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C L A S S A C T I O N R E P O R T E R
Friday, March 26, 1999, Vol. 1, No. 36
Headlines
CHS ELECTRONICS: Shepherd & Geller Amend Shareholder Complaint
CHS ELECTRONICS: Kaplan Kilsheimer File Complaint in Florida
COMPAQ COMPUTER: Milberg Weiss Files Complaint in Texas
EMERGING MEXICO: Fairness Hearing Postponed to April 6, 1999
HANDICAPPED PARKING: Carolina Residents Sue to End $5 Permit Fee
HOLOCAUST VICTIMS: World Jewish Congress Rejects French Bank Plan
MOTOROLA: Cancer Theorists Predicted to Push for Research Funding
OKLAHOMA INMATES: Request for Receiver to Oversee Medical Care
PARTY CITY: Kantrowitz Goldhamer Files Complaint in New Jersey
PATHOGENESIS CORP.: Cohen Milstein Files Complaint in Washington
PATHOGENESIS CORP.: Wolf Popper Files Complaint in Washington
SAFESKIN: Lockridge Grindal Files Complaint in California
SPRINT: Girard & Green Files "Casual Caller Rate" Class Action
TOBACCO LITIGATION: Florida Flight Attendants Settlement Upheld
*********
CHS ELECTRONICS: Shepherd & Geller Amend Shareholder Complaint
--------------------------------------------------------------
Shepherd & Geller, LLC, announced that it filed an Amended
Complaint against CHS Electronics Corp. (NYSE:HS) in United
States District Court, Southern District of Florida. The lawsuit
is on behalf of all purchasers of CHS common stock during the
period December 18, 1997 through March 22, 1999.
The Amended Complaint charges that CHS Electronics and certain of
its officers and directors violated the federal securities laws
by submitting false financial statements and false earnings. The
complaint alleges that:
a) Defendants' financial statements were based, in large
measure, upon forged documents and false customer orders;
b) throughout the Class Period, defendants had inaccurately
described the amount of its vendor rebates;
c) throughout the Class Period, defendants had improperly kept
certain assets (primarily accounts receivable) off its
balance sheet;
d) CHS routinely shifted inventory from country to country in
Europe to avoid the 18% value added tax;
e) a CHS executive officer who was involved in CHS' scheme to
avoid value added taxes had fled the country under fear of
indictment;
f) as a result of the value added tax avoidance, CHS'
operating profit margins were overstated;
g) throughout the Class Period, as a result of the foregoing,
CHS's assets and earnings were materially overstated; and
h) as a result of the foregoing, CHS was performing far worse
than publicly represented and its operating performance
measures (particularly its accounts receivable/turnover
ratio) were materially overstated.
When certain of this information was disclosed on February 24,
1999 and March 22, 1999, the price of CHS collapsed, and
currently trades far below its Class Period highs.
CHS ELECTRONICS: Kaplan Kilsheimer File Complaint in Florida
------------------------------------------------------------
Kaplan, Kilsheimer & Fox LLP has filed a Class Action lawsuit
against CHS ELECTRONICS, INC. (NYSE: HS) and certain of its
officers and directors in the United States District Court for
the Southern District of Florida. The suit is brought on behalf
of all persons or entities who purchased or otherwise acquired
the common stock of CHS between June 19, 1998 and March 19,
1999, inclusive.
The lawsuit charges CHS and several of its top officers with
violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule l0b-5 promulgated thereunder. The
complaint alleges that defendants issued a series of false and
misleading statements concerning the Company's earnings, revenue
and future prospects. Specifically, the complaint alleges that
the Company knowingly or recklessly overstated the Company's
vendor rebates from its European subsidiaries for the second,
third and fourth quarters of 1998, which had the effect of
inflating the Company's earnings. The complaint alleges that
defendants concealed the overstatements in order to inflate the
share price to assure the success of an overseas acquisition
campaign and to secure listing on the New York Stock Exchange.
Upon the announcement of the truth concerning the vendor rebates
for the affected quarters, the Company's stock price plunged
nearly 35% on extraordinarily heavy trading volume.
COMPAQ COMPUTER: Milberg Weiss Files Complaint in Texas
-------------------------------------------------------
Milberg Weiss Bershad Hynes & Lerach commenced a class action
lawsuit on March 24, 1999, in the United States District Court
for the Southern District of Texas, on behalf of all purchasers
of the common stock of Compaq Computer Corp. (NYSE: CPQ) between
January 27, 1999, and February 25, 1999, inclusive.
The complaint charges Compaq and certain officers with violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 as well as Rule 10b-5 promulgated thereunder. The complaint
alleges that defendants issued a series of false statements and
failed to disclose material facts throughout the Class Period
concerning the Company's operating results and its future
prospects. Because of the issuance of a series of false and
misleading statements, the price of Compaq common stock was
artificially inflated during the Class Period. Prior to the
disclosure of the adverse facts described above certain Compaq
insiders sold hundreds of thousands of shares of Compaq common
stock to the unsuspecting investing public at artificially
inflated prices.
EMERGING MEXICO: Fairness Hearing Postponed to April 6, 1999
------------------------------------------------------------
A federal judge has postponed the hearing to consider the
fairness of the settlement to two class action lawsuits pending
against The Emerging Mexico Fund, Inc. (the "Fund") (NYSE: MEF)
and its Board of Directors until April 6, 1999 at 10:30 a.m.
The hearing was been scheduled for today, but the judge advised
the parties he is not available on that day for the hearing.
The Fund's special stockholders' meeting to be held for the
purpose of voting on the proposed liquidation and dissolution of
the Fund remains scheduled for March 30, 1999. The Fund's
liquidation is subject to approval of the Fund's stockholders
and court approval of the resolution of the lawsuits. If
stockholders approve the Fund's liquidation at the meeting and
the settlement of the claims is approved, the Fund's shares of
common stock will cease to trade on the New York Stock Exchange
shortly thereafter. The Fund is a non-diversified, closed-end
management investment company. The investment objective of the
Fund is long-term capital appreciation through investment
primarily in Mexican equity securities.
Santander Management Inc. is the Fund's investment adviser and
Gestion Santander Mexico, S.A. de C.V. serves as the Fund's sub-
advisor in Mexico.
HANDICAPPED PARKING: Carolina Residents Sue to End $5 Permit Fee
----------------------------------------------------------------
A group of handicapped North Carolina residents has filed a
lawsuit against the state in an effort to eliminate a $5 fee
officials charge for a plastic placard that gives permission to
use handicapped- only parking spaces, United Press International
reports. The class-action suit filed earlier this month in Wake
County Superior Court, says the fee violates the 1991 Americans
With Disabilities Act. Robert Owens, coordinator of the North
Carolina office of the Americans With Disabilities Act, said the
fee is reasonable, considering the time and material that goes
into making the placards, which are good for five years.
HOLOCAUST VICTIMS: World Jewish Congress Rejects French Bank Plan
-----------------------------------------------------------------
Joan Gralla, writing for Reuters, reports from New York that
apowerful U.S. Jewish group that says it speaks for all Jewish
victims of the Holocaust, regardless of what country they came
from, on Wednesday rejected a compensation plan announced by
French banks.
The French Banking Association's (AFB) decision to move ahead
with its compensation plan, after an earlier version was
scuttled by the French government, was assailed by the World
Jewish Congress, the New York City-based group that has insisted
on involving representatives of the international Jewish
community, as well as French Jewish groups, to help craft any
settlement.
"This unilateral announcement by the French banks is a betrayal
of the memory of the Holocaust victims," Elan Steinberg, WJC
executive director, told Reuters by telephone.
The French government last week pressured the French banks to
drop an earlier version of their plan because a government panel
probing the looting and restitution of Holocaust assets
threatened to resign, saying its work would be made redundant.
New York City Comptroller Alan Hevesi, heeding the WJC's advice,
on Wednesday urged the French banks to open their talks not only
to world Jewish groups but to U.S. lawyers who are suing the
banks over Holocaust claims. The plaintiff attorneys believe
they would have to approve any deal for the French banks to be
shielded from lawsuits.
"I encourage the French banks to talk with representatives of the
world Jewish community and the class action attorneys who
represent survivors. Only real negotiations can produce a real
settlement," Hevesi said in prepared remarks.
The WJC has said it will fight a planned merger between Societe
Generale and Paribas , and a $37 billion bid by Banque
Nationale de Paris to buy both those rivals. And it plans to
tell Hevesi, who in June will chair a meeting of public finance
officers on French banks, that French banks "believe they can
circumvent and avoid their moral responsibility."
According to a March 10 draft, the AFB plan was drawn up after
consulting with the Representative Council of Jewish
Institutions (Crif), a French umbrella group, but that phrase
was not in Wednesday's release. "So they can't even claim they
negotiated with the French Jewish leadership," Steinberg said.
The French banks' new plan calls on them to make an unspecified
"significant financial contribution" to a memorial fund. So-
called "heirless" assets, bank accounts and other valuables of
people whose entire families perished in Nazi death camps, also
would be turned over to the new fund, but the WJC faulted the
plan, saying there was no sign the money would be controlled by
Holocaust survivors. The French compensation plan also obliges
the AFB to turn over by May 15 to the government investigation
panel the lists of dormant accounts and other assets of people
who were considered Jewish under Nazi and Vichy laws. This is a
different approach than the one used by Swiss banks, whose
dormant accounts are being independently audited. The WJC
faulted the French banks for not subjecting themselves to the
same tough standards.
MOTOROLA: Cancer Theorists Predicted to Push for Research Funding
-----------------------------------------------------------------
Communications Today suggests that although there won't be any
U.S. Supreme Court review of a four-year-old decision in a
class-action suit against Motorola and other handset
manufacturers that sought to link certain cancers to cellular
phone use, keep your eyes on Capitol Hill, where advocates of the
cancer theory have found a sympathetic ear there in Rep. Edward
Markey (D-Mass.), who has pushed before for government funding to
investigate the health risks.
OKLAHOMA INMATES: Request for Receiver to Oversee Medical Care
--------------------------------------------------------------
A study of 41 inmate deaths within the Oklahoma Department of
Corrections showed that 24 percent were avoidable, according to
a Tulsa attorney who is asking a federal court to take control
of the department's medical operations. Tulsa attorney Louis
Bullock cited the study in a brief filed Monday in U.S. District
Court for the Eastern District in Muskogee. Bullock represents
inmates in a class-action lawsuit, Battle vs. Anderson, which in
the past has brought federal control of the state's prison system
and required millions of dollars to bring the system into
constitutional compliance.
The Oklahoma Board of Corrections last month postponed signing a
settlement agreement to bring an end to the suit, saying it
wanted to get a financial commitment from lawmakers. However,
Tulsa World reports, officials with the Governor's Office and
lawmakers said they had a problem with the settlement agreement
because it names Bullock as a monitor and has no definite price
tag.
In his filing Monday, Bullock asked U.S. District Judge Michael
Burrage to appoint a receiver for the medical operations of the
prison system, saying an emergency exists. The receiver shall
immediately address the needed remedies, have the authority to
hire staff, oversee the clinical practice of staff, establish
delivery systems and protocols and provide systems of quality
improvement, the brief says.
Tulsa World relates that the Oklahoma Department of Corrections
contracted with the Oklahoma Foundation for Medical Quality to
review inmate deaths between July 1997 and 1998. The
Foundation's Web site states that it was founded as a nonprofit
organization in 1972 as a federally contracted peer-review
organization. It also holds a contract with the state to review
Oklahoma's Medicaid program. Of the 41 inmate deaths studied,
the group determined that 10 -- or 24 percent -- were avoidable.
The deaths were initially called "avoidable," a term that later
was changed to "possibly avoidable," according to a footnote that
did not explain the reason for the terminology change.
"These results indicate that nearly one quarter of the inmate
deaths came about following serious deficiencies in medical
care, which, if corrected, could have saved the person's life,"
Bullock's brief alleges. "This is unacceptable under any
standard of care." The brief notes that during the time frame
of the study, there were actually 60 deaths, but after the
department received the results of the first 41 deaths, it chose
not to complete the review. Bullock's brief does not state why
the study was discontinued.
Ken Lackey, Gov. Frank Keating's chief of staff, said it may be
necessary to get a second opinion before accepting the study.
"It does require a little independent investigation," Lackey
said. "It may not be the only evaluation. Perhaps there may be
other ways to do things."
However, Bullock's brief claims that the report may actually
understate the loss of life due to inadequate care. One inmate
died from an infection three days after a dental procedure, the
brief says. The inmate had no follow-up care or antibiotics, but
the review said the inmate's death was unavoidable. Inmates are
victims of needless suffering as a result of improper or a lack
of medical treatment, the brief alleges. One inmate at an
Oklahoma private facility that contracts with the department to
house state inmates suffered needlessly as a result of a kidney
stone, the brief says. The inmate, who had a history of kidney
stones, in June reported severe kidney pain. A nurse did
nothing. Later, the inmate was seen by a physician who conducted
no examination but diagnosed it as an enlarged prostate. Later,
the inmate returned to medical personnel, reporting that the
stone had moved and was interfering with his ability to urinate.
Two nurses, after speaking to a doctor by phone, tried to
dislodge it, "which is a medical procedure which they did not
have a license to perform," the brief alleges. First they used
a soft catheter, then they attempted to dislodge the stone with
a hard catheter. The inmate was not given pain medication.
Badly bleeding, the inmate was taken to the hospital, where the
stone was dislodged. Once he returned to prison, he was not
given pain medication. The inmate later went back to the
hospital, where surgery was done to remove scar tissue caused by
the original procedure. Once returned to prison, he was denied
medication for four days.
"This suffering was wholly avoidable," the brief alleges.
Psychiatric and psychological care is "virtually nonexistent,"
the brief alleges. The department's medical system is
inadequately organized with little oversight, the brief says.
The department has no chief medical officer and no central office
employee qualified to oversee medical care for 21,000 inmates.
The department does not analyze the pattern of deaths at each
facility in order to identify weakness in the system or assess
care quality, the brief alleges. "There is no peer review,"
the brief alleges. "This is in spite of the fact that the
defendants know that the physicians working within the prisons
are frequently poorly trained and are ineligible for a license
to practice any place other than within a state institution."
Staffing patterns call for 25 physicians, an inadequate number to
serve 15,000 inmates in 17 prisons. Of the 25 posts, nine are
vacant, the brief says. The department has inadequate staff,
facilities, resources and supplies, the brief alleges. It
also cites inadequate access to specialty care, chronic disease
care and continuity of care.
Legislative leaders, the governor and others, Tulsa World
relates, are trying to determine how much the settlement
agreement will cost, Lackey said.
PARTY CITY: Kantrowitz Goldhamer Files Complaint in New Jersey
--------------------------------------------------------------
A lawsuit has been filed by the law firm of Kantrowitz,
Goldhamer & Graifman, of Montvale, New Jersey and two other firms
on behalf of a Plaintiff and a proposed class of former
shareholders of Party City Corporation (NASDAQ: PCTY) and its
Chief Executive Officer for the class period July 23, 1998
through March 19, 1999, in the U.S. District Court of New Jersey
where Party City Corporation maintains its U.S. headquarters.
The complaint alleges that Party City and its CEO violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder, by making false and
misleading statements concerning the company's financial
condition and outstanding loan obligations. As a result of these
alleged violations, the price of common shares of Party City was
artificially inflated during the Class Period.
PATHOGENESIS: Cohen Milstein Files Complaint in Washington
----------------------------------------------------------
Cohen, Milstein, Hausfeld & Toll, P.L.L.C., on March 24, 1999,
filed a lawsuit in the United States District Court for the
Western District of Washington on behalf of purchasers of the
common stock of PathoGenesis Corp. (Nasdaq:PGNS) during the
period between January 26, 1999 through March 22, 1999
inclusive.
The complaint charges PathoGenesis and certain officers of the
Company during the relevant time period with violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
The complaint alleges that defendants issued a series of
materially false and misleading statements regarding the market
for its principal product tobramycin solution for inhalation
(TOBI). On March 22, 1999, the Company announced that sales for
the first quarter would only be about $10 million, and that it
expected to report a net loss of $0.30 per share versus
consensus estimates of a $0.20 profit. In addition, the Company
said sales for the year would likely be in the $62 - $63 million
range as opposed to $90 - $100 million. As a result of this
announcement, the stock price fell on March 23rd by over 22
points, from approximately $34 per share to $12 per share on
volume of over 22 million shares.
PATHOGENESIS CORP.: Wolf Popper Files Complaint in Washington
-------------------------------------------------------------
PathoGenesis Corporation (Nasdaq: PGNS) and two of its senior
officers have been named in a securities fraud lawsuit filed on
March 24, 1999 in the U.S. District Court for the District of
Washington. The lawsuit was filed on behalf of all persons or
entities who purchased PathoGenesis common stock during the
period January 26, 1999 through March 22, 1999 inclusive.
PathoGenesis is primarily in the business of marketing a drug,
tradenamed TOBI, to treat cystic fibrosis.
The lawsuit alleges that defendants' January 25, 1999
announcement that PathoGenesis had achieved net revenues of $17.8
million during the fourth quarter of 1998, almost exclusively
from the sale of TOBI, was materially false and misleading.
Defendants informed investors on that announcement that fourth
quarter sales growth was "due to excellent acceptance of TOBI by
the cystic fibrosis community." Defendants reiterated their
positive comments about product demand throughout the first
quarter of 1999, and guided analysts to revenue estimates of
$90-100 million for 1999. On the basis of the company's public
statements as to the acceptance of its product by the cystic
fibrosis community, fourth quarter 1998 financial results, and
company guidance, analysts and investors were projecting that
PathoGenesis would achieve net revenues in 1999 of $90 million.
Defendants knew or were reckless in failing to know that fourth
quarter financial results were not due to excellent acceptance
of TOBI by the cystic fibrosis community, but rather due to
defendants' efforts to induce PathoGenesis' distributors to
accept greater shipments of the drug than necessary to meet
customer demand. Defendants knew or were reckless in failing to
know that demand for TOBI had peaked and that sales for the
product in future quarters would be dramatically below that
achieved in the fourth quarter. Defendants' knowledge, and
basis for obtaining that knowledge, was through direct contact
with the limited number of distributors for the company's
product and the 113 cystic fibrosis treatment centers.
Defendants belatedly announced on March 22, 1999 that sales for
the first quarter of 1999 would be only approximately $10
million -- or 50% below estimates that were based on defendants'
own public statements -- precisely because its distributors had
accepted product in the fourth quarter of 1998 that was not then
necessary to meet customer demand. On March 23, 1999,
PathoGenesis common stock fell approximately 66%, from $34 to $12
a share, on this announcement. The Complaint filed in the class
action alleges that defendants were motivated to commit the
fraud, among other things, (i) to create the perception of demand
for its product among healthcare professionals, and therefore
drive future growth, and (ii) to sell shares at inflated prices.
SAFESKIN: Lockridge Grindal Files Complaint in California
---------------------------------------------------------
Lockridge Grindal Nauen & Holstein P.L.L.P. filed a class action
complaint in the United States District Court for the Southern
District of California on behalf of a Class of persons who
purchased or otherwise acquired securities issued by Safeskin
Corporation (Nasdaq: SFSK) in the open market during the period
October 29, 1998 through March 11, 1999.
The Complaint charges that throughout the Class Period,
defendants violated the U.S. securities laws by issuing
materially false and misleading statements and by omitting
material facts required to be disclosed so as to make the
statements issued not materially false and misleading.
Specifically, the complaint alleges that during the Class
Period, defendants knowingly or recklessly overstated Safeskin's
results of operations and net income for the third and fourth
quarters of fiscal year 1998 and misled the investing public as
to the Company's opportunities for fiscal 1999, by "stuffing the
channel," i.e., selling to its distributors more product than
they wanted or could reasonably sell and thereby giving the
false appearance that the Company's business was continuing to
grow at record levels.
SPRINT: Girard & Green Files "Casual Caller Rate" Class Action
--------------------------------------------------------------
Girard & Green, LLP, commenced a class action lawsuit in the
United States District Court for the District of Kansas, on
behalf of all Sprint subscribers who were charged Sprint's
"casual caller" rates (in some cases as high as $2.99 for a one-
minute call) instead of the lower rates which Sprint advertises
and which subscribers expect to be charged.
The lawsuit alleges that this practice by Sprint violates the
Telecommunications Act of 1934. Sprint has one set of rates for
subscriber direct dialing, including its widely promoted "Sprint
Sense Anytime" and "Sprint Unlimited Weekend" Calling Plans,
which typically charge customers approximately $0.10 per minute
for most interstate calls. Sprint also has another, much higher
set of rates it charges non-subscribers or "casual callers":
$0.40 per minute, plus a surcharge of $2.45 for every call.
Sprint charges these rates to non-subscribers who choose to
place their calls over the Sprint network. Sprint, however, has
charged many of its own subscribers the higher non-subscriber
rates for calls they placed with ordinary "one-plus" dialing.
The FCC recently found that a similar practice, perpetrated by
MCI, violated the Telecommunications Act. The plaintiff in the
class action seeks to recover damages on behalf of all persons
who were customers of record for telephone lines presubscribed to
Sprint as the Primary Interexchange Carrier, and who were charged
non- subscriber rates or surcharges by Sprint for direct-dialed
calls placed on those lines.
TOBACCO LITIGATION: Florida Flight Attendants Settlement Upheld
----------------------------------------------------------------
Tracy Fields, writing for the Associated Press, reports from
Miami, Florida, that a state appeals court on Wednesday upheld a
$349 million class action settlement to nonsmoking flight
attendants who sued cigarette makers claiming that working on
smoky airplanes made them sick.
The settlement was first proposed in October 1997 as defense
lawyers for the tobacco companies were presenting their case.
Circuit Judge Robert P. Kaye approved it in February 1998, but
some of the flight attendants initially objected.
"All of the class representatives approved, and strongly
endorsed, the settlement," Judge Robert Shevin wrote in the
ruling filed Wednesday at the 3rd District Court of Appeal.
The appeal judges said the settlement was "fair, adequate, and
reasonable."
"The objectors' complaint that they must now bring individual
lawsuits does not render the settlement inadequate," Shevin
wrote.
The deal calls for $300 million to fund a foundation to sponsor
research on diseases suffered by the attendants. The rest of the
money goes for attorney fees and costs. The settlement provides
no money for individual flight attendants, but allows them to
use evidence from the trial in their individual cases. The
settlement also relieves them of the burden of proving cigarette
smoking caused their illnesses.
Flight attendants sued the nation's four largest cigarette makers
Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard
saying secondhand smoke on flights gave them lung cancer and
other diseases. Smoking on domestic flights was banned in 1990.
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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., Princeton, NJ, and Beard
Group, Inc., Washington, DC. Peter A. Chapman, Editor.
Copyright 1999. All rights reserved. ISSN XXXX-XXXX.
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