prominent critic of Madison County Circuit Court, to label it "the most abusive class-action settlement of the decade, if not the century," the St. Louis Post-Dispatch reports. Meanwhile in the most recent ruling, Judge Kardis issued a stinging rebuke to Mr. Pope, and denied the New York lawyer's request for official standing in the case as an objector to the settlement. "Objectors and their counsel have disrupted this proceeding," Judge Kardis wrote, "by litigating this matter in the press, and by moving for an unnecessary continuance." The decision came a day after the Illinois Supreme Court held a hearing in Chicago over concerns by business interests that the class-action process was being misused, particularly in Madison County, to benefit trial lawyers. INDIANA: ICLU Lodges Suit Over 5-Month Pendleton Prison Lockdown ---------------------------------------------------------------- The Indiana Civil Liberties Union (ICLU) is filing a class action against the state on behalf of more than 400 inmates who were under lockdown at the state prison in Pendleton, Indiana for nearly five months, the Associated Press reports. The suit, filed in the United States District Court in Indianapolis, Indiana, alleged that the lockdown left some inmates in conditions unfit for dogs. The ICLU say it amounted to cruel and unusual punishment. The ICLU says some inmates were forced to share a cell 12 feet by eight feet, except for three showers per week. A Department of Correction spokeswoman says the agency does not comment on pending litigation, AP reports. Over 1,400 inmates are housed in the prison about 25 miles northwest of Indianapolis. MARSH & MCLENNAN: Bonsignore & Brewer Lodges Lawsuit V. Insurers ---------------------------------------------------------------- In the latest legal action involving allegations of bid rigging and contingent commissions within the insurance industry, the Massachusetts-based law firm of Bonsignore & Brewer filed a civil suit in the U.S. District Court in Boston against Marsh & McLennan Cos. Inc., ACE Ltd., American International Group Inc., The Hartford Financial Services Group Inc. and MetLife Inc., the BI Daily News reports. The suit alleges that MMC, through its Marsh Inc. unit, engaged in a systematic bid-rigging scheme and conspiracy to steer business to ACE, AIG, The Hartford and MetLife, through collusive agreements that provided Marsh with contingent commissions. Filed on behalf of an individual Marsh client and seeks class action status, the suit is the latest legal action against the world's largest brokerage. It follows New York Attorney General Eliot Spitzer's fraud and bid-rigging lawsuit filed last October against MMC, in which AIG, ACE and The Hartford are cited in the bid-rigging allegations but are not named as defendants. It is seeking compensatory damages and the disgorgement of "all unlawfully obtained monies and profits." The factual allegations made in the latest suit are similar to the allegations made by Mr. Spitzer, however Robert J. Bonsignore of Bonsignore & Brewer law firm, stressed that his suit has a different focus, according to him, "We're tying to give the corporate death penalty to the few executives who skim off the top." MCDONALD'S CORPORATION: Court Partly Reinstates Obesity Lawsuit --------------------------------------------------------------- The United States 2nd Circuit Court of Appeals reinstated several claims in the controversial class action filed against McDonald's Corporation for making people fat, the Associated Press reports. The appellate court reinstated claims pertaining to deceptive advertising, saying that a lower court judge erred when he dismissed the suit. The suit, filed on behalf of overweight children who ate at two McDonald's branches in the Bronx borough of New York City, seeks unspecified damages from the firm over health problems that included diabetes, coronary heart disease, high blood pressure and elevated cholesterol. One of the plaintiffs is a 15-year- old who allegedly weighs 400 pounds and had diabetes after eating McDonald's food every day since he was six, an earlier Class Action Reporter story (January 24,2003) states. In January 2003, U.S. District Judge Robert Sweet dismissed the case, saying that the plaintiffs failed to show that customers of the world's largest fast-food chain were unaware that eating too much McDonald's fare could be unhealthy. "This opinion is guided by the principle that legal consequences should not attach to the consumption of hamburgers and other fast-food fare unless consumers are unaware of the dangers of eating such food," Judge Sweet said, the Class Action Reporter stated. "If consumers know . the potential ill health effect of eating at McDonald's, they cannot blame McDonald's if they, nonetheless, choose to satiate their appetite with a surfeit of supersized McDonald's products." However, the appeals court said New York's general business law requires a plaintiff to show only that deceptive advertising was misleading and that the plaintiff was injured as a result. The panel upheld other parts of the dismissal. The opinion, written by U.S. District Judge Jed Rakoff, Amalia Kearse and Guido Calabresi, concluded that Judge Sweet erred in his ruling when he concluded the plaintiffs had failed to show an adequate link between their consumption of McDonald's food and their alleged injuries. "This, however, is the sort of information that is appropriately the subject of discovery," which Sweet did not allow, the appeals panel wrote. The case was sent back to Sweet for further proceedings. In a statement, Oak Brook, Illinois-based McDonald's Corporation said "common sense tells you this particular case makes no sense," adding the ruling "simply delays the inevitable conclusion that this case is without merit," AP reports. A message left for the lawyer representing two children named in the lawsuit was not immediately returned. The suit, styled "Pelman, et al v. McDonald's Corp., et al, case no. 1:02-cv-07821-RWS," was initially filed in the United States District Court for the Southern District of New York, under Judge Robert W. Sweet. It was appealed at the United States 2nd Circuit Court of Appeals, under Judge Jed Rakoff. Lawyer for the plaintiffs is Samuel Hirsch, 350 Fifth Avenue Suite 2418, New York, NY 10118, Phone: (212) 947-3800. Lawyers for the defendants are Bruce Roger Braun, Bradley E. Lerman, Thomas J. Quigley of Winston & Strawn LLP (IL), 35 West Wacker Drive, Chicago, IL 60601, Phone: (312) 558-5600, Fax: (312)-558-5700, E-mail: bbraun@winston.com, blerman@winston.com or tquigley@winston.com; and Anne Kimball, 225 West Wacker Drive #2800, Chicago, IL 60606, Phone: (312) 201-2000 MERRILL LYNCH: Woman Lodges CA Suit Over Variable Annuity Sales --------------------------------------------------------------- Jane Westbrook of Santee initiated a second class-action complaint for violations of federal securities laws in U.S. District Court in San Diego, this time naming securities dealer Merrill Lynch & Co. Inc., the North County Times reports. Filed a day after William Dornon of Vista lodged a nearly identical complaint against financial services giant Morgan Stanley Inc., the suit alleges that the plaintiffs were induced by the companies through investment counselors to purchase securities known as variable annuities without being told that the firms would receive undisclosed sales commissions from the insurance companies issuing the annuities. Both Mr. Westbrook and Mr. Dornon are represented by San Diego attorney Ronald Marron, who said the practice of selling variable annuities to elderly investors is so common that he is seeking to have the suits recognized by the court as class actions. He has estimated that the number of people who may qualify as members of the class could be "from the thousands to the tens of thousands." As previously reported in the January 25, 2005 edition of the Class Action Reporter, Mr. Dornon's suit alleges that Morgan Stanley sold an insurance product called variable annuities to plaintiff as an investment without telling him that the insurance company was paying Morgan Stanley a fee for recommending and selling its product. A variable annuity is an insurance contract that is recognized under the federal Securities Act of 1933 as being an investment contract. The premium, usually paid as a lump sum at the beginning of the contract, is available for tax-deferred investment, usually in mutual funds, which are themselves made up of common stocks. The investments produce capital gains and earned interest, and usually the annuity includes a death benefit. Because of its makeup, the variable annuity can represent risk to the buyer, whose exposure is the up-front premium payment. He may or may not reap a financial reward in the end, and he may face considerable expense in the form of early termination charges if he does not hold the annuity to maturity. Ron Marron, attorney for the 77-year-old Mr. Dornon, told the North County Times contracts of that sort usually are not seen as wise investments for the elderly, whose immediate concern is preservation of assets and income production that can be accessed regularly. Mr. Marron told the North County Times, "I've never seen a variable annuity case that didn't involve a sale to an elderly person," and adds, "frankly, this is a simple case of elder abuse." The complaint further alleges that Morgan Stanley unjustly enriched itself by steering clients into the variable annuities, and that the company committed investment fraud. It also asks the court to certify the suit as a class action and asks for compensatory and punitive damages and for disgorgement of all the company's gains from the sale of variable annuities with undisclosed commission arrangements. California Department of Insurance spokesman Normal Williams declined to comment on Mr. Dornon's case directly. "We're not participating or taking any action on this complaint, so it's not something we're working on," Mr. Williams told the North County Times. "As far as the variable annuities issue is concerned, in a broad sense (Insurance Commissioner John Garamendi) is investigating a broad range that includes all broker activities." MIDLAND NATIONAL: Faces CA Suit Over Annuity Payment Schedules -------------------------------------------------------------- Midland National Life Insurance Company of West Des Moines, Iowa faces a lawsuit, charging it with selling annuities with payment schedules calling for payments to start long after the end of the purchasers' projected lifespans, the National Underwriter reports. Lawyer William Shernoff of Shernoff Bidart & Darras L.L.P. filed the suit, saying that life insurers should make some effort to compare annuity deferral periods with customers' life expectancies. Mr. Shernoff has joined with other lawyers to file a suit concerning the deferral period issue in a state court in Los Angeles, California. The lawyers are filing purportedly on behalf of a large class of older annuity purchasers who have bought contracts with long deferral periods. In the suit, Mr. Shernoff identifies one annuitant, John Migliaccio, who was 73 when he paid $43,000 for a Midland National annuity. Mr. Migliaccio, who has died, was scheduled to start receiving annuity payments when he was 115, Shernoff told the National Underwriter. "The aim of this class action is to stop the sale of such policies to senior citizens and to refund premiums to those who already have been sold such policies," Shernoff says in a statement about the Los Angeles suit. Other lawyers working on the suit include Howard Finkelstein and Stephen Basser. A Midland National spokesman declined to comment on the suit, The National Underwriter stated. "We've just received the complaint, and we haven't had a chance to review it," the spokesman said. NATIONAL RESEARCH: MI Joins Settlement of Student Privacy Suit -------------------------------------------------------------- Michigan has joined a multi-state settlement with a leading data collection company stemming from the Company's undisclosed sharing of high school students' personal information with marketers eager to reach the teen consumers, Attorney General Mike Cox announced in a statement. Under the terms of the settlement, the National Research Center for College and University Admissions (NRCCUA) will voluntarily pay $300,000 to the 42 participating states and change its practices to safeguard the privacy and security of student data. A Missouri not-for-profit corporation, NRCCUA regularly collects student data through surveys disseminated by high school teachers, guidance counselors, and the Internet. Instead of providing the data only to colleges, universities, and other education-related entities that were disclosed to students, NRCCUA also shared the data with businesses for non-educational purposes. "Protecting our children's personal information is essential, particularly when considering the dangers of identity theft," AG Cox said. "Parents and schools must be vigilant in teaching children not to give out their information to anyone who asks, whether in person, over the telephone, by mail, or on the Internet." The settlement requires that NRCCUA must: (1) Not misrepresent how personally identifiable student information will be collected, used or disclosed, or how the collection of the information is funded; (2) Disclose clearly and conspicuously why it collects personal information of students and describe the types of entities that may receive students' information; (3) Include disclosures in all privacy statements, questionnaires, survey instruments, and other documents; (4) Cease all future use of survey data if a parent (in the case of a minor) or an adult high school student requests that the student not complete the survey or directs NRCCUA to stop using information already collected; (5) Provide schools with a notice for parents that explains the survey and how parents may opt their children out of completing the survey, in the event NRCCUA changes its current practice and allows others to use its survey data for non-educational, marketing purposes. Parents and students wishing to restrict the use of students' information may contact their schools or the NRCCUA at http://www.nrccua.org. Tips on preventing identity theft are available on the Attorney General's Web site, http://www.michigan.gov/ag,or by calling the Consumer Protection Division's toll- free number, 1-877-765-8388. NEW YORK: Goldman Sachs, Morgan Stanley Pay $80M To Settle Suits ---------------------------------------------------------------- In a settlement with the Securities and Exchange Commission, Goldman Sachs and Morgan Stanley agreed to pay $40 million each to settle allegations that they sought commitments from customers to buy shares after an initial public offering in a move to support the price after the stock began trading, the New York Times reports. The settlement, which brings to a conclusion another chapter of regulatory scrutiny of the marketing and selling of hot new offerings in the technology boom of 1999 and 2000, is one of many alleged malpractices that Wall Street firms have settled with regulators, including awarding coveted shares of initial offerings to chief executives to secure lucrative investment banking business and accepting kickbacks in the form of inflated trading commissions from investors who received high-demand shares in initial public offerings. The SEC's complaints against Goldman Sachs and Morgan Stanley accused them of violating a rule that prohibits the offering underwriters from trying to induce investors to buy shares after trading begins. Since, the rule does not require proof of market manipulation or intent to manipulate such cases are contentious on Wall Street because underwriters also have an obligation to gauge demand for the shares when trading starts in the open market. Stephen M. Cutler, director of enforcement at the commission, told the Times Goldman Sachs and Morgan Stanley settled the complaints without admitting or denying wrongdoing, he also describe their decision to settle by saying, "These cases underscore the commission's resolve to ensure the integrity of I.P.O. markets by prohibiting conduct that could artificially stimulate demand or higher prices in the aftermarket - whether or not there is manipulative effect." In the complaints that were filed by the SEC, both firms communicated to prospective customers that they might get better allocations of a hot offering if they agreed to buy shares in the trading immediately afterward, when shares would typically rise sharply. The SEC complaints also outlined various examples of the firms' encouraging certain customers to increase the price at which they would agree to buy in this aftermarket. Commenting on the settlement, Melissa Stoneberg, a Morgan Stanley spokeswoman, told the Times "Since news of the settlement was first reported in June of last year, we have been working with the S.E.C. staff to finalize its terms and we are happy this is now resolved." For their part, Lucas van Praag, a Goldman Sachs spokesman, said the "firm does not comment on regulatory matters." The issue is a gray one for many on Wall Street, since part of an investment bank's responsibility in managing an initial public offering is to canvass its customers and determine whether they are interested in buying shares, how many a customer might want at a certain price and what that customer's intentions are with the stock. Corporate chief executives want customers interested in holding their stock, rather than buying and selling large quantities, which may cause the stock's price to fluctuate. Mark K. Schonfeld, the director of the SEC's Northeast regional office told the Times "The rule is written to prohibit attempts to induce and not just actual inducement," he also reiterates, "It's a protective rule." NICOR INC.: Directors Okays Settlement Of IL Derivative Action -------------------------------------------------------------- Nicor Inc.'s (NYSE:GAS) board of directors has approved a preliminary agreement to settle the shareholder derivative action brought in the Circuit Court of Cook County in August 2002 against certain Nicor directors and officers. The final settlement is contingent upon execution of a formal stipulation of settlement and approval by the court and entry of final judgment by the court. The defendants' agreement to the terms of the derivative settlement does not constitute an admission of liability. As part of the settlement, the Company has agreed to adopt certain new corporate governance policies and has acknowledged that the filing of the derivative action was a meaningful factor in the corporate governance and personnel changes made during the prosecution of the derivative action and in the directors and officers carriers' decision to make the payments described below. The new policies include strengthened independence requirements for directors, lead audit partner rotation requirements, additional regulatory and accounting training, outside board membership limitations, required interim reporting to the board and the general counsel regarding the company's compliance obligations to the Illinois Commerce Commission (ICC) and the adequacy of the company's ICC disclosures; and a minimum number of executive sessions of the independent directors outside the presence of management. The defendants have agreed to a payment of $3.5 million to the derivative plaintiffs' counsel in fees and expenses to be paid out of insurance proceeds. In April 2004, the Company announced that one of its directors and officers insurance carriers agreed to pay $29 million to a third party escrow agent on behalf of the company and its insured directors and officers to be used to satisfy liabilities and expenses associated with claims asserted against them in a securities class action, a shareholder derivative action, or related matters. Upon final court approval of the settlement of the shareholder derivative action, the escrow will be terminated and the company will receive approximately $25.5 million, which is the original escrow amount of $29 million reduced by the $3.5 million payment of derivative plaintiffs' counsel fees referenced above. In connection with the settlement, the Company has also entered into a Settlement Term Sheet with its excess insurance carrier, pursuant to which the excess insurance carrier agreed to pay the company $4 million upon final court approval of the settlement of the shareholder derivative action. Amounts related to the preliminary agreement to settle the shareholder derivative action, the amounts held in escrow, and the settlement with the excess insurance carrier, have not been reflected in the Company's previously reported earnings or its earnings guidance provided on November 4, 2004 as part of its earnings press release for the period ended September 30, 2004. The Company is in the process of determining the appropriate periods in which to include the foregoing amounts. ROWAN REGIONAL: Patient Launches Lawsuit Over Overcharging in NC ---------------------------------------------------------------- Rowan Regional Medical Center, in response to a former patient's allegation that the hospital overcharged her for treatment in its Emergency Department, said it would defend itself and its collection policy in court. Rowan Regional sued the patient in November 2004 -- more than a year after the patient's car accident, during which no payment was made on her bill. The counter suit against Rowan Regional was filed in Rowan County Court in North Carolina by a Salisbury woman who claims she was overcharged and not given an estimate of charges prior to being treated in the Emergency Department. Notice of the counter suit was served on Rowan Regional last Friday. The patient was brought to Rowan Regional following an automobile accident in June 2003. She was treated in the Emergency Department before being kept overnight for observation and released the next day. "The patient has made no effort to pay anything on her bill, despite repeated phone calls and letters from us," said Paula Tucker, Director of the Business Office at Rowan Regional Medical Center. "In fact, she never returned a phone call or responded to a letter from us in the 17 months between her treatment and when a lawsuit was finally filed against her." "Rowan Regional provided more than $8,542,000 in charity care to uninsured and self-pay patients in the last fiscal year (which ended September 30, 2004)," said Marlin Markham, Chief Financial Officer at Rowan Regional. "We would have been happy to help her work out a payment schedule if she had only responded to our requests for information." The patient's counter suit against Rowan Regional asks the court for class action status, and is similar to suits filed against other hospitals across the state and the nation in recent weeks. One of her claims is that Rowan Regional and other hospitals use two tiers of pricing, which keeps uninsured patients from reaping the benefits of volume discounts such as those negotiated by insurance companies for the people they insure. Rowan Regional's policy uses federal poverty guidelines to establish levels of payment, and the total amount to be paid by uninsured and self- paying patients for hospital services. Patients who don't have health insurance, or who aren't covered by Medicare, Medicaid or other government programs can request financial counseling to make payment arrangements. "For years, we've made financial counselors available to patients who needed consideration with bills, whether they had insurance or not," said Charles W. Elliott, Jr., Chief Executive Officer at Rowan Regional Medical Center. "Even with the new policy, we know some patients will be unable to pay a significant amount, and in some cases anything, on their hospital bills. We work with patients on a daily basis to make a careful review of their financial situation. We recognize the fact that some people are out of work or for other reasons are unable to pay medical expenses. "We and other hospitals always treat patients in the Emergency Department regardless of their ability to pay," Elliott said. "And we constantly urge our patients to let us know if their financial situation changes. But patients need to communicate with our Business Office if they have difficulties paying so that we can help them." Rowan Regional Medical Center is a private, not-for-profit, acute care hospital. It offers women's health services, cardiology, oncology, and inpatient rehabilitation services, extensive outpatient services, a 24-hour Emergency Department, hospice and home health services, and psychiatric services. SOUTH KOREA: Government, Uri Party To Pass Class Action Bill ------------------------------------------------------------ The South Korean government and the ruling Uri Party plan to pass the revised bill concerning the securities class action system next month, to help local companies prepare for the retroactive lawsuit regarding their past corporate wrongdoings, The Korea Times reports. Under the class action lawsuit system, small shareholders can file a lawsuit against listed companies involved in questionable market activities such as unfair disclosure, stock price manipulation, insider trading and accounting irregularities. A group of at least 50 shareholders holding a combined 0.01 percent of the company's outstanding shares are eligible to file lawsuits but the court's ruling is applied to all shareholders alike. The class action system was started in the United States in the 1960s to protect the rights of the individual. In 1990, Korea created a draft of the law, but the law was later shelved for 14 years, due to protests by businesses. Back in June 2003, the government agreed upon the introduction of the law in return for $2 billion in loans from the International Bank for Reconstruction and Development (IBRD). About 82 listed companies with at least 2 trillion won ($1.9 billion) in assets, 5.2 percent of the total listed firms on the Korea Stock Exchange and the Kosdaq Stock Market, are subject to the law from January 1, 2005 but the law will be applied to those with less than 2 trillion won from 2007, the Korea Times reports. Last December, the Legislation and Judiciary Committee of the National Assembly previously turned down the two-year postponement of the system with a vote of 5-3, with the result meaning companies with dubious records going back two to three years up until January 19 will be punished for their irregularities as well as any auditors who are involved. Prime Minister Lee Hae-chan on Monday chaired a policy consultation meeting attended by officials from the economy- related ministries and the governing party to discuss a number of economy-related bills, including the class action lawsuit, in an effort to successfully pass them at the National Assembly's special session next month. Both ruling and opposition party had initially decided to waive the retroactive securities class action lawsuit for one year regarding the past wrongdoings of listed companies such as accounting irregularities committed before Jan 19, 2004 when the lawsuit became law. The government and the Uri Party are now poised to extend the grace period for two more years until 2007, The Korea Times reports. Local businessmen have asserted that false accountings and other corporate wrongdoings made before January 19, 2004 should be exempt from the class action lawsuit, adding that the lawsuit should not be retroactive since most corporate balance sheets of local listed companies will show past records of false statements, according to the Korea Times. Large conglomerates such as Samsung Group expressed concerns that without the postponement of the lawsuit system, they would suffer countless class action suits and huge legal expenses, they added. However, officials at the Financial Supervisory Commission told the Korea Times that companies should not try to avoid responsibilities for their wrongdoings even if it happened before the class action lawsuit went into effect. STANLEY MEDICAL: Widow Launches Lawsuit Over Brain Harvest in ME ---------------------------------------------------------------- Alice Geary, 57, the widow of Raymond Geary, who died in a car crash on April 27, 2000, at the age of 54 and who had served on the City Council in the 1980s filed suit against a Bucksport man and others for "harvesting" her dead husband's brain for use in research without her consent, the Bangor Daily News reports. In her suit, Mrs. Geary claimed that Matthew Cyr of Bucksport improperly persuaded the State Medical Examiner's Office to release Mr. Geary's brain to a Bethesda, Maryland-based research firm. Mr. Cyr, a Bucksport police officer, was the state's funeral inspector during the late 1990s and early 2000s, he resigned had resigned from the state post in August, but remains a Bucksport officer. In an investigation last year, the Maine Sunday Telegram found that 31 of 99 brains sent from Maine to Stanley Medical Research Institute lacked the proper consent forms from family members. The suit claims that the institute, paid Mr. Cyr and others around the country $1.9 million in 2002 for brain collection. Mr. Cyr was paid $1,000 to $2,000 for each brain he sent to SMRI, according to the newspaper, for a total of about $150,000. SMRI supported research on schizophrenia and manic depression, and as of early 2001 "had reportedly shipped out 100,000 sections of brain tissue to researchers on several continents." The suit further claimed that "as of the summer of 2003, the laboratory was the repository of one of the largest brain collections in the world - numbering over 400 'specimens."' Mrs. Geary's suit seeks the return of her late husband's brain and other body parts, and asks the court to award actual and punitive damages. It named SMRI, its director, Dr. E. Fuller Torrey, and Lorie Stevens of Bucksport, Cyr's domestic partner as defendants as well. According to Mrs. Geary's complaint, Mr. Cyr called her on the evening of her husband's death, asking her to agree to donate her husband's organs. She had refused, hanging up on Mr. Cyr. The next day, Mrs. Geary claimed, she received another call from him. The suit further claims, "The call upset [her] and she told the caller no, that she was not interested and that she would not agree to donate her husband's organs. The caller mentioned something about the Stanley Institute and asked if she would agree to donate a small sample of tissue." Mrs. Geary insists she was clear with Mr. Cyr that she would not give her consent, the Bangor Daily News reports. Furthermore, Mrs. Geary believes that Mr. Cyr and his partner Mr. Stevens "filed and signed a document falsely stating that she consented to the donation of the brain and other organs," the suit claims. It also alleges that Mr. Cyr contacted the medical examiner's office before the autopsy "and told them he had obtained [her] consent for [Mr. Geary's] organs and tissue to be donated to SMRI." By reading the autopsy report, Mrs. Geary learned on December 8, more than four years after the funeral, that her late husband's "brain, dura, pineal, spleen, pituitary, blood and portions of other organs" were sent to SMRI. The suit points out that Maine law, adopted in 1969, requires that an organ donation by a spouse "be made by a signed document, or by telegraphic message, recorded telephonic message or telephonic message witnessed in writing by at least two people." Two Portland lawyers are exploring the possibility of launching a class-action lawsuit on behalf of other Maine families who believe organs from dead relatives were sent to SMRI without their consent, The Associated Press reported earlier this month. UNITED STATES: Insurers Seen As Beneficiaries of Tort Reform ------------------------------------------------------------ The insurance industry would be one of the top beneficiaries, if legislation limiting class-action lawsuits were passed this year, the CBS MarketWatch reports. The bill, which was introduced in the Senate recently, would transfer more class-action suits to federal courts from state courts. It's designed to prevent venue shopping, a tactic in which class action complaints are filed in local jurisdictions that have a history of making companies pay huge damages to plaintiffs. Class-action lawsuits are filed on behalf of groups of plaintiffs with similar grievances. They're designed to cut the cost of litigation because individuals group together to file one complaint rather than numerous suits. However, according to the Property Casualty Insurers Association of America, a trade group, the number of class-action suits has surged by more than 1,000 percent in the past decade, boosting litigation costs for U.S. consumers and businesses to more than $200 billion a year. The trade group further stated that while businesses carry the direct burden, many of these litigation costs are covered by insurance and as costs spiral, the rates insurers charge on policies can end up being inadequate. It pointed out that this type of uncertainty also makes it difficult to set prices on new policies. Joseph Annotti, a spokesman for the trade group, also told CBS Marketwatch, "This bill will hopefully lend more predictability to future litigation costs and insurers crave that predictability. Predictable costs help insurers more accurately set rates and leads to more stable insurance prices." However, Robert Bonsignore, a partner at Medford, Massachusetts- based law firm Bonsignore & Brewer, contended that shifting more class-action suits to federal courts would discourage victims from filing claims because the system is more complicated and time-consuming. He adds, "This legislation is corrupt and is being pushed forward by big businesses that want immunity from illegal acts. It will be the beginning of the end for insurers' liabilities." A similar class-action bill failed by one vote in the Senate last year, however, the insurance industry is now more hopeful after Republicans gained seats in the November elections. Dennis Kelly, a spokesman for the American Insurance Association told CBS Marketwatch, "The fact that the Senate Republican leadership has made this class-action reform one of its top priorities is very encouraging, however, we do not see this gaining passage easily and we're ready to fight off any amendments that would weaken the bill." Furthermore, success with this bill may also smooth the passage of other insurance-friendly legislation, such as the formation of a multi-billion dollar asbestos fund and the capping of damages related to medical malpractice, Mr. Annotti told CBS MarketWatch. UNITED STATES: Senate Bill To Curb Various Wireless Lawsuits ------------------------------------------------------------ Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, has introduced legislation that could curb consumer and health class-action suits brought against the wireless industry in recent years, the RCR Wireless News reports. In remarks to the Senate, Sen. Grassley stated, "In the 109th Congress we once again have the opportunity to stop class-action lawyers from being able to snag millions of dollars while class- action members receive a worthless coupon or even nothing. Many class actions are just frivolous lawsuits filed by crafty lawyers who want to make a quick buck and do little or nothing for the consumers these cases are allegedly supposed to help. We need to put an end to the frivolous litigation tax that everyone ends up paying." Though he chairs the Senate Finance Committee the Judiciary Committee would handle his Class Action Fairness bill. Part of a broader Republican tort reform campaign and supported by the Bush administration, the class-action bill is the top priority for the GOP congressional leadership in 2005. The bill, which consumer groups and trial lawyers have vehemently opposed, would create federal jurisdiction over class actions in which the aggregate amount in controversy exceeds $5 million and any member of a plaintiff class is a citizen of a different state from any defendant. Under those provisions alone, many past and present wireless suits would be barred from state courts. While the bill would maneuver many suits to federal court, it would not entirely prevent state class-action litigation, since one provision in the bill keeps local controversies in state court and allows removal of class actions that are truly inter- state in character to federal court. Under this provision, cases would stay in state court if the plaintiffs have sued at least one in-state defendant whose conduct forms a significant basis of their claims, if the principal injuries occurred in the state where the suit is brought, and if no class action has been filed alleging the same claims against any of the defendants in the last three years. UNITED STATES: Tort Reform Bill Gains Momentum in Senate Floor -------------------------------------------------------------- A bill aimed at curbing class action lawsuits gained ground in the U.S. Senate as the leader of the Republican majority set debate for the week of February 7 and the top Democrat said he thought the measure would pass, Reuters reports. Senate Majority Leader Bill Frist told reporters, "My goal is to get a class action (bill) on that week of February the 7th," Reuters reports. A long-time dream of the U.S. corporate community and favored by President George W. Bush, the bill would move most large multi-state class action lawsuits into federal court. Sponsored mostly by Republicans, the bill would keep plaintiffs from shopping for friendly court forums. However, critics argue that the proposal will make it harder for some class action suits to be heard at all, especially multi- state consumer cases, because some federal courts have refused to take such cases. Class action reform bills have passed the House of Representatives three times in six years, but the Senate has always blocked them, last year alone the bill stalled in a procedural snarl even though more than 60 senators supported it. The Senate's new minority leader, Democrat Harry Reid of Utah, has indicated a willingness to let the bill come up for debate and a vote if the House of Representatives, which has a larger Republican majority, will accept the Senate version. Asked on whether he thought the bill would pass the Senate this time around, the democrat answered simply "yes," Reuters reports. Senate Judiciary Committee Chairman Arlen Specter, a Pennsylvania Republican, stated that he hoped his panel would approve the legislation on February 3, Reuters reports. In the House, aides said lawmakers would carefully consider whatever the Senate does. A spokesman for House Judiciary Committee Chairman Jim Sensenbrenner, a Wisconsin Republican told Reuters, "I'd say, the Senate passing class action reform would be a tremendous achievement. Class action supporters are extremely encouraged by what we are hearing in the Senate, which has been the obstacle in the past." Class action lawsuits allow plaintiffs to combine their claims into one lawsuit against a common defendant. In addition to shifting larger class actions to federal court, the bill would limit coupon settlements in which plaintiffs often receive little in compensation while lawyers get big fees. Though opposed by trial lawyers and a coalition of civil rights, environmental and consumer groups, who are expected to try to amend the bill, the Republican majority on Sen. Specter's committee and the Senate floor could however make this difficult. VIOXX: Merck Withdraws Researcher From Study Critical of Vioxx -------------------------------------------------------------- Pharmaceutical firm Merck & Co. forced on of its researchers to remove her name from a study linking Vioxx to heart attacks, then criticized the findings before ultimately pulling the arthritis drug from the market last fall, two of the scientist's colleagues said, according to AP. The Archives of Internal Medicine contains several studies about Vioxx and Celebrex, drugs belonging to a class called Cox-2 inhibitors. The painkillers were once heavily promoted as stomach-friendly alternatives to aspirin, but on September 30, Merck withdrew Vioxx from the market because of a study suggesting it doubled the risk of heart attack and stroke. Last month, Celebrex maker Pfizer Inc. halted its ads after a study linked high doses with increased heart and stroke risks. The drugs are now under congressional and regulatory scrutiny/ The journal contains several studies about the drugs, which were also heavily promoted painkillers advertised as stomach-friendly alternatives to aspirin. They are under congressional and regulatory scrutiny. One new report echoes previous data suggesting that in some older patients the drugs might not offer as much protection as thought against gastrointestinal problems. A separate study suggests they have been over-prescribed, frequently to patients at low risk for GI problems. Other research supports evidence that Vioxx increases some patients' blood pressure, AP reports. The Archives reports, published Monday, come just weeks before a February 16-18 Food and Drug Administration meeting on the safety of all Cox-2 drugs. The watchdog group Public Citizen petitioned the FDA to immediately remove from the market Celebrex and a related drug, Bextra, because of the potential heart risks. Critics contend Merck attempted for years to suppress Vioxx risks found in numerous studies. The company maintains it has acted responsibly. "Even after funding and agreeing with the design of the study, Merck publicly discredited our findings," Drs. Daniel Solomon and Jerry Avorn of Boston's Brigham and Women's Hospital wrote in this week's Archives of Internal Medicine, according to AP. Merck spokeswoman Anita Larsen confirmed the Company's action, saying Merck believed the study's conclusions "were not supported by the data," AP reports. The incident came about six months before another study prompted the drugmaker to withdraw Vioxx. The author-removal incident, mentioned in previous news reports, involved a Merck study of more than 50,000 patients age 65 and older taking Vioxx, Celebrex, traditional painkillers or none of the drugs. The results, published last year in the journal Circulation, showed Vioxx patients faced a higher heart attack risk than the other groups. When the results came in, "Merck required a co-author who was an employee of the company to remove her name from the article immediately prior to publication," Solomon and Avorn said in an Archives editorial, AP reports. Dr. Solomon identified the co-author as Merck epidemiologist Carolyn Cannuscio. She did not respond to e-mail and telephone requests for comment, according to AP. Ms. Larsen told AP publication policies at Circulation and Merck allowed the drugmaker to remove the employee's name "if the authors draw conclusions that are not supported by the data." She said Cannuscio agreed with Merck's decision. New Securities Fraud Cases 51JOB INC.: Marc Henzel Lodges Securities Fraud Suit in S.D. NY --------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the United States District Court for the Southern District of New York on behalf of all persons who purchased the publicly traded securities of 51Job, Inc. (Nasdaq: JOBS) between November 4, 2004 and January 14, 2005. The Complaint alleges that 51Job violated United States securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that 51Job failed to disclose the fact that it improperly recognized recruitment advertising revenue in 3Q04. Moreover, the Complaint alleges 51Job failed to disclose the fact that the drop in late- December advertising suggested that many Chinese firms have adopted a more Western schedule for hiring and, as a result of this market shift, 51Job was forced to sharply lower its profit outlook. On January 18, 2005, 51Job announced softness in sales for the latter part of the month of December 2004, the exit of the peripheral stationery and office supplies business and updated guidance for the fourth quarter of 2004. It disclosed that fourth quarter total revenues are now expected to be between RMB117 and RMB121 million, compared with RMB140 million, the low-end of its previous forecasted range. On this news, shares of 51Job fell from a close of $43.82 per share on January 14, 2005, to close at $28.32 per share on January 18, 2005, the next trading day. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com AMERICAN BUSINESS: Squitieri & Fearon Lodges PA Securities Suit --------------------------------------------------------------- The law firm of Squitieri & Fearon, LLP initiated a class action lawsuit in the United States District Court for the Eastern District of Pennsylvania on behalf of purchasers of the subordinated notes of American Business Financial Services (Nasdaq:ABFI) ("ABFI" or the "Company") during the period January 27, 2000 through January 21, 2005 (the "Class Period"). The Complaint charges that certain of the Company's officers and directors violated the federal Securities Act of 1933 by misrepresenting the Company's financial performance and business operations, overstating the Company's revenues and earnings, maintaining insufficient reserves, and failing to disclose significant problems with the Company's business during the Class Period. The lawsuit seeks to recover on behalf of investors who bought the Company's subordinated notes pursuant to materially false and misleading prospectuses and registration statements which violated Sections 11 and 12 of the Securities Act of 1933. At the end of 2004, the Company stopped paying principal and interest on maturity and stopped honoring checks written on ABFI money market accounts. On December 23, 2004 the Company issued a press release stating that it was unable to make any payments on the Company's notes as they became due and on January 21, 2005 the Company announced that it had filed for bankruptcy protection. For more details, contact Stephen J. Fearon, Jr. of Squitieri & Fearon, LLP by Phone: (212) 421-6492 or by E-mail: Stephen@sfclasslaw.com. AUTOBYTEL INC.: Marc Henzel Commences Securities Suit in C.D. CA ---------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Central District of California on behalf of all securities purchasers of the Autobytel Inc. (Nasdaq: ABTL) from July 24, 2003 through October 20, 2004 inclusive. The complaint charges Autobytel, Michael Fuchs, Jeffrey Schwartz, and Hoshi Printer 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 inappropriately recognized some unapplied credits; (2) that as a result of this, the Company's financial results were materially inflated by $900,000; (3) that the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal controls; and (5) that as a result of the above, the Company's financial results were materially inflated at all relevant times. On October 21, 2004, Autobytel announced partial third quarter 2004 financial results and that it would reschedule its earnings conference call and webcast, which had been scheduled for that afternoon. Furthermore, the Company announced that the Audit Committee of the Board of Directors of the Company was directing an internal review of the accounting treatment of certain unapplied credits that were recognized as revenue during the four quarters ended March 31, 2004. This news shocked the market. Shares of Autobytel fell $1.93 per share, or 21.91 percent, on October 21, 2004, to close at $6.80 per share. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com CONEXANT SYSTEMS: Chitwood Harley Lodges Securities Suit in NJ -------------------------------------------------------------- The law firm of Chitwood & Harley LLP initiated a securities fraud class action complaint in the United States District Court for the District of New Jersey against Conexant Systems, Inc. ("Conexant" or the "Company") (NASDAQ: CNXT), Dwight W. Decker and Armando Geday on behalf of purchasers of Conexant securities during the period between November 3, 2003 and November 4, 2004 (the "Class Period"). A copy of the complaint is available from the court and will be posted on our website, www.classlaw.com, for the next two months. The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market concerning the merger with GlobespanVirta, stating that the merged Company would deliver stronger financial performance and create more value for its shareholders, customers and employees than either Conexant or GlobespanVirata could if they continued operating independently between November 3, 2003 and November 4, 2004, inclusive. In addition, the Complaint alleges that, throughout the Class Period, Defendants issued a series of false and misleading statements regarding its wireless local area network ("WLAN") business, which was acquired by GlobespanVirata from Intersil in August, 2003, the manner in which that business unit had been integrated into the Company and its ability to contribute to Company earnings. The Complaint alleges that, in actuality, the merger of Conexant and GlobespanVirata was not successful and, throughout the Class Period, the Company was facing severe integration problems with respect to the combined companies' parallel DSL and wireless technology offerings, as well as their sales and administrative functions. The Complaint also alleges that the Company failed to properly integrate the WLAN business unit and made material misrepresentations regarding this business unit because, during the Class Period, Defendants had effectively ceased working upon the integration of the WLAN business unit -- which was a critical component of the rationale for the merger. The truth began to emerge on November 4, 2004, when Conexant released its financial and operational results for the fourth quarter ended October 1, 2004, reporting that its "fourth fiscal quarter 2004 revenues of $213.1 million decreased 20 percent from the third fiscal quarter revenues of $267.6 million," and stating that "'Conexant's sequential decline in revenues to $213.1 million in the fourth fiscal quarter was largely due to excess channel inventory that resulted from lower-than-expected customer demand....'" On this news, Conexant stock fell 10% on November 5, 2004. This marked fall in stock price followed a decline in Conexant's stock price of over 43% on July 6, 2004, when the Company announced similarly disappointing performance in the third quarter of 2004. For more details, contact Nichole Browning 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. CONEXANT SYSTEMS: Wolf Haldenstein Lodges Securities Suit in NJ --------------------------------------------------------------- The law firm of Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the District of New Jersey, on behalf of all persons who purchased or otherwise acquired the securities of Conexant Systems, Inc. ("Conexant" or the "Company") [Nasdaq: CNXT] between March 1, 2004 and November 4, 2004, inclusive, (the "Class Period") against defendants Conexant and certain officers and directors of the Company. The case name is Gaines v. Conexant Systems, Inc., et al. The complaint alleges that defendants violated the federal securities laws by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities. Throughout the Class Period, defendants issued statements, press releases and filed quarterly and annual reports with the SEC describing the Company's business operations and financial condition. The Complaint alleges that these representations were materially false and misleading because they failed to disclose the following adverse facts: (1) that the Company was stuffing the channel with products, such that its revenues did not reflect the true, end- user demand for its products; (2) that the Company's inventory glut would lead to lowered revenues as distributors and retailers would need to exhaust existing inventory before purchasing new products from Conexant; (3) that the combined company was suffering from serious operating deficiencies, particularly in the wireless local area network ("WLAN") division of Globespan that was not effectively integrated into the combined company's operations, causing the Company to lose its leadership position in the WLAN market; and (4) that, contrary to defendants express representations that the Globespan integration was "on schedule" and that "outstanding progress" was being made in that regard, integration of the Globespan acquisition was mishandled, causing such a massive drain on the Company that, by the end of the Class Period, the outlook for the much larger combined company was worse than Conexant's stand-alone prospects. On November 4, 2004, defendants issued a press release announcing disappointing results for the fourth quarter of 2004, including a loss of $367.5 million ($0.79 per share) which was blamed on poor demand, inventory buildup and failed product launches. Later that day, the Company held a conference call to discuss its fourth quarter results. Defendant Geday's response to an analyst's question revealed that the Company's inventory glut was not a recent phenomenon, but had been building for as long as five quarters. In reaction to the Company's press release and conference call, the price of Conexant securities dropped to $1.60 per share on November 5, 2004 from $1.76 on November 4, 2004. As detailed in the complaint, earlier announcements that only partially disclosed the facts about Conexant's business had already taken a heavy toll on Conexant's stock price, which traded as high as $7.77 per share during the Class Period. For more details, contact Fred Taylor Isquith, Esq., Lawrence Kolker, Esq., Gustavo Bruckner, Esq., or Derek Behnke of Wolf Haldenstein Adler Freeman & Herz LLP by Phone: 270 Madison Avenue, New York, NY 10016 by Phone: (800) 575-0735 by E-mail: classmember@whafh.com or visit their Web site: http://www.whafh.com. HUFFY CORPORATION: Marc Henzel Lodges Securities Suit in S.D. OH ---------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the United States District Court for the Southern District of Ohio on behalf of all persons who purchased the publicly traded securities of Huffy Corp. (Pink Sheets: HUFCQ.PK) between April 16, 2002 and August 13, 2004. The Complaint alleges that Huffy violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that Huffy's positive statements concerning its growth and long-term prospects were false and misleading because Huffy was experiencing problems integrating the McCalla and Gen-X acquisitions; Huffy's Canadian operations were engaged in improper accounting practices; legacy costs associated with discontinued operations were continuing to mount; and, as a result of the foregoing, Huffy's financial condition was dramatically eroding such that it was approaching insolvency. On August 13, 2004, Huffy issued a press release announcing that, in the course of its review of its financial statements for the first quarter of 2004, it had determined that certain accounting entries, estimated in the range of $3.5 to $5.0 million and related primarily to customer deductions, credits and reserves for inventory valuation and doubtful account receivables for Huffy Sports Canada (formerly known as Gen-X Sports), were more properly reflected in the period ended December 31, 2003 rather than in the first quarter of 2004. In response to this announcement, the price of Huffy common stock declined from a close of $0.58 per share on August 13, 2004, to close at $0.35 per share on August 14, 2004. Then, on August 16, 2004, Huffy announced that it was being delisted from the New York Stock Exchange ("NYSE"). Finally, on October 20, 2004, Huffy announced that it was filing for bankruptcy. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com HUFFY CORPORATION: Schatz & Nobel Lodges Securities Suit in OH -------------------------------------------------------------- The law firm of Schatz & Nobel, P.C. initiated a lawsuit seeking class action status has been filed in the United States District Court for the Southern District of Ohio on behalf of all persons who purchased the publicly traded securities of Huffy Corp. (Pink Sheets: HUFCQ.PK) ("Huffy") between April 16, 2002 and August 13, 2004 (the "Class Period"). The Complaint alleges that Huffy violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that Huffy's positive statements concerning its growth and long-term prospects were false and misleading because Huffy was experiencing problems integrating the McCalla and Gen-X acquisitions; Huffy's Canadian operations were engaged in improper accounting practices; legacy costs associated with discontinued operations were continuing to mount; and, as a result of the foregoing, Huffy's financial condition was dramatically eroding such that it was approaching insolvency. On August 13, 2004, Huffy issued a press release announcing that, in the course of its review of its financial statements for the first quarter of 2004, it had determined that certain accounting entries, estimated in the range of $3.5 to $5.0 million and related primarily to customer deductions, credits and reserves for inventory valuation and doubtful account receivables for Huffy Sports Canada (formerly known as Gen-X Sports), were more properly reflected in the period ended December 31, 2003 rather than in the first quarter of 2004. In response to this announcement, the price of Huffy common stock declined from a close of $0.58 per share on August 13, 2004, to close at $0.35 per share on August 14, 2004. Then, on August 16, 2004, Huffy announced that it was being delisted from the New York Stock Exchange ("NYSE"). Finally, on October 20, 2004, Huffy announced that it was filing for bankruptcy. For more details, contact Wayne T. Boulton by Phone: (800) 797-5499 by E-mail: sn06106@aol.com or visit their Web site: http://www.snlaw.net. OFFICEMAX INC.: Marc Henzel Lodges Securities Suit in N.D. IL ------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Northern District of Illinois on behalf of purchasers of OfficeMax Inc. (NYSE: OMX) publicly traded securities during the period between November 9, 2004 and January 11, 2005. The complaint charges OfficeMax and certain of its officers and directors with violations of the Securities Exchange Act of 1934. OfficeMax, formerly Boise Cascade Corporation, is a multinational contract and retail distributor of office supplies and paper, technology products and office furniture. The complaint alleges that during the Class Period, defendants made false and misleading statements regarding the Company's earnings. The facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (1) that for a period of at least two years, millions of dollars worth of the Company's sales were fraudulently booked as legitimate sales; (2) that the Company was using (and manipulating its use of) "vendor allowances" (monies paid by suppliers for promotions, prime shelf space, discounts and rebates) in order to manipulate the Company's earnings and timing of revenue recognition; (3) that the Company's Q4 2004 results and those beyond were being eroded by the Company's internal investigation costs and the halting of the Company's abusive vendor allowance scheme; (4) that the Company lacked the necessary internal controls to insure all revenue reported complied with generally accepted accounting principles; and (5) that the Company had entered into a long term-paper supply contract with Boise Cascade, LLC, which, unbeknownst to investors, was not commensurate with the market rate. As a result of defendants' false statements, OfficeMax shares traded at inflated levels during the Class Period, increasing to as high as $32.52 on December 16, 2004, whereby the Company's top officers and directors arranged to sell nearly $1.5 billion worth of the Company's notes. On January 12, 2005, OfficeMax announced that its chief financial officer had resigned and that it would postpone the release of its earnings for the fourth quarter and full year 2004, pending the conclusion of an internal investigation into issues relating to its accounting for vendor income. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com OSI PHARMACEUTICALS: Schoengold Sporn Lodges NY Securities Suit --------------------------------------------------------------- The law firm of Schoengold Sporn Laitman & Lometti, P.C. ("SSLL") initiated a class action lawsuit against OSI Pharmaceuticals, Inc. ("OSIP" or the "Company") (Nasdaq:OSIP) and certain key officers and directors in the United States District Court for the Eastern District of New York on behalf of all purchasers of OSIP securities during the period between October 26, 2004 and November 22, 2004 (the "Class Period"). The Complaint alleges that defendants OSIP, Colin Goodard, Robert I. Ingram, Gabriel Leung, Nicole Onetto, Robert L. Van Nostrand, John P. White and certain members of the Company's Board of Director violated Section 11, 12(a)(2) and 15 of the Securities Act of 1933 having caused, allowed or permitted false and materially misleading registration statement and prospectus dated November 10, 2004 to be issued, whereby $445,000,000 of OSIP's stock was sold to the investing public at artificially inflated prices. In addition, defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations about the Company's new anti-cancer drug Tarecva, which failed to disclose and /or misrepresented the following adverse facts, among others, that the defendants knew, at least as early as October 26, 2004 that: (1) the Food and Drug Administration ("FDA") would require that OSIP disclose in it labeling for Tarceva that no survival benefit was observed in the epidermal growth factor receptor ("EGFR")-negative subgroup; and (2) OSIP did not have sufficient data to claim that Tarceva provided a survivability benefit for EGFR-negative patients. As a result of the foregoing, the defendants' positive statements only served to artificially inflate the Company's stock price. On November 19, 2004, a Piper Jaffray analyst report commented on the FDA's approval of Tarceva and a "surprise" in the labeling of Tarceva. The "surprise" in labeling shows that contrary to the Company's prior representation to the investing public, there is currently no scientifically significant data for OSIP's statement that Tarceva provided a survivability benefit for EGFR-negative patients. The revelation in this analyst report caused OSIP's stock price to drop from $64.25 per share on November 18, 2004 to $58.16 per share on November 19, 2004, on volume of 18,496,800 -- over ten times the previous day's volume. The Company's common stock price continued to drop following the publication of the Piper Jaffray analyst report to $54.22 per share on Monday, November 22, 2004. For more details, contact Jay P. Saltzman, Esq. or Frank R. Schirripa, Esq. of Schoengold Sporn Laitman & Lometti, P.C. by Mail: 19 Fulton Street, Suite 406, New York, New York 10038 by Phone: (212) 964-0046 by Fax: (212) 267-8137 or (866) 348-7700 by E-mail: shareholderrelations@spornlaw.com or visit their Web site: www.spornlaw.com. PHARMOS CORPORATION: Marc Henzel Lodges Securities Lawsuit in NJ ---------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the United States District Court for the District of New Jersey on behalf of all persons who purchased the publicly traded securities of Pharmos Corporation (Nasdaq: PARS) between August 23, 2004 and December 17, 2004. The Complaint alleges that Pharmos violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that Dexanabinol, the company's flagship drug product, in Phase III trials for Traumatic Brain Injury ("TBI") trial, was not exhibiting a materially favorable reaction. However, prior to disclosing this information to the public, Pharmos sold $16.75 million worth of stock in a private placement. Furthermore, the company's CEO sold 20% of his holdings and its President sold almost 50% of his holdings. Such sales occurred after the close of Phase III enrollment and after the six month post-enrollment period had concluded. On December 20, 2004, just weeks after insiders sold 400,000 shares of stock, Pharmos announced that Dexanabinol was not found to be materially effective in Phase III testing. Furthermore, after years of touting the effectiveness of Dexanabinol, Pharmos abruptly ceased its effort to gain approval for Dexanabinol for TBI. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com PHARMOS CORPORATION: Schatz & Nobel Lodges Securities Suit in NJ ---------------------------------------------------------------- The law firm of Schatz & Nobel, P.C. initiated a lawsuit seeking class action status has been filed in the United States District Court for the District of New Jersey on behalf of all persons who purchased the publicly traded securities of Pharmos Corp. (Nasdaq: PARS) ("Pharmos") between August 23, 2004 and December 17, 2004 (the "Class Period"). The Complaint alleges that Pharmos violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that Dexanabinol, the company's flagship drug product, in Phase III trials for Traumatic Brain Injury ("TBI") trial, was not exhibiting a materially favorable reaction. However, prior to disclosing this information to the public, Pharmos sold $16.75 million worth of stock in a private placement. Furthermore, the company's CEO sold 20% of his holdings and its President sold almost 50% of his holdings. Such sales occurred after the close of Phase III enrollment and after the six month post-enrollment period had concluded. On December 20, 2004, just weeks after insiders sold 400,000 shares of stock, Pharmos announced that Dexanabinol was not found to be materially effective in Phase III testing. Furthermore, after years of touting the effectiveness of Dexanabinol, Pharmos abruptly ceased its effort to gain approval for Dexanabinol for TBI. For more details, contact Wayne T. Boulton by Phone: (800) 797-5499 by E-mail: sn06106@aol.com or visit their Web site: http://www.snlaw.net. SHURGARD STORAGE: Marc Henzel Lodges Securities Suit in W.D. WA --------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Western District of Washington on behalf of all persons who purchased the publicly traded securities of Shurgard Storage Centers, Inc. (NYSE: SHU) between May 9, 2001 and March 26, 2004 (the "Class Period"), including purchasers in the July 10, 2003 and June 25, 2002 stock offerings and the March 24, 2003 debt offering. The Complaint alleges that Shurgard violated federal securities laws by issuing false or misleading public statements. On May 17, 2004, Shurgard announced that it was restating its financial results after a re-audit of its financial statements for the years ended December 31, 2001 and 2002 and for the first three quarters of 2003. Shurgard indicated that its new auditors, PricewaterhouseCoopers, had identified accounting errors impacting prior periods which had to be restated. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com SIPEX CORPORATION: Marc Henzel Lodges Securities Suit in N.D. CA ---------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the Northern District of California on behalf of all securities purchasers of Sipex Corporation (Nasdaq: SIPX) between April 10, 2003 and January 20, 2005, inclusive (the "Class Period"). The complaint charges Sipex, Douglas M. McBurnie, Walid Maghribi, Phillip A. Kagel, and Clyde R. Wallin 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 inappropriately recognized revenue on sales for which price protection, stock rotation and/or return rights were granted; (2) that the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP"); (3) that the Company lacked adequate internal controls; and (4) that as a result of the above, the Company's financial results were materially inflated at all relevant times. On January 20, 2005 Sipex announced that the Company may restate its financial statements for the fiscal year ended December 31, 2003 and the fiscal quarters ended April 3, 2004, July 3, 2004 and October 2, 2004 due to the possible improper recognition of revenue during these periods on sales for which price protection, stock rotation and/or return rights may have been granted. The news shocked the market. Shares of Sipex fell $0.90 per share, or 23.44 percent, on January 21, 2005 to close at $2.94 per share, on unusually high volume. For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com TRAVELZOO: Marc Henzel Lodges Securities Fraud Suit in S.D. NY -------------------------------------------------------------- The Law Offices of Marc S. Henzel initiated a securities class action in the United States District Court for the United States District Court for the Southern District of New York on behalf of all persons who purchased the publicly traded securities of Travelzoo (NasdaqNM:TZOO) between October 12, 2004 and January 21, 2005 (the "Class Period"). A profit warning and report of an SEC inquiry whacked highflying Travelzoo (NasdaqNM:TZOO) Monday, marking the latest casualty in an ugly fourth-quarter earnings season. The provider of online travel deals earned 9 cents a share in the fourth quarter, up 350% vs. a year earlier, but 4 cents below Thomson First Call's mean estimate. Travelzoo also said the SEC is probing stock- trading activity last year. Travelzoo plunged 25% to 55.33 -- 49% off its Dec. 28 peak For more details, contact Law Offices of Marc S. Henzel by Mail: 273 Montgomery Ave., Suite 202, Bala Cynwyd, PA 19004, by Phone: 610.660.8000 or 888.643.6735 by Fax: 610.660.8080 E-Mail: mhenzel182@aol.com ********* 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 Seorin, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2005. 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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