/raid1/www/Hosts/bankrupt/CAR_Public/990604.MBX              C L A S S   A C T I O N   R E P O R T E R

                Friday, June 4, 1999, Vol. 1, No. 86


CALIFORNIA PERS: Ninth Circuit Prohibits Age Based Benefits
CONNECTICUT: Police Barracks Secret Wiretap Settlement Nears
ENGELHARD CORP: Maximum Settlement Payment Set at $7.2 Million
GOLDEN BEAR: Florida Securities Litigation Consolidated
HECHINGER CO: Delaware Shareholders Suit Dismissed by Agreement

INTERNATIONAL RECTIFIER: Securities Trial Set for August 1999
KTI INC: Shareholders Complain Accounts were Misrepresented
MOTOROLA INC: Cellular Telephones Linked to Injuries & Accidents
NATIONAL REALTY: Florida Investor Sues for Fraud in Wisconsin
PARAMETRIC TECHNOLOGY: Denies Misrepresenting 1998 Earnings

PROJECTAVISION INC: Submitting Reply in Motion to Dismiss
PRUDENTIAL INSURANCE: Actuarial Firm Used for Medical Decisions
US DOJ: Federal Prosecutors Seek $250 Million in Unpaid Overtime
VITAMIN LITIGATION: Animal Feed Industry Makes Antitrust Claims
WELFARE BENEFITS: Denver Pays for Dropping Families w/o Notice


CALIFORNIA PERS: Ninth Circuit Prohibits Age Based Benefits
The Recorder reports that the Ninth Circuit U.S. Court of
Appeals handed a victory to a class of older workers and held
Wednesday that the state can't use age as a factor when
calculating disability retirement benefits. In Arnett v.
California Public Employment Retirement System, 99 C.D.O.S.
4184, the court sided with a group of retired state police and
correctional officers who claimed that using a worker's starting
age to determine disability benefits violates the Age
Discrimination in Employment Act.

The workers had allies in the Equal Employment Opportunity
Commission and the American Association of Retired Persons, both
of which filed amicus curiae briefs siding with the plaintiffs.

The suit challenges California's method of calculating
disability benefits under the California Public Employees
Retirement System and may change the disability benefits package
offered by 2,600 agencies to 1.1 million people involved in the

U.S. District Judge Charles Breyer granted defense motions to
dismiss claims of disparate treatment and disparate impact
against the state.

But on Wednesday the appellate court said the state's argument
that using age in calculating disability benefits is a
"sufficient business necessity" was not enough to toss the
plaintiffs case. "It is unquestionable that the employees would
have received greater disability retirement benefits but for
their older ages at hire," wrote Ninth Circuit Judge Margaret
McKeown. McKeown reversed Breyer's pretrial ruling and sent the
case back for further proceedings. "Whether such a rationale
constituted a sufficient business necessity could not be
determined on a motion to dismiss," she wrote. Ninth Circuit
Judge Ferdinand Fernandez and Senior U.S. District Judge Charles
Weiner of Pennsylvania, sitting by designation, concurred.

Under PERS disability benefits, an employee is eligible for
retirement benefits equal to the amount the worker would have
been paid if employed to age 55. To get to that amount, the
state calculates an employee's "years of service" by subtracting
his age at the time of hire from 55. Under the system, a 25-
year-old worker will receive 10 years more benefits than a 35-
year-old worker who started on the same day. The participants in
the class action were all 40 or older at their time of hire and
all later retired because of an industrial disability.

The state argued that beginning work at a later age is
"voluntary" and that older workers have more resources than
their younger counterparts.

McKeown didn't buy it. "PERS contends that the employees cannot
complain about lower disability benefits because they
voluntarily chose to begin work at a later age," McKeown wrote.
"This argument not only ignores the reality of the modern work
force, it conflicts with our rejection of precisely the same
argument" in a 1993 case, E.E.O.C. v. Local 350, Plumbers and
Pipefitters, 998 F.2d 641.

Deputy Attorney General Irene Tamura, who argued on behalf of
the state, could not be reached for comment Wednesday. A
spokesman for the AG's office said the opinion was "under

Ellen Lake, the Oakland solo who argued on behalf of the
plaintiffs, called the ruling a "terrific victory." "The statute
has unfairly impacted older people for 18 years," she said.

Whether Arnett ever makes it to trial, however, is another
matter. Already, California AB 448 aims to achieve the same
objective by changing how benefits are calculated. (The
Recorder; June 3, 1999)

CONNECTICUT: Police Barracks Secret Wiretap Settlement Nears
In dollar terms the pending $17 million settlement between
Connecticut criminal defense lawyers and the state police over
secret wiretaps on all police barracks phones between 1978 and
1989 is nailed down. But the public policy lessons of this
battle, by the settlement's very terms, are open to question.

The state admits no wrongdoing.

And, says Rep. Robert Farr, R-West Hartford, the case highlights
the shortsightedness of Congress. Federal lawmakers in 1986
imposed as much as $10,000 in damages per phone call on the
police whenever a call is made without knowledge by either
caller or recipient that the conversation is recorded. "There's
no indication that anyone listened to the tapes -- that anyone's
privacy was actually invaded, yet there are these huge damages,"
Farr says.

Using the $10,000 per call yardstick, class plaintiffs
calculated in 1992 that the state faced over $1 billion in
potential liability.

Farr and the rest of the legislative Judiciary Committee
approved the May 7 agreement without objection on May 25. It is
now subject to the approval of U. S. District Judge Alan H.

For Christopher D. Bernard, of Bridgeport's Koskoff, Koskoff &
Bieder, the settlement represents the culmination of ten years
work. The agreed payments of $300 to $650 per call are well
below damages set out in state and federal laws against illegal
wiretapping. Those laws originally called for $1,000 per
incident until 1986 when the federal maximum was raised to
$10,000, says Bernard. Through years of discovery, he says, the
plaintiffs determined that the state police spent hundreds of
thousands of dollars installing equipment that would record
every call coming in and going out of Connecticut's 13 state
police barracks. Steps were taken to make sure no beep tones
would sound, Bernard says, to avoid alerting callers they were
being taped.

"The nature of the offense is that it's secret, and that's the
problem," he says. "You can imagine how useless a law would be
if you had to prove that somebody was secretly listening to the
tape. A defendant would have to be pretty stupid to disclose the
fact that they'd listened."

The Connecticut Defense Lawyers Association brought the original
lawsuit against the state police in 1989, and named then police
commissioner Lester Forst as the lead defendant. Forst resigned
in the uproar over the taping scandal.

The state successfully defended the original lawsuit on
sovereign immunity grounds. Subsequently, ranking barracks
commanders were sued individually. This was an indirect tactic
that relied on the state's practice of indemnifying state
employees for excusable acts at work that expose them to civil

The plaintiffs were represented by Bernard and Michael Koskoff,
also of Koskoff, Koskoff & Bieder, and Hartford's R. Bartley
Halloran. A subclass of rank-and-file troopers and barracks
employees also sued. William B. Yelenak, of Moore, O'Brien,
Jacques & Yelenak in Cheshire, represented them.

The state was defended by the attorney general's office and the
Hartford firm of Cowdery & Ecker, along with San Francisco-based
Morrison & Foerster.

Like the Watergate tapes, the state police taping practice came
to light unexpectedly -- in the course of examining a witness.
Robert Little, a Waterbury policeman, was arrested by state
trooper Christopher Garrity for an Aug. 5, 1988, traffic
accident in which a female hitchhiker was killed. Little faced
charges of manslaughter and drunk driving, and retained Hugh F.
Keefe of New Haven's Lynch, Traub, Keefe & Errante to defend
him. In the course of his efforts to suppress the evidence
gathered from Little at the time of his arrest, Keefe questioned
Garrity on the stand. Keefe says Garrity volunteered information
from a conversation between Little and his lawyer. Where did you
hear that conversation? Keefe recalls asking. "On the tape.
These telephones are all automatically tape recorded, and the
tapes are available afterwards to listen to," Keefe recounts
Garrity answering.

"I said how long have they been automatic," Keefes recalls, "and
he says always, as long as I know, everywhere in the state, in
every state police barracks, the calls are automatically taped.
The judge leaned over and asked, 'Trooper, do you know what you
just said?' " "The poor kid -- it was blissful ignorance. He was
a nice young trooper," says Keefe. "But all hell broke loose.
The press was all over the case the next day."

On a smaller scale, police taping lawsuits have been
successfully prosecuted against city departments in New Haven,
which settled for $1.2 million in 1985, and Torrington, which
settled for $3.4 million in 1992. The potential exposure of the
state police class action loomed far larger than these city
department cases.

Under the terms of the proposed settlement, lawyers and their
clients, troopers and their families, and others calling to or
from state police barracks would be entitled to payments ranging
from $300 to $650 per call, with a cap of $1,950 per person.

Most calls between clients and lawyers would fall under category
"A" of the settlement at $550 per incident, if the call was
between Jan. 1, 1978, and Jan. 18, 1987. The rate increases to
$650 for attorney-client calls between Jan. 19, 1987, and Nov.
9, 1989, which is the end of the covered period.

According to Bernard, much of the police taping appeared to be
used on their own members. The taping covered calls made between
troopers and the state police union or troopers and family
members. Calls that are not between attorneys and clients are
divided into five separate classes, and range from $300 to $450
per call.

The claims are to be administered by a Birmingham, Ala., concern
that specializes in class-action settlements. Once the proposed
settlement is approved by a court, potential claimants will be
able to sign up with the claims administrator in Alabama and
receive mail notice of claim filing procedures. The proposed
claim form requires applicants to answer 11 questions stating
the approximate dates of phone calls; whether attorney-client
business was discussed and the parties to the call. The claimant
must have been unaware of the taping, and assert that the phone
call was not for emergency purposes. The claim form provides
penalties for making a false statement, but does not require
documentary proof that the calls were made. Documents would be
helpful, however, and criminal defense attorneys can expect to
receive calls from old clients from that time period. A dime
used to call a lawyer from a state police lockup back then has
clearly grown in value.

It is too early to tell how many claimants will come forward,
Bernard says. The class action didn't require plaintiffs to opt
in to be a member of the class, but plaintiffs counsel have a
list of 1,600 known potential claimants.

Over an 11-year period, at 13 state police barracks, that class
only averages one claimant per location per month. However,
anyone arrested and allowed to call a lawyer from a state police
post is a potential claimant during the time period. So the
share of the $17 million available for attorneys' fees is not
known at this time.

Farr, a partner in Hartford's Heffernan & Farr, says he voted to
approve the settlement as a practical solution since the state's
potential exposure was so large. Nevertheless, he feels the
federal wiretap law was never intended to be used in this
scenario. "What I think Congress envisioned was the police going
out and putting a wiretap on your house or something. But here
there was no expectation of privacy, if you were calling the
police station," he says. As a policy matter, taxpayers' dollars
are now being spent in this settlement to send a message that's
been learned long ago, Farr says. "To me it's outrageous that
you can now go and make these claims. The people who are really
going to make the money on these things are the lawyers, " Farr

The state is paying about $12 million of the settlement not
insurance companies, says Farr. "That $12 million is money that
could otherwise go to run a community college, or help the
elderly or the poor or veterans -- all the great programs that
are underfunded, but instead we're paying it out to plaintiffs
for whom it's a windfall, and who didn't suffer any damages."

Bernard, the lead plaintiffs' counsel, says he found
considerable damage to the privacy of troopers themselves. "A
lot of the motivation," for the taping, he says, "was to spy on
their own." Indeed, he says, "There were specific instances we
know of where troopers were reprimanded for things that were
heard on tapes that never should have been heard."

Bernard takes issue with the idea that damages are unproven
here. "That's a frightening argument to be made by someone in
government -- that there's no damage to private citizens in
having private conversations in essence stolen, without their
knowledge, or consent. Just because somebody doesn't lose money,
in an invasion of privacy, shouldn't mean they haven't suffered

The purpose of Connecticut's $1,000 liquidated damages figure
for illegal wiretaps, and the federal statute's $10,000 amount,
says Bernard, "is a recognition that this is not an economic
loss that you can prove, but that it's a real loss, and it's to
send a message to those who would steal these kinds of
communications, that this is not to be tolerated. If you didn't
have these liquidated damages, what remedy would you have?"

And the next time the state upgrades its telephone technology,
predicts Bernard, decision-makers will have individual privacy
firmly in mind, because of this settlement. (The Connecticut Law
Tribune; May 31, 1999)

ENGELHARD CORP: Maximum Settlement Payment Set at $7.2 Million
ENGELHARD CORP and certain of its present and former officers
have agreed to a Stipulation of Settlement ("Stipulation") of a
class action filed in November 1995 which alleged misstatements
and omissions in connection with press releases issued in 1995
concerning the Company's PremAir(trademark) catalyst systems.

In the settlement, which was approved by the Court on December
8, 1998, in exchange for the dismissal of the complaint against
all defendants, the Company will pay no more than $7.2 million
of a maximum settlement amount of $21.5 million. The balance of
the settlement amount will be paid by insurance carried by the
Company for such purposes.

Because the final settlement amount will depend on the number of
eligible shares of the Company's common stock for which claims
are submitted, the amounts to be paid by the Company and the
insurer could be less, but in no event more, than the above-
stated amounts. This matter, if resolved in accordance with the
Stipulation of settlement, will not have a material adverse
effect on the operating results of the Company.

GOLDEN BEAR: Florida Securities Litigation Consolidated
Based on a comprehensive review conducted by GOLDEN BEAR GOLF
INC of its Paragon subsidiary's construction projects, it was
necessary for the Company to restate certain financial
statements it had previously filed with the Securities and
Exchange Commission. As a result of the restatement of the
Company's financial statements, numerous purported class action
lawsuits have been filed against the Company and certain current
and former officers and directors of the Company, asserting
various claims under the federal securities laws.

On July 28, 1998, individuals purporting to be shareholders of
the Company filed a class action lawsuit in the United States
District Court for the Southern District of Florida against the
Company and certain of the Company's present and former officers
and directors.

Since the filing of this matter, nine additional lawsuits have
been filed against the Company and certain of its present and
former officers and directors. Eight of these lawsuits were
filed in the United States District Court for the Southern
District of Florida and one was filed in the United States
District Court for the Eastern District of New York, though the
court in New York has entered an order transferring this action
to the Southern District of Florida. The District Court in
Florida entered an order consolidating all of the actions
originally filed in the Southern District of Florida and all
similar actions which are transferred to or subsequently filed
in the Southern District of Florida and directed the plaintiffs
to file a consolidated complaint.

On December 24, 1998, plaintiffs filed their First Consolidated
Class Action Complaint ("Consolidated Complaint") on behalf of
themselves and all others who purchased common stock of the
Company from April 30, 1997 through July 27, 1998, with the
exception of the defendants and certain related or affiliated
persons or entities. The defendants named in the Consolidated
Complaint are Golden Bear Golf, Inc., Jack W. Nicklaus, Richard
P. Bellinger, Jack P. Bates, Stephen S. Winslett, John Boyd and
Arthur Andersen LLP. The Consolidated Complaint alleges that
during the purported class period, the defendants violated
Section 10(b) and Rule 10b-5 promulgated thereunder and Section
20(a) of the Securities Exchange Act of 1934 by making
misrepresentations or omissions of material fact in publicly
filed documents and in other alleged public statements relating
to the Company's financial condition and that of its wholly-
owned subsidiary, Paragon Construction International, Inc. The
plaintiffs are seeking an unspecified amount of damages,
interest, costs and attorneys' fees.

The Company intends to vigorously defend each of the foregoing
lawsuits, but their respective outcomes cannot be predicated.

HECHINGER CO: Delaware Shareholders Suit Dismissed by Agreement
On July 23, 1997, a purported class action complaint was filed
in the Delaware Chancery Court on behalf of all holders of the
Company's common stock against the Company and the former
Company directors.

The plaintiff alleged that the former officers and directors of
the Company breached their fiduciary duties to the holders of
the common stock by, among other things, failing to take all
reasonable steps to assure the maximization of stockholder
value, including the implementation of a bidding mechanism to
foster a fair auction of the Company, and by entering into an
agreement with Centers Holdings under which the consideration
offered by Centers Holdings to holders of the common stock was
"unfair and grossly inadequate."

On April 1, 1999, the complaint was dismissed by the court at
the request of both parties with no payment required by either

INTERNATIONAL RECTIFIER: Securities Trial Set for August 1999
INTERNATIONAL RECTIFIER CORP and certain of its directors and
officers have been named  as defendants in three class action
lawsuits filed in Federal District  Court for the Central
District of California in 1991. These suits seek  unspecified
but substantial compensatory and punitive damages for  alleged
intentional and negligent misrepresentations and violations of  
the federal securities laws in connection with the public
offering of  the Company's common stock completed in April 1991
and the redemption  and conversion in June 1991 of the Company's
9% Convertible  Subordinated Debentures Due 2010. They also
allege that the Company's  projections for growth in fiscal 1992
were materially misleading. Two  of these suits also named the
Company's underwriters, Kidder, Peabody  & Co. Incorporated and
Montgomery Securities as defendants.

On March 31, 1997, the Court, on the Company's motion for
summary  judgment, issued the following orders: (a) the motion
for summary  judgment was granted as to claims brought under
Sections 11 and 12(2)  of the Securities Act of 1933; (b) the
motion was denied as to claims  brought under Section 10(b) of
the Securities Exchange Act of 1934 and  the Securities and
Exchange Commission Rule 10b-5; and (c) the motion  was granted
as to the common law claims for fraud and negligent  
misrepresentation to the extent said claims are based on  
representations contained in the offering prospectus and was
denied as  to other such claims. The Court also granted the
summary judgment  motion brought by the underwriters. The
plaintiffs' motion for  reconsideration or certification of an
interlocutory appeal of these  orders was denied.

On January 28, 1998, the Court decertified the class pursuing
common  law claims for fraud and negligent misrepresentation and
granted the  defendants' motion to narrow the shareholder class
period to June 19, 1991 through October 21, 1991. Plaintiff's
motion for reconsideration  or certification of an interlocutory
appeal of these rulings was denied.

Although the Company believes that the remaining claims alleged
in the  suits are without merit, the ultimate outcome cannot be
presently  determined. A substantial judgment or settlement, if
any, could have a  material adverse effect on the Company's
financial condition and  results of operations. Trial is
scheduled for August 1999.

KTI INC: Shareholders Complain Accounts were Misrepresented
On or about April 26, 1999, Salvatore Russo purported to have
filed an action in the U.S. District Court, District of New
Jersey against KTI INC and two of its principal officers, Ross
Pirasteh and Martin J. Sergi, on behalf of all stockholders who
purchased common stock of the Company from May 4, 1998 through
and including August 14, 1998.

The complaint alleges that the defendants made material
misrepresentations in the Company's Form 10-Q for the period
ended March 31, 1998 in violation of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, concerning its
allowance for doubtful accounts and net income. The plaintiff is
seeking undisclosed damages.

The Company believes it has meritorious defenses to the

MOTOROLA INC: Cellular Telephones Linked to Injuries & Accidents
Motorola has been a defendant in several cases arising out of
its manufacture and sale of portable cellular telephones.

Schiffner v. Motorola, Inc., filed on March 3, 1995 in the
Circuit Court of Cook County, Illinois, was a purported class
action by purchasers of portable cellular phones alleging
economic losses. On March 22, 1999, the United States Supreme
Court denied the plaintiffs' petition for writ of certiorari,
thereby terminating the litigation in favor of Motorola.

Jerald P. Busse, et al. v. Motorola, Inc. et al., filed on
October 26, 1995 in the Circuit Court of Cook County, Illinois,
Chancery Division, is a purported class action alleging that
defendants have failed to adequately warn consumers of the
alleged dangers of cellular telephones and challenging ongoing
safety studies as invasions of privacy. All claims have been
dismissed on defendants' motions. Plaintiffs have moved for
reconsideration of the Court's decision.

Silber, et al. v. Motorola, Inc., et al., filed on August 1,
1995 in the Supreme Court of the State of New York, County of
Suffolk, is an action wherein it is alleged that a traffic
accident was caused by the use of a cellular phone. On April 27,
1999, the Court granted defendants' motion for summary judgment
and dismissed the suit. Plaintiffs may appeal.

Motorola has been named as one of several defendants in Freeland
v. Iridium World Communications, LTD, et al., Yong v. Iridium
World Communications, LTD, et al., Kleinman v. Iridium World
Communications, LTD, et al., Marshall v. Iridium World
Communications, LTD, et al., Ackerman v. Iridium World
Communications, LTD, et al., Hargrove v. Iridium World
Communications, LTD, et al., and Turner v. Iridium World
Communications et al., a series of nearly identical putative
class action securities lawsuits filed beginning April 22, 1999
in the U.S. District Court for the District of Columbia. All of
these lawsuits allege violations of the Federal securities laws
arising from alleged material misrepresentations or omissions
regarding difficulties in the satellite communications business
of Iridium World Communications, LTD, Iridium LLC and Iridium
Operating LLC. The alleged classes consist of purchasers of all
Iridium securities during the period from September 9, 1998 to
March 29, 1999.

NATIONAL REALTY: Florida Investor Sues for Fraud in Wisconsin
The Milwaukee Sentinel & Journal reports that a Florida investor
has filed a lawsuit against a real estate company and business
executive, John Vishnevsky, alleging that the company and
Vishnevsky defrauded hundreds of investors in limited
partnerships. David Paustenbach is the only investor named in
the lawsuit, which asks a judge to certify the case as a class
action. That would allow others to join. More than 1,000 other
investors in apartment complexes in Milwaukee and Madison were
charged excessive fees and defrauded into extending the lives of
partnerships, Paustenbach alleges in his lawsuit, which was
filed last week by attorneys in Oshkosh and Atlanta.

The lawsuit accuses Vishnevsky, a longtime real estate investor
who filed for bankruptcy in the early 1990s but settled the
case, and his company of engaging in racketeering, mail fraud,
kickback schemes and illegal charging of overhead and other
expenses to limited partnerships without the investors'

Vishnevsky and a spokeswoman at National Realty Management Inc.
in Pewaukee declined to comment and referred questions to
attorney John Erich. Erich released a statement calling the
lawsuit's allegations "baseless and without merit." "We believe
that (Paustenbach) is not the real party in interest," Erich
said. "Rather, this is a hostile takeover attempt by a firm
which has sought to take advantage of Mr. Vishnevsky's investors
and purchase their limited partnership interest at fire-sale
prices." "To protect his investors, Mr. Vishnevsky will
vigorously defend against this action," said Erich, who added
that he planned to file a counterclaim seeking punitive damages.

An attorney representing Paustenbach, Vincent Gresham, could not
be immediately reached for comment. But in an earlier interview,
Gresham said Paustenbach had suffered "substantial" losses from
his investments in several partnerships with Vishnevsky's
company. "We believe that the investors have incurred
substantial losses which we are seeking to recover in this
lawsuit," Gresham said. "We are trying to get them a fair return
on their investment and a fair liquidity." Gresham said the
partnerships were sold in the 1970s and 1980s "with the
expectation that they would be liquidated in quick fashion."
"They're still not sold," he said. "We believe that the
investors might benefit from having these properties properly
marketed and shopped." He estimated that distribution of assets
after liquidation could reach millions of dollars. "There was an
example where a purchase offer was made by a third party in the
property," Gresham said. "That purchase offer was met with

Of the 12 partnerships in Paustenbach's lawsuit, all involve
apartment complexes and nine are in the Milwaukee and Madison
areas. The remaining three are in Las Vegas.

Several other people and various limited partnerships are also
named as defendants in the lawsuit.

The lawsuit asks a judge to close out the partnerships and
conduct a financial accounting of them, remove the current
general partners and install new general partners, and award
compensatory and punitive damages. It alleges that Vishnevsky
and his company engaged in mail fraud by mailing fraudulent
annual reports to investors that failed to disclose excessive
and illegal fees charged to partnerships. Also, Paustenbach
alleges that Vishnevsky set up a kickback scheme consisting of
consulting fees that netted him more than $650,000 in 1997
alone. (Milwaukee Sentinel & Journal; 06/01/99)

PARAMETRIC TECHNOLOGY: Denies Misrepresenting 1998 Earnings
Certain class action lawsuits were filed in the fourth quarter
of 1998 against PARAMETRIC TECHNOLOGY CORP and certain of its
current and former officers and directors in the U.S. District
Court in Massachusetts claiming violations of the federal
securities laws based on alleged misrepresentations regarding
anticipated revenue and earnings for the third quarter of 1998.
The plaintiffs in these lawsuits joined together to file a
consolidated and amended complaint in the second quarter of
1999. These actions seek unspecified damages.

PARAMETRIC TECHNOLOGY CORP believes the claims made in the
amended complaint are without merit, and intends to defend them

PROJECTAVISION INC: Submitting Reply in Motion to Dismiss
In December, 1998, a stockholder of PROJECTAVISION INC initiated
an action in Supreme Court, State of New York, alleging common
law fraud, negligence and breach of fiduciary duty claims
against the Company and its Directors.

In February, 1999 the Company and the Defendant Directors moved
to dismiss this action based upon undisputed documentary
evidence and based upon an assertion that the Complaint failed
to state a cause of action. The Plaintiffs' responsive papers
are due in April, 1999 and reply papers are due to be submitted
by the Company and the Defendant Directors in May, 1999.

Based upon discussions with counsel, the Company's management
believes that the motion to dismiss is well-founded. In the
event, however, that the motion were not granted, the Company's
management believes that it has meritorious defenses and intends
to vigorously defend against these claims.

PRUDENTIAL INSURANCE: Actuarial Firm Used for Medical Decisions
A Manhattan judge has given the go-ahead to a class action
alleging that a leading health maintenance organization
committed fraud and breach of contract by letting personnel
other than doctors decide what length of hospital stay will be
covered. In denying the Prudential Insurance Co.'s bid to have
the case dismissed in its entirety, Supreme Court Justice Herman
Cahn said the suit can proceed even though the plaintiffs had
failed to exhaust their remedies under the insurance contract.

Cahn also rejected Prudential's argument that the suit was
rendered moot because of recent changes in New York's Public
Health Law, which set up tighter standards for "medical
necessity" determinations. The judge, however, refused to
declare certain sections of Prudential's insurance contracts
void on public policy grounds.

The suit was brought by Musette Baras and Nancy T. Vogel, on
behalf of themselves and all other subscribers to health care
plans offered through Prudential or its subsidiary, Prudential
Health Care Plan of New York Inc. (PruCare). Baras was admitted
to the Winthrop Hospital in Mineola in 1996 after an attack of
Crohn's Disease. She claims that even though her attending
doctor recommended she stay in the hospital for additional
tests, she was advised by Prudential that the additional stay
would not be covered. She alleges that the decision not to
authorize the tests was made by a Prudential clinical reviewer
or "Concurrent Review Nurse." Baras was hospitalized for a burst
intestine a month later, and she alleges that she was released
earlier than recommended by her doctor, based on a decision made
by a review nurse. Vogel was hospitalized in March 1996 for a
hysterectomy and was discharged only two days after the
operation, despite her doctor's recommendation that she stay for
five days. She claims that the decision that a two-day stay was
all that was medically necessary was made by a Prudential review

Both women assert that the review nurses' decisions were based
on guidelines created by a Seattle actuarial firm, Milliman &
Robertson Inc., rather than on the doctors' recommendations. The
firm's guidelines contain recommended hospital stays for
illnesses from sore throats to heart attacks.

In 1997, the women sued Prudential and PruCare in Manhattan
Supreme Court alleging that the carriers' handling of the
"medical necessity" determinations amounted to breach of
contract, fraud, breach of fiduciary duty and interference with
contract. Specifically, they contended that Prudential, through
its subscriber contracts and its promotional materials, had
represented that its "medical necessity" decisions were to be
made by trained doctors in the relevant specialty based on
prevailing medical opinion in the field. While Cahn agreed with
Prudential that the claims of breach of fiduciary duty and
interference with contract must be dismissed, he found that the
contract and fraud claims were viable.

Although conceding that Prudential's plan provided for a
grievance procedure for denied claims, the judge said that the
class claims did not fall within the scope of that process. The
plaintiffs, he noted, base their cause of action on allegations
that procedures employed by Prudential in making the medical
necessity decisions were "not as promised." Such claims, he
added, would not be barred by subsequent legislation concerning
claims review procedures. As for the fraud claims, the judge
found that it was too early in discovery to rule on the
possibility that Prudential may have "misrepresented the terms
and conditions of the benefits offered."

Stanley M. Grossman, D. Brian Hufford and Robert J. Axelrod, of
Pomerantz Hudek Block & Gossman represented the class. Peter L.
Altieri, Claudia M. Cohen and Jeremy I. Bohrer, of Epstein
Becker & Green, represented Prudential. This story originally
appeared in the New York Law Journal.

US DOJ: Federal Prosecutors Seek $250 Million in Unpaid Overtime
If the department of Justice began paying its 9,000 lawyers for
overtime or limited them to a 40-hour workweek, either way the
result would be chaos.

That was the prediction of DOJ officials in an internal 1994
survey. Department heads said if Congress didn't give them the
annual $ 45 million needed to pay overtime, paying from DOJ's
budget -- $ 20 billion -- could bring layoffs. And if overtime
were eliminated, cases would come to a grinding halt as
prosecutors streamed out of their offices on Thursdays.

But the reality, say prosecutors on both sides of the debate, is
that whatever the result of John Doe v. U.S., No. 98-896, the
class action seeking overtime pay for federal prosecutors, the
lawyers will continue to work, paid overtime or not.

Filed on Nov. 25, 1998, in the U.S. Court of Federal Claims
before Judge Robert Hodges Jr., the suit has 115 name plaintiffs
and a class of 12,000 current and former DOJ attorneys allegedly
owed $250 million.

DOJ argues that under the Federal Employees Pay Act, only
overtime specifically authorized must be paid. The plaintiffs
claim that overtime worked with the knowledge of superiors, when
attorneys are "induced" to work, requires compensation.

Documents obtained in discovery show that DOJ has known for
decades that its internal rule against paying attorneys overtime
was probably illegal. DOJ failed to obtain an exemption from
Congress in 1996 and is seeking one again, several federal
prosecutors said.

"Damn them, they knew and they were trying to hide the ball.
Then they try to go to Congress to get a quick fix. That's bad
faith," said one name plaintiff, a veteran federal prosecutor.
San Francisco Asst. U.S. Attorney William I. Shockley, a
director at the 1,200-member National Association of Assistant
U.S. Attorneys, said that the increase in career prosecutors and
the federalization of criminal law have led to this demand for
better compensation.

DOJ would not comment on the case, but in an undated memo titled
"Attorney Overtime Compensation Options," DOJ officials said,
"In a longstanding line of decisions, the U.S. Court of Claims
has held that, absent specific order or approval, an agency is
liable for overtime compensation when it 'induces' overtime." It
suggests options including doing nothing, paying overtime, and
offering flexible schedules and flat-rate, rather than hourly,
overtime pay. But the memo criticized paying overtime, saying
that it could be "at odds with a culture of professionalism."

The case has divided prosecutors. "No one works at the DOJ for
the money," said John Q. Barrett, former counselor to DOJ
Inspector General. Former San Diego U.S. Attorney Charles La
Bella agreed. "People feel strongly that we shouldn't be paid
overtime. Career prosecutors find it offensive to be reduced to

But the plaintiffs feel that DOJ has exploited their sense of
duty. "Obviously, those who say that haven't paid the price:
hospitalization, failed marriage, lack of a relationship with
your children," said one plaintiff. "It's a moral question."
(The National Law Journal; May 24, 1999)

VITAMIN LITIGATION: Animal Feed Industry Makes Antitrust Claims
The Legal Times noted that D.C.'s Dickstein Shapiro Morin &
Oshinsky filed an antitrust suit in federal court in Arkansas on
May 25 against a host of international vitamin manufacturers and
wholesalers on behalf of 12 U.S. companies, including Tyson
Foods Inc. This is the first of what is expected to be a flood
of similar suits following in the wake of a record-breaking $725
million criminal fine that the Justice Department announced May
20 against Swiss pharmaceutical giant Hoffman-La Roche and
Germany's BASF AG.

The drug-makers pleaded guilty to participating in a nine-year
conspiracy to inflate the prices of several vitamins used
primarily as supplements in animal feed. Dickstein Shapiro's
case deals exclusively with choline chloride, a vitamin used to
supplement the diets of poultry and hogs, and names BASF but not
Hoffman-La Roche.

"You're going to see other cases filed as other large purchasers
make the decision that they want to go after the vitamin
companies, " says Dickstein Shapiro partner Kenneth Adams, head
of the firm's civil litigation practice. The firm represents on
a contingent basis more than 30 buyers of bulk vitamins. "It's a
billion-dollar case in terms of what it's going to cost these
price-fixers to get out from under this, " says Adams.

In a related development, attorneys in 25 lawsuits previously
filed in federal courts have consolidated their claims against
the manufacturers into one class action filed in U.S. District
Court for the District of Columbia. Lead counsel will be
litigation heavyweights David Boies of New York's Boies &
Schiller, Michael Hausfeld of D.C.'s Cohen, Milstein, Hausfeld &
Toll, and Stephen Susman of Dallas' Susman Godfrey. (Legal
Times; May 31, 1999)

WELFARE BENEFITS: Denver Pays for Dropping Families w/o Notice
The Denver Post reported that Denver city officials say they're
doing the right thing by paying about 1,900 welfare families
$1,200 each to settle part of a class-action lawsuit against the
city, the state and Adams County, in which the families claim
the governments failed to give proper notice before dropping
them from welfare rolls. Grass-roots organizations that monitor
welfare reform and work with impoverished clients also told the
Post that the notices were inadequate.

The Denver City Council will vote June 7 on an ordinance to
settle the matter. City attorneys already have filed a
conditional settlement in district court. But the state and
Adams County are reportedly going to fight the lawsuit, arguing
that fair and adequate warnings were given to the families.

The issue is complicated. Before welfare reform, all a family
had to do was meet low- or no-income guidelines and have
children. Welfare was an entitlement. In other words, if you
were poor enough and had children, you were entitled to welfare
benefits. But because welfare reform did away with Aid to
Families with Dependent Children, there is no entitlement under
current law. The only way a person can remain eligible for cash
benefits is to participate in training for a job, actively
search for a job or actually have a job. According to the Denver
Post, that's why the state opposes Denver's decision to settle.
Settling can be construed as creating an entitlement, which
flies in the face of welfare reform and could cost millions to
the state. (Denver Post; 05/27/99)


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
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Copyright 1999. All rights reserved. ISSN 1525-2272.

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