/raid1/www/Hosts/bankrupt/CAR_Public/991202.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, December 2, 1999, Vol. 1, No. 212
Headlines
ALBERTSON’S INC: Retail Chain Settles Employees’ OT & Disability Claims
BENCHMARK ELECTRONICS: Milberg Weiss Files Securities Suit in Texas
BERGEN CAPITAL: Milberg Weiss Files Securities Suit in California
BREAST IMPLANT: Fd Judge Oks Plan, Clearing Way for Settlement Payment
BURDINES: 1st after Macy’s To Be Sued over Access for Disabled Shoppers
CA HIGHWAY PATROL: New Plaintiffs Added to Suit Over Racial Bias
DELAWARE SOLID: Settles in Dela. with Waste Haulers over Tipping Fees
DELTA AIR: Ticked Travel Agents Sue over Slashed Fees for Ticket Sales
GUN MANUFACTURERS: Parents of Murder Victims Can Claim Public Nuisance
HEALTH MGT.: Jury in 1st PSLRA Trial Rules in Favor of Accounting Firm
INTELECT COMMUNICATIONS: SEC Filing Tells of Securities Suit in Texas
KOCH INDUSTRIES: To Pay for Damages in Gas Fed Fire Ball Case in Texas
NAVIGANT CONSULTING: Susman & Watkins File Securities Suit in Illinois
NAVIGANT CONSULTING: Wolf Haldenstein Files Securities Suit in Illinois
NEWELL RUBBERMAID: Much Shelist Files Securities Suit in Illinois
PLAINS ALL: Day Edwards Files Securities Suit in Texas
PLAINS ALL: Milberg Weiss Files Securities Suit in Texas
PLAINS ALL: Steven E. Cauley Files Securities Suit in Texas
PLAINS ALL: Wechsler Harwood Files Securities Suit in Texas
RIBOZYME PHARMACEUTICALS: Harold B. Obstfeld Files Colo Securities Suit
SEX OFFENDERS: MA Ruling, the First After New Law, Slows Access to Data
STYLING TECHNOLOGY: Berman, DeValerio Files Securities Suit in Arizona
STYLING TECHNOLOGY: Wolf Popper Files Securities Suit in Arizona
TOBACCO LITIGATION: A Study on Women Shows 2nd Hand Smoke Is Dangerous
TOBACCO LITIGATION: Govt, Industry Argue in Sp Ct over Authority of FDA
TOBACCO LITIGATION: Smoking Caused Cancer, Doctor Testifies
TRUSTEE BANKS: Bank One, Suntrust Sued for Servicing Failed Venture
WATER HEATERS: Missouri Judge Gives Preliminary Approval to Settlement
*********
ALBERTSON’S INC: Retail Chain Settles Employees’ OT & Disability Claims
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Albertson's Inc. settled eight federal lawsuits alleging that it forced
employees to work overtime off the clock and discouraged them from
filing disability claims, officials said Tuesday.
Albertson's, the nation's second-largest food-and-drug chain, denied any
wrongdoing.
It estimated total liability at $37 million, according to a one-time
charge against third-quarter earnings. The agreement calls for $17.5
million to cover the plaintiffs' legal bills, leaving $19.5 million to
pay claims to what the United Food & Commercial Workers International
Union estimated could be 150,000 eligible current and former employees.
The settlement calls for payments of at least $2,500 for plaintiffs who
participated in depositions and at least $1,000 for those who were named
as plaintiffs but did not participate in depositions. Others eligible
must submit claims of at least $100.
"The UFCW is pleased that Albertson's has finally agreed to do the right
thing: Clean up its act and pay employees who worked off the clock to
meet arbitrary labor cost goals," said union President Douglas Dority.
Albertson's Vice President Mike Read said the number of current and
former employees eligible should be substantially fewer than the union
estimated. Read said the settlement was fair. He said the company had
been trying to establish the extent of the alleged problem so all
eligible employees can get the pay they deserve.
Boise-based Albertson's has 220,000 employees and operates about 2,500
retail stores in 38 states. (The Associated Press Nov-30-1999)
Union UFCW Lauds Settlement in Idaho
An agreement in principle settling eight class action lawsuits against
Albertson's, Inc. that were consolidated in U.S. District Court in
Boise, Idaho, has been reached, attorneys for the employees and on
November 30, 1999 the company informed the court, and the United Food &
Commercial Workers International Union (UFCW), which financed the
litigation, hailed the agreement as a major victory for Albertson's
workers.
"The UFCW is pleased that Albertson's has finally agreed to do the right
thing: Clean up its act, and pay employees who worked off the clock to
meet arbitrary labor cost goals," said Douglas H. Dority, UFCW
international president.
The Union's Worker Advocacy Project in 1996 began a systematic
investigation of claims by union and non-union employees of the grocery
chain that Albertson's wasn't paying them for all of their work time and
was discouraging injured workers from filing worker's compensation
claims.
When Albertson's refused the UFCW's request to stop its illegal pay
practices, the Union agreed to financially support the filing of class
action lawsuits against the company in Washington, California, Florida,
and Idaho by the Webster, Mrak and Blumberg law firm of Seattle. The
suits were consolidated in federal district court in 1997, and cover
employees in every state where Albertson's operated at the time.
Thousands of current and former employees have filed sworn statements
and certified claim forms with the court in support of the litigation.
Dority noted the Union's goals in sponsoring the suits "were basic: (1)
Stop illegal, unpaid off-the-clock work at Albertson's; (2) eliminate
fear of retaliation against employees seeking pay for time worked and
fairly pay workers for their labor; (3) end abuses of injured workers
who file worker's compensation claims; (4) eliminate incentives in the
bonus system for store-level managers that lead to off-the-clock work
and worker's comp abuses, and (5) show the chain's non-union workers the
power of collective action."
"UFCW succeeded on each of these goals," he concluded. "Worker rights
will be enhanced and protected by the consent decree entered into by
Albertson's. Bonuses for managers will no longer be dependent on getting
workers to work extra hours off the clock or on diverting injured worker
claims to private health insurance. Anyone who files a claim has the
strongest possible protections against retaliation. The claims procedure
is fair to employees, while protecting the company from inflated
claims."
A full explanation of the settlement and the claims procedure will be
mailed to all affected employees by the court when it sets a hearing on
whether to approve the settlement. In the meantime, current and former
employees may access a copy of the outline of the agreement at
www.Albsuits.com, or may call a toll-free number set up by the
attorneys, 888-BACKPAY, for more information.
"The UFCW sought to reform Albertson's employment practices, not to
punish a company that employs tens of thousands of our members," Dority
said. "Therefore, we applaud the plaintiffs' and Albertson's decision to
adopt a prompt claims-payment procedure rather than to litigate
further."
"This settlement should send a strong message to companies which violate
workers' rights and seek to deprive workers of effective union
representation that the UFCW will not be deterred," he continued.
The settlement is one of the broadest and most comprehensive ever
negotiated for alleged violations of wage-and-hour laws. Up to 150,000
current and former employees of the nation's second largest grocery
chain could be eligible to participate. Among other items in the
agreement, Albertson's will compensate the plaintiffs' attorneys $17.5
million and the UFCW will recover its litigation expenses.
The Supreme Court earlier this fall refused to hear Albertson's appeal
of the district court's dismissal of its preemptive suit against the
UFCW alleging that union employees had to arbitrate unpaid work claims
before filing suit, which would have overwhelmed the grievance and
arbitration process with thousands of off-the-clock work claims.
Ironically, Albertson's simultaneously was complaining in another forum
that the Union was swamping the company with grievances and information
requests. That trial continues on a nationwide complaint against
Albertson's issued by the National Labor Relations Board alleging the
chain failed to respond to grievances in a timely manner.
Additional information on the lawsuit available at www.Albsuits.com.
Additional information on the UFCW can be found at www.ufcw.org or by
calling Greg Denier, UFCW, 202-466-1591, or Joe Peterson, UFCW,
206-223-0344, ext. 243. The Webster, Mrak and Blumberg law firm can be
reached at 206-223-0344. Contact: United Food and Commercial Workers
International Union Greg Denier, 202-466-1591 or Joe Peterson,
206-223-0344, ext. 243 http://www.ufcw.org
The Los Angeles Times of December 1, 1999 reported that the Company’s
earnings dip to merger. According to the paper, Albertson's Inc. said
Tuesday that the high cost of converting California's Lucky supermarket
chain to Albertsons stores depressed its third-quarter earnings and will
cause profits next year to miss forecasts.
Albertson's, the No. 2 food retailer, has struggled with a
more-costly-than-expected integration of the stores and operations of
Lucky's parent, American Stores Corp., since its acquisition in June.
The Boise, Idaho-based Albertson's also was forced to sell 145
stores--about 50 more than originally anticipated--to satisfy state and
federal regulators, making the $ 12.5-billion merger more expensive.
In total, these expenses cost the company an additional $ 90 million,
Albertson's officials said. "While we are disappointed with our earnings
and with the short-term cost of the merger and integration, we are
confident that the long-term picture is positive," said Gary Michael,
Albertson's chairman and chief executive.
Albertson's share price dropped $ 3.81 to close at $ 32 on the New York
Stock Exchange. The company's stock has lost more than half its value
this year on concern over merger-related woes, and is poised to snap a
24-year string of increases--the longest streak in the Standard & Poor's
500 Index.
Analysts in recent weeks have downgraded the stock to "hold" and even
"reduce." However, many believe the profits plunge is temporary. "We
think this was just a blip," said Asma Usmani, a supermarket analyst
with Edward D. Jones & Co. in St. Louis. "This is a fundamentally strong
company. Given the size of the acquisition, it was hard for them to
estimate what the costs would be."
In the third quarter ending Oct. 28, net earnings fell 15% to $ 185
million, or 44 cents a share, from $ 218 million, or 52 cents a share, a
year earlier. Sales rose 1.6% to $ 8.98 billion from $ 8.84 billion.
Analysts polled by First Call Corp. had expected the company to earn an
average of 59 cents in the quarter.
Albertson's said it expects to earn 70 cents a share in the fourth
quarter and $ 2.70 next year, significantly less than the 87 cents and $
2.99 that analysts had expected.
The company's weakened financial performance in the third quarter
included a $ 37-million one-time charge to settle eight multi-state
class-action lawsuits financed by the United Food & Commercial Workers
International Union (UFCW), alleging "off-the-clock" work violations and
workers' compensation abuses at Albertson's. Albertson's operates 2,500
stores in 38 states.
BENCHMARK ELECTRONICS: Milberg Weiss Files Securities Suit in Texas
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The following is an announcement by the law firm of Milberg Weiss
Bershad Hynes & Lerach:
Notice is hereby given that a class action lawsuit was filed on November
24, 1999, in the United States District Court for the Southern District
of Texas, on behalf of all persons who purchased the securities of
Benchmark Electronics, Inc. ("Benchmark" or the "Company") (NYSE: BHE)
between August 10, 1999, and October 21, 1999, inclusive (the "Class
Period").
If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact, at Milberg Weiss Bershad Hynes & Lerach ("Milberg Weiss"),
Steven G. Schulman or Samuel H. Rudman at One Pennsylvania Plaza, 49th
Floor, New York, New York 10119-0165, by telephone 1-800-320-5081 or via
e-mail: endfraud@mwbhlny.com or visit our website at www.milberg.com.
The complaint charges Benchmark and certain of its officers with
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that
defendants issued a series of materially false and misleading statements
concerning the Company's operations and future prospects. As a result of
these materially false and misleading statements the price of Benchmark
securities were artificially inflated during the Class period. Prior to
the disclosure of the adverse facts described above Benchmark financed a
major acquisition using, among other things, its artificially inflated
common stock as currency.
If you are a member of the class described above you may, not later than
sixty days from November 19, 1999, move the Court to serve as lead
plaintiff of the class, if you so choose. In order to serve as lead
plaintiff, however, you must meet certain legal requirements. Contact:
Shareholder Relations Dept. E-Mail: endfraud@mwbhlny.com 1-800-320-5081
BERGEN CAPITAL: Milberg Weiss Files Securities Suit in California
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Milberg Weiss (http://www.milberg.com)announced on November 30, 1999
that a class action has been commenced in the United States District
Court for the Central District of California on behalf of those who
purchased or otherwise acquired the 7.8% Trust Originated Preferred
Securities (the "7.8% Preferred Securities") of Bergen Capital Trust I
("Bergen Capital" or the "Company") (NYSE:BBC A) in connection with
Bergen Capital's May 26, 1999 public offering (the "Offering") or
thereafter on the open market until October 14, 1999 (the "Class
Period"), seeking to remedy violations of the federal securities laws.
On or about May 26, 1999, Bergen Capital went public in an offering
underwritten by Merrill Lynch & Co., Banc of America Securities LLC
("Bank of America"), A.G. Edwards & Sons, Inc., Goldman, Sachs & Co.,
Morgan Stanley Dean Witter, PaineWebber Incorporated and Prudential
Securities (the "Underwriters") in which$300 million worth of 7.8%
Preferred Securities were sold by the defendants to public investors at
$25 per share via a Form 424B4 Prospectus and Form 8-A12B Registration
Statement (the "Registration Statement/Prospectus"). The Underwriters
were paid $9.45 million by Bergen Brunswig Corporation ("Bergen")
(NYSE:BBC).
Bergen Capital was formed to acquire subordinated notes from Bergen with
funds raised from the Offering. Bergen in turn used part of the proceeds
from the sale of the notes to Bergen Capital to pay off loans from Banc
of America.
The Registration Statement/Prospectus included Bergen's financial
results and made representations about Bergen's recent acquisition of
Stadtlander Drug Company ("Stadtlander") in January 1999 and failed to
disclose accounting irregularities and fraud in the financial statements
of the Stadtlander business unit and the adverse impact these
irregularities would have on the Bergen Capital securities.
Then on October 14, 1999, Bergen announced the stunning magnitude of the
false Stadtlander financial results and uncollectible Stadtlander
accounts receivable and other bogus assets Bergen had been carrying on
its books for nine months. Bergen told investors that up to $80 million
of Stadtlander assets would be written off as of September 30, 1999, and
that Bergen had filed a suit for fraud against Counsel, Stadtlander's
former parent corporation, relating to the Bergen/Stadtlander merger.
On this announcement, Bergen Capital's market price dropped to below $20
per share and has subsequently dropped to as low as $13.19 per share.
If you wish to serve as lead plaintiff, you must move the Court no later
than 60 days from October 22, 1999. If you wish to discuss this action
or have any questions concerning this notice or your rights or
interests, please contact plaintiff's counsel, William Lerach or Darren
Robbins of Milberg Weiss at 800/449-4900 or via e-mail at
post@mwbhl.com.
BREAST IMPLANT: Fd Judge Oks Plan, Clearing Way for Settlement Payment
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Dow Corning Corp., which was the largest maker of silicone-gel breast
implants, said a federal judge confirmed the company's bankruptcy
reorganization plan, allowing the company to pay $3.2-billion (US) to
resolve suits alleging the implants caused health problems in women. The
plan, agreed to in November, 1998, provides up to $3.17-billion over 16
years to pay claims. It gives women the choice of going to court, having
their implants removed or being compensated for rupture or disease
caused by the implants. The plan also calls for $1.3-billion in payments
to commercial creditors. The company filed for Chapter 11 protection
from its creditors in May 1995. (National Post (formerly The Financial
Post) Dec-1-1999)
BURDINES: 1st after Macy’s To Be Sued over Access for Disabled Shoppers
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The class-action suit alleging access problems comes after a California
ruling against Macy's that could affect the industry.
When Edward Resnick shops a shoe sale at Burdines, he needs someone else
to wedge between the racks and retrieve several pairs just so he can
look at them.
"They shove the racks too close together for my wheelchair to get in,"
said the 73-year-old retired Miami lawyer. "And at Christmas they even
fill the main aisles through the store with display racks. I can't get
around at all. I've actually had to backtrack just to get out of the
store."
Resnick is one of four disabled shoppers who this week filed a federal
class action discrimination suit against Burdines. They are seeking to
force the 50-store chain to clear out heaps of merchandise that have
shrunk "dozens of aisles" within its stores to passageways as skinny as
12 inches. That would be a tight squeeze for an able-bodied person. It's
impossible for Resnick, whose wheelchair requires 32 inches.
The discrimination case may give a fright to retail executives who for
years have packed more and more merchandise into their stores, heedless
of potentially illegal barriers to the disabled. Major stores across the
country may soon face similar lawsuits, according to advocates for the
disabled. "Burdines is far from the worst offender," Resnick said. The
suit against Miami-based Burdines follows success in a pioneering suit
against its sibling chain, Macy's. Both are owned by Cincinnati-based
Federated Department Stores Inc.
On Oct. 29, a federal judge in San Francisco found R.H. Macy & Co. in
violation of the Americans with Disabilities Act. U.S. District Court
Judge Marilyn Hall Patel gave Macy's 60 days to come up with a plan for
maintaining at least a 36-inch passageway between the sea of movable
racks of merchandise jammed in its eight-story flagship store in San
Francisco's Union Square.
Melissa Kasnitz, an Oakland attorney who helped argue the case for
Disability Rights Advocates of California, said, "It's the first time a
judge has ever defined access to the disabled as applying to the
merchandise layout in a store."
The decision has big-money implications. Macy's estimated that making
room to comply strictly with the ADA would wipe out 15 to 25 percent of
the inventory in its San Francisco store. And that's at the time of the
year when it has the least inventory on hand. Retailers' productivity is
typically measured in sales per square foot, so every inch of the sales
floor is considered golden. Department heads frequently wage fierce
battles for the space for even a single movable clothes rack.
After the ruling, an Oakland-based advocacy group for the disabled filed
a similar case against all of Macy's West Coast stores. Next, the firm
that sued Burdines is preparing to file one against Macy's East Coast
stores. "These sorts of cases are going to spread to all sorts of
retailers," said Rosemarie Richard, a Stuart attorney who filed the case
against Burdines. "There are advocacy groups all over the country that
have complained about this problem for years that have learned of the
Macy's decision."
A Miami advocacy group, Access Now Inc., chose to go after Burdines
first because the chain had more complaints than others. The case
applies to the entire chain but is based on disabled customers'
experiences in four Burdines stores scattered down the East Coast from
Stuart to Miami. "The aisles in one of these stores was cleared a few
years ago only after disabled shoppers went to the fire marshal to
complain," Richard said. Officials with Burdines and its parent,
Federated Department Stores Inc., declined to comment until they
reviewed the suit.
Stores jammed with merchandise have grown more common as retailers cut
costs by relying on their sales floor to store goods that once would
have been kept in a warehouse. The problem peaks at Christmastime.
Retailers dense-pack their stores to make replenishment quicker as
shoppers empty the racks with lightning speed. A large discount store,
for instance, sells out its entire inventory six to eight times during
the Christmas season.
Store managers say they shoehorn in as much merchandise as they can
because there is no place else to put it. Many retail executives think
it makes a store look more prosperous. They also subscribe to an old
rule in retailing: Shoppers are more likely to buy things once they are
slowed down enough that they are forced to look at them.
The ADA applies to stores, and Congress has said main pathway aisles
must be accessible to those in wheelchairs. But the law does not specify
that individual departments be as easy to navigate. The law says
permanent display units must be at least 36 inches apart. Department of
Justice guidelines suggest movable displays - such as those that blanket
apparel, housewares and gift departments - should have the same minimal
clearance. Until now, those guidelines have been widely ignored.
Before making any part of their stores inaccessible to the disabled,
however, merchants are required to prove that a solution was "not
readily achievable" for financial reasons. In the Macy's case, Judge
Patel said the retailer did not consider access to the disabled in
deciding how to lay out its merchandise, even after the store got a $
130-million remodeling. Macy's "simply ignored the problem," she wrote.
She rejected Macy's defense that its clerks are supposed to help the
disabled get items from areas they cannot reach. Based on testimony in
the case, the judge wrote the disabled "had difficulty just getting the
attention of a sales clerk."
In the Burdines case, the disabled also alleged:
* Hooks and chairs in at least one fitting room per store were higher
than permitted, making it harder for them to try on clothes. In some
stores, fitting rooms specially built for the handicapped had been
converted into stockrooms or had so much merchandise blocking the
entrance that people in wheelchairs could not get to them.
* Some sales counters were built too high for people in wheelchairs to
use them. ADA guidelines say sales counters should be no higher than
36 inches unless a clipboard is available for signing sales slips.
(St. Petersburg Times Dec-1-1999)
CA HIGHWAY PATROL: New Plaintiffs Added to Suit Over Racial Bias
----------------------------------------------------------------
A lawsuit that alleges California Highway Patrol and state narcotics
officers single out minorities was broadened on November 30 to include
more people who claim they were harassed on the state's highways because
of their race.
The American Civil Liberties Union, which filed the original suit
against the CHP and the Bureau of Narcotic Enforcement in June, asked
that the suit be made a class action on behalf of minorities who have
been unjustly pulled over near the Highway 152 and Interstate 5
interchange in Merced County.
The suit claims officers go after minorities in a misguided zeal to stem
the flow of drugs. ACLU attorney Michelle Alexander said a favorable
ruling in a class-action suit can bring about "sweeping institutional
reform" in the way the agencies operate.
The amended lawsuit, filed in U.S. District Court in San Jose, seeks
unspecified monetary damages and an end to so-called racial profiling in
traffic stops. The ACLU also wants to require officers to record the
race of people stopped for traffic violations and make the information
public.
By using minor traffic violations as an opportunity to interrogate
drivers and search for drugs, the CHP operates "a roving program of
racial discrimination on the state's highways," said Jon Streeter, an
attorney for Keker & Van Nest, a San Francisco law firm working with the
ACLU.
False Stereotyping Alleged
The suit claims that CHP and narcotics officers stop minorities as
suspected drug couriers as part of a drug crackdown called Operation
Pipeline. The practice sweeps up thousands of innocent motorists based
on false racial stereotypes, according to the ACLU.
The suit seeks class-action status for minorities pulled over near the
Highway 152/I-5 interchange near Los Banos, a major traffic artery
leading to the Bay Area. Streeter said numerous drivers have called an
ACLU hotline to report harassment along those highways. "One of the hot
spots turned out to be that particular area," he said.
CHP Commissioner Dwight Helmick said the allegations will be thoroughly
investigated. "We do not condone the profiling or unfair treatment of
people," he said. "The real truth comes when all the facts are laid
out."
The issue of racial profiling has received nationwide attention over the
past year. Lawsuits alleging illegal profiling have been filed in
numerous states.
In September, Gov. Gray Davis vetoed a bill backed by the ACLU that
would have required state and large local police agencies to make a note
of the race of drivers they stopped. Davis said there was no evidence
that profiling was a statewide problem, while the extra paperwork would
burden officers.
Many Departments Keep Records
Meanwhile, more than 35 police and sheriff's departments in California
have said officers will collect racial data. The list includes Alameda
County and the cities of San Francisco, San Jose, Richmond and San
Diego.
The November 30 action added Jose Lopez, who is Latino, and MacArthur
Washington, who is African American, to the lawsuit.
According to the suit, Washington was stopped near Highway 152 and I-5
by the CHP and narcotics agents while on his way to pick up a co-worker
in May. Told he was stopped because the light on his license plate was
allegedly broken, Washington was given a field sobriety test and his
vehicle was searched.
Lopez and Stephanie Gevorkian, the white mother of his son, were stopped
near the same intersection because a small crystal was hanging from
their rear view mirror, the ACLU claims. Officers questioned the couple
for half an hour and searched their vehicle before letting them go
without a ticket. "I can assure you we don't train our folks to see a
crystal and stop somebody," Helmick said. "Having said that, I want a
complete investigation into that incident." (The San Francisco Chronicle
Dec-1-1999)
DELAWARE SOLID: Settles in Dela. with Waste Haulers over Tipping Fees
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The Delaware Solid Waste Authority ("DSWA") has agreed to a $3.9 million
dollar settlement to resolve the class action filed against it by the
National Solid Wastes Management Association and a group of private
waste haulers, according to plaintiffs' counsel Bernstein Litowitz
Berger & Grossmann LLP and the Law Office of David Staats, P.A.
The Settlement, which is pending approval by the United States District
Court for the District of Delaware, will apply to all persons which
disposed of Solid Waste generated within the State of Delaware at Solid
Waste facilities operated by, or on behalf of, or under contract with,
DSWA and paid tipping fees of $58.50 per ton to DSWA during the period
May 21, 1995 until April 30, 1999 and who have not voluntarily excluded
themselves from the class.
The lawsuit challenged DSWA's Regulations prohibiting the out-of-state
disposal of Solid Waste generated within the State of Delaware. The
complaint alleged that these Regulations violated the Commerce Clause of
the U.S. Constitution, which prohibits an entity acting under the color
of state law from discriminating against the free flow of commerce among
the states. By their class action, plaintiffs sought, among other
relief, an injunction against the enforcement of these Regulations and
to recover damages for the excessive tipping fees plaintiffs contend
were imposed by DSWA for the disposal of Solid Waste during the Class
Period.
The Court has scheduled a hearing to consider the Settlement on February
9, In order to participate in the distribution of the proceeds of the
Settlement, class members must complete and return a proof of claim
form. Requests for exclusion from the Settlement must be made in
writing. Further details of the Settlement are set forth in the Notice
of Pendency and Proposed Settlement of Class Action, which can be
obtained from the web site indicated below.
For more information about the Delaware Solid Waste Authority tipping
fee litigation, you may call Jeffrey A. Klafter, partner at Bernstein
Litowitz Berger & Grossmann LLP at 212-554-1400 or toll-free at
800-380-8496 or visit the firm's web site at http://www.blbglaw.com.
David Staats, of the Law Office of David Staats, P.A. may be reached at
302-658-8188. Contact: Ava C. Thorin of Bernstein Litowitz Berger &
Grossmann LLP, 212-554-1429
DELTA AIR: Ticked Travel Agents Sue over Slashed Fees for Ticket Sales
----------------------------------------------------------------------
Travel agents are suing Delta Air Lines Inc. and other carriers for
cutting fees they are paid for each ticket sold, Delta said Tuesday,
adding that it disputes the charge.
Delta, the No.3 U.S. air carrier, said in a filing with the Securities
and Exchange Commission that the travel agents filed the class-action
suit in the Superior Court of Hanover County, N.C. on Oct.27. It said
they are seeking a jury trial, treble damages and punitive damages in
addition to attorneys fees and costs. Delta's SEC filing did not
identify the other airlines named in the purported class action, and
Delta representatives did not return a phone call seeking further
information.
Delta said the suit alleges that the airlines "tortiously interfered"
with the prospective contractual relationship between the travel agents
and customers, engaged in unfair competition and conspired to restrain
trade. Delta said the suit also charged that it attempted to or did in
fact monopolize airline ticket sales as well as breach a fiduciary duty
owed to travel agents. "Delta believes this lawsuit is without merit and
intends to defend this matter vigorously," the company said in the SEC
filing.
Many of the major U.S. airlines, including UAL Corp.'s United Airlines
and US Airways Group Inc., have lowered the commission rate they pay
travel agents for booking tickets to five percent from eight percent,
with a $50 maximum on round trip bookings. (The Orlando Sentinel
Dec-1-1999)
GUN MANUFACTURERS: Parents of Murder Victims Can Claim Public Nuisance
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The parents of three murder victims, all shot dead, can proceed with
their claims alleging that several gun manufacturers created a public
nuisance, a Cook County Circuit Court judge ruled Tuesday.
The court finds that plaintiffs have standing to bring their cause of
action for public nuisance against the defendants," Law Division Judge
Jennifer Duncan-Brice wrote in an eight-page order.
Duncan-Brice also denied a motion to dismiss the three lawsuits against
Smith & Wesson Corp. and Bryco Arms, as well as more than a dozen other
gun manufacturers, distributors and resellers. Duncan-Brice rejected
contentions by the defendants that the plaintiffs failed to state a
claim for public nuisance. Here, the plaintiffs allege affirmative acts
by the defendants that specifically target juvenile offenders and other
criminal elements and encourage them to acquire weapons the defendants
make readily available," Duncan-Brice wrote.
Taking all well-pled facts as true, it is clear from these facts allege
that the rising gun-related crime rate has created a reasonable
apprehension of fear and danger among the citizens of Chicago and that
defendants' actions contribute to this fear and danger," the judge
continued.
Locke E. Bowman, who represents the plaintiffs, called the ruling an
extremely important, positive development" for his clients, as well as
for a similar lawsuit the City of Chicago and Cook County have filed
against gun makers. That case, City of Chicago and County of Cook v.
Beretta U.S.A. Corp., et al., No. 98 CH 15596, is pending before Judge
Stephen A. Schiller.
Tuesday's ruling is a well-reasoned, common-sense application of bedrock
principles of public nuisance to the public health and safety problem
that is created when handguns are freely available to young people in
the city," said Bowman, legal director of the MacArthur Justice Center
at the University of Chicago.
But defense attorney Anne Giddings Kimball, a Wildman, Harold, Allen &
Dixon partner who represents Smith & Wesson, stressed that the decision
is merely a preliminary ruling based on the pleadings. We think that
further proceedings will result in dismissal of the cases," Kimball
predicted.
The families of Michael Ceriale, Andrew Young and Salada Smith each
filed a lawsuit against various firearm manufacturers, distributors and
retailers.
The complaints allege that the defendants have created and maintained a
channel of firearm distribution through which thousands of guns have
been funneled to children in the City of Chicago." The long-term effect
of the distribution practices constitutes a public nuisance that has
created a climate of violence among Chicago citizens," the plaintiffs
charge.
Ceriale was a Chicago police officer; he was shot during a narcotics
surveillance outside a public housing complex at 4101 S. Federal St. on
Aug. 15, 1998, and died six days later. A 16-year-old boy was implicated
in the murder.
The lawsuit filed in May by Ceriale's father, Anthony Ceriale, names
Smith & Wesson, which manufactured the .357 Magnum revolver used in the
murder, and various others in the gun industry. Anthony Ceriale, etc. v.
Smith & Wesson Corp., No. 99 L 5628.
Plaintiff Stephen Young lost his 19-year-old son, Andrew, who was shot
while stopped at a traffic light in June 1996. Another teenager
mistakenly believed Young was a member of a rival gang. Stephen Young,
etc. v. Bryco Arms, No. 98 L 6684.
The third plaintiff is Obrellia Smith, whose 24-year-old daughter,
Salada, was an innocent bystander shot in June 1997 when five people
fired on rival gang members. The victim was pregnant at the time.
Obrellia Smith, etc. v. Bryco Arms, No. 98 L 13465.
The three lawsuits seek class-action status, but a motion for class
certification has yet to be filed, Bowman said. The plaintiffs also are
represented by Thomas H. Geoghegan of Despres, Schwartz & Geoghegan.
Duncan-Brice set a Dec. 9 status date for the cases. (Chicago Daily Law
Bulletin Nov-30-1999)
HEALTH MGT.: Jury in 1st PSLRA Trial Rules in Favor of Accounting Firm
---------------------------------------------------------------------
A great debate -- at least among securities lawyers -- continues to
simmer in the circuits over the pleading standards required by the
Private Securities Litigation Reform Act of 1995 (PSLRA). But the
question of whether pleading mere or deliberate recklessness -- or
something in between -- is necessary to withstand a motion to dismiss
does not address what happens if a plaintiffs' suit actually makes it to
trial.
A class action brought under the PSLRA has finally gone to trial, and
the jury's verdict in favor of the defendant, accounting firm BDO
Seidman, suggests that a shareholder suit that makes it past the
pleading stage will still find it tough going if the success of the
litigation turns on proving recklessness.
The litigation arose from a massive accounting fraud at Health
Management Inc. The Long Island, N.Y.-based healthcare company claimed
to have close to $ 2 million in inventory in transit when accountants
from Seidman came to review the company and prepare its financial
statements. That inventory was nonexistent, but the fraud was exposed
only after the financial statements were released. The financials were
later restated, the company was eventually sold to another health care
concern, and ultimately the company's founder, Clifford E. Hotte, was
convicted and sentenced to nine years in prison (the sentence is on
appeal).
When the company disclosed the financial irregularities, the price of
its Nasdaq-traded stock plummeted. The shareholders brought suit;
Seidman was the only party not to settle. Seidman General Counsel Scott
Univer said that although his firm's "preferred way of dealing with
litigation" is to "dispose of these cases by settlement," in this
instance, "our audit engagement team did a thorough job of
investigating" the company, and the firm decided to fight the charges.
Seidman hired Michael Young, a partner at New York's Willkie Farr &
Gallagher, and Ira Greenberg, a partner in the New York office of
Providence, R.I.'s Edwards & Angell, to defend it in the four-week jury
trial before U.S. District Judge Arthur D. Spatt, of Uniondale, N.Y. Mr.
Young said that the accountants had done nothing wrong and had
undertaken "extensive procedures to confirm" the existence of the
inventory.
Fred Fox, a partner at New York's Kaplan, Kilsheimer & Fox L.L.P., and
Jeffrey Zwerling, a partner at New York's Zwerling, Schachter & Zwerling
L.L.P., represented the shareholder class, which claimed that the
Seidman team was reckless in its audit, in violation of Sec. 10(b) of
the Securities Exchange Act of 1934. The jury, however, disagreed, and
exonerated the accountants.
The lawyers involved believe that this is the first case to get to a
jury under the PSLRA. Pleading requirements are high; while those
imposed by the U.S. Court of Appeals for the 2d Circuit, which covers
Judge Spatt's district, are among the most plaintiff-favorable, they
nonetheless impose formidable burdens on shareholders.
The jury's verdict in favor of BDO Seidman may mean that convincing a
judge a suit has merit in the pleading stage is still a far cry from
proving scienter in the trial phase. Mr. Zwerling said that in speaking
to the jurors after the verdict, he found that they didn't believe the
story the company executives concocted. But, he said, although the
jurors "were not, to a person, convinced the accountants did enough,"
they saw that the auditors had attempted some verification of the
company's representations. He said that the "jurors thought that doing
something" meant the auditors had not been reckless. The jurors were
careful; they asked the judge to reread the recklessness instruction,
which equated the term with an "extreme departure from standards of
ordinary care," "egregious refusal to see the obvious" and other similar
phrases, Mr. Zwerling added.
Mr. Young and Mr. Univer said that there simply was no recklessness, but
Mr. Zwerling suggested that the jury may have had a hard time grasping
the meaning of the term, just as circuit courts have had difficulty
defining it for pleadings. (The National Law Journal Nov-15-1999)
INTELECT COMMUNICATIONS: SEC Filing Tells of Securities Suit in Texas
---------------------------------------------------------------------
Intelect Communications Inc. discloses the following in its filing with
the Securities and Exchange Commission for the conformed period of
November 22, 1999 filed as of November 23, 1999:
A shareholders class action lawsuit was filed in the U.S. District Court
for the Northern District of Texas purported to have been filed on
behalf of all persons and entities who purchased Intelect common stock
during the period between February 24, 1998 and November 17, 1998. The
named defendants include Intelect Network Technologies Company, certain
former and present officers and directors of Intelect, and Arthur
Andersen, LLP. The complaint alleges that the defendants 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 Intelect's reported financial results during the period,
primarily relating to revenue recognition, asset impairment and
capitalization issues. The plaintiffs seek monetary damages, interest,
costs and expenses. Intelect intends to defend the suit vigorously in
all aspects.
KOCH INDUSTRIES: To Pay for Damages in Gas Fed Fire Ball Case in Texas
----------------------------------------------------------------------
A pipeline explosion in 1996 that caused the deaths of two teenagers has
resulted in a $ 296 million jury verdict in Texas and an immediate $ 3.5
million settlement of the plaintiffs' demands for punitive damages.
The defendant, Koch Industries, said that it will appeal the jury's $
296 million award of compensatory damages.
The suit arose from the horrific deaths of Danielle Smalley and Jason
Stone, both 17, on Aug. 24, 1996. Ms. Smalley was at her home in a rural
area near Kaufman, Texas, packing to go to college, "when she smelled
gas," said plaintiffs' attorney Ted B. Lyon Jr., of Mesquite, Texas' Ted
B. Lyon & Associates. Ms. Smalley and her friend Mr. Stone drove off to
report the gas leak, but when their pickup truck hit a low-lying creek,
the truck stalled. They tried to start it, and this ignited butane fumes
leaking from a Koch pipeline below the ground, Mr. Lyon said.
Truck Became A Fireball
The truck turned into a fireball, he said: "They began running away from
the truck, probably thinking the truck was exploding." But the gas-fed
fire, quickly rising as much as 10 stories high, consumed them, Mr. Lyon
said. Ms. Smalley's father, Danny, saw the truck ignite and rushed
toward them. "He tried to put out the flames," Mr. Lyon said, but was
unsuccessful and became trapped by the flames. The fire burned for 38
hours, he said. Mr. Smalley survived, but Ms. Smalley and Mr. Stone both
burned to death in less than two minutes.
The Stone and Smalley families filed wrongful-death actions against Koch
Industries and several subsidiaries, including Koch Pipeline Co. and
Koch Hydrocarbon, contending that the companies were negligent in
failing to maintain the underground pipeline. The Stone family settled
before trial for an undisclosed amount, said Koch spokesman Jay Rosser.
The pipeline had been placed underground near the Smalley home in the
1980s and was part of more than 30,000 miles of Koch underground
pipelines, Mr. Lyon said. "In 1995, testing had found 583 corrosive rust
spots on these pipelines. Koch fixed only 80 of them," he contended. The
liquid butane pumped through the pipeline near the Smalley home
"provided the equivalent of 100,000 sticks of dynamite every 90
seconds," Mr. Lyon said.
Mr. Lyon tried the case with Mark Wolfe, also of Mr. Lyon's Mesquite
office, and Michael McCauley of Dallas' McCauley, MacDonald, Devin &
Huddleston.
The plaintiffs charged that the pipeline did not have the required
"cathotic protection, where an electrical current surrounds the pipe and
keeps it from rusting," Mr. Lyon said. In addition, they alleged that a
protective coating on the pipe had deteriorated, resulting in the leak.
The plaintiffs also contended that Koch had failed to provide public
education materials on the pipeline's danger to neighbors, in violation
of federal regulations. Smalley v. Koch Industries, 51458 (Dist. Ct.,
Kaufman Co., Texas).
Koch Industries and its subsidiaries admitted that the leak and
subsequent fire were caused by a corroded pipe but denied any
negligence.
"The testimony showed that in 1995, we extensively tested the line and
didn't find any issues that were any concern to public health or
safety," said Mr. Rosser. In these tests, Koch sent sensors "up and down
the length of the pipe to sense corrosion spots."
What happened "was not foreseeable," said defense counsel Michael
Steindorf, of the Dallas office of Fulbright & Jaworski L.L.P. "The
corrosion involved occurred at a rate so unprecedented that it could not
have been anticipated by Koch or anyone else."
The corrosion was caused by a still-undetermined microbiological agent,
said Mr. Rosser. The Koch pipelines, he said, have never had any other
"accidents of this nature." Since the accident, Mr. Rosser said, Koch
has "made a number of changes in our public education program, and we've
retooled our whole inspection program."
On Oct. 22, the jury found Koch negligent and awarded the $ 296 million
to Mr. Smalley and his daughter's estate. The jury was scheduled to
consider punitive damages, but on Oct. 23, Mr. Lyon reported, "we agreed
to settle the punitives for $ 3 million." Koch added another $ 500,000
to the settlement on the plaintiffs' agreement to wait until Nov. 5 to
file the judgment, Mr. Lyon added.
The compensatory damages phase, however, is not over. "It's a virtual
certainty that it will be appealed," Mr. Rosser said. With prejudgment
interest, the award is now at $ 378 million, Mr. Lyon added. (The
National Law Journal Nov-15-1999)
NAVIGANT CONSULTING: Susman & Watkins File Securities Suit in Illinois
----------------------------------------------------------------------
Notice is hereby given that on November 26, 1999 a securities class
action lawsuit was filed in the United States District Court for the
Northern District of Illinois against Navigant Consulting Inc.,
("Navigant" or the "Company") (NYSE: NCI) and certain officers and
directors of the Company on behalf of purchasers of common stock during
the period May 6,1999, through November 23, 1999, inclusive (the "Class
Period"). The action was filed on behalf of plaintiffs Milton and Roslyn
Applebaum.
On November 23, 1999, the Company announced that: (1) Robert Maher, its
Chairman, Chief Executive Officer and President, had ben forced to
resign over concerns about the propriety of a $10 million dollar loan
which he took from the Company; (2) two other Navigant officers had been
terminated amid concerns over similar loans which they had received from
the Company and used to purchase Navigant stock; and (3) that the
Company's independent auditors were examining the propriety of the
Company's accounting practices in light of these and related
transactions. The stock price dropped as much as 55% on the news,
closing at $11.50 per share, down from $26.00 just two days earlier, and
down from a class period high of $54.
Plaintiffs' complaint alleges that defendants violated the federal
securities laws (Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934) by misrepresenting or failing to disclose material information
about the Company's accounting practices, as well as the impropriety of
the loans made to its officers. Specifically, the compliant alleges that
defendants issued false and misleading press releases and financial
statements to the investing public during the Class Period. As a result
of defendants' false and misleading statements and material omissions,
the price of Navigant stock was substantially inflated during the Class
Period. Thus, individuals who purchased Navigant stock during the Class
Period were damaged by overpaying for the stock.
Plaintiffs seek to recover damages on their own behalf and on behalf of
all purchasers of Navigant common stock. Plaintiffs have no interests
which are adverse to those of the Class and have each signed
certifications as required by the Private Securities Litigation Reform
Act of 1995. Plaintiffs are represented in this class action by the
Chicago law firm of Susman & Watkins. Susman & Watkins has extensive
experience representing shareholders in class actions and has served as
lead counsel in several similar matters.
If you are a member of the class described above, you may, not later
than 60 days from November 26, 1999, move the court to serve as a lead
plaintiff, provided you meet certain legal requirements. If you wish to
discuss this action, or have any questions concerning this notice or
your rights or interests with respect to this matter, please contact
Robert J. Emanuel at Susman & Watkins, Two First National Plaza, Suite
600, Chicago, Illinois 60603. Telephone: (312) 346-3466. Contact: Susman
& Watkins Robert J. Emanuel, Esq., 312/346-3466
NAVIGANT CONSULTING: Wolf Haldenstein Files Securities Suit in Illinois
-----------------------------------------------------------------------
The following is an announcement by Wolf Haldenstein Adler Freeman &
Herz LLP on November 30, 1999:
Wolf Haldenstein Adler Freeman & Herz LLP announce that they have filed
a class action lawsuit in the United States District Court for the
Northern District of Illinois, Eastern Division on behalf of all persons
who purchased the common stock of Navigant Consulting, Inc. ("Navigant"
or the "Company") (NYSE: NCI) between May 6, 1999 through November 19,
1999 inclusive (the "Class Period").
The complaint charges Navigant and certain of its officers and directors
with violations of sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges
that defendants issued a series of materially false and misleading
statements concerning the substance and nature of$17 million in loans
made to Navigant's senior executive officers, who used the monies to
purchase Navigant common stock.
The Complaint also alleges that the Company failed to disclose that
Company's senior executives' insider buying of Navigant common stock
jeopardized the Company's use of "pooling of interest" accounting
treatment for several acquisitions completed in 1999. As a result of
these false and misleading statements, the price of Navigant common
stock was artificially inflated during the Class Period.
If you purchased Navigant stock during the Class Period, you have until,
January 23, 2000 to participate in the case and ask the Court to appoint
you as one of the lead plaintiffs for the Class. In order to serve as
lead plaintiff, you must meet certain legal requirements. If you wish to
discuss this action or have any questions, please contact Wolf
Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York,
New York 10016, by telephone at (800) 575-0735 (Michael Miske, Gregory
Nespole, Esq., Fred Taylor Isquith, Esq. or Shane T. Rowley, Esq.), via
e-mail at classmember@whafh.com, whafh@aol.com, nespole@whafh.com, our
website at www.whafh.com
NEWELL RUBBERMAID: Much Shelist Files Securities Suit in Illinois
-----------------------------------------------------------------
Much Shelist Freed Denenberg Ament & Rubenstein, P.C. announces on
November 30, 1999 that it has filed a class action lawsuit in the United
States District Court for the Northern District of Illinois, on behalf
of all persons who purchased the common stock of Newell Co. ("Newell")
or Newell Rubbermaid, Inc. ("Newell Rubbermaid") (NYSE:NWL) between
October 21, 1998 and September 3, 1999, inclusive (the "Class Period"),
or exchanged shares of Rubbermaid Incorporated ("Rubbermaid") common
stock for shares of Newell Rubbermaid common stock pursuant to a joint
proxy/registration statement and prospectus (the "Joint Proxy").
The complaint charges Newell Rubbermaid and certain of its officers and
directors 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 materially false
and misleading statements concerning the Company's business, financial
condition, earnings and prospects for Newell Rubbermaid. As a result of
these materially false and misleading statements and omissions,
plaintiff alleges that the price of Newell-Rubbermaid common stock was
artificially inflated during the Class Period.
If you purchased Newell Rubbermaid or Newell shares between October 21,
1998 and September 3, 1999, or if you received Newell Rubbermaid shares
in exchange for shares of Rubbermaid stock when it was acquired by
Newell Rubbermaid, you may move the court no later than December 14,
1999, to serve as a lead plaintiff of the class. In order to serve as a
lead plaintiff, you must meet certain legal requirements.
If you wish to discuss this action or have any questions concerning this
notice or your rights with respect to this matter, you may call, e-mail
or write to:
Michael J. Freed Carol V. Gilden Much Shelist Freed Denenberg
Ament & Rubenstein, P.C. 200 N. LaSalle Street, Suite 2100 Chicago, IL
60601-1095 Phone: (312) 346-3100 Fax: (312) 621-1750 e-mail:
cgilden@muchlaw.com
PLAINS ALL: Day Edwards Files Securities Suit in Texas
------------------------------------------------------
The following is an announcement by law firm Day Edwards Federman
Propester & Christensen, P.C. on November 30, 1999:
Day Edwards Federman Propester & Christensen, P.C., filed a securities
class action lawsuit against Plains All American Pipeline LP (NYSE:
PAA), accusing it of violating the federal securities laws by
misrepresenting the partnership's financial situation through improper
and misleading accounting practices. The price of Plains partnership
units recently collapsed approximately 50% when it revealed that one of
its crude-oil traders had caused $160 million in losses, forcing the
partnership to renegotiate credit agreements. The partnership units had
a Class Period high of $20-3/16 on November 9, 1999.
Day Edwards Federman Propester & Christensen, P.C., was retained to
recover losses suffered by investors from at least November 23, 1998
through November 26, 1999, inclusive.
The Complaint particularizes how Plains and its management violated the
Securities Exchange Act of 1934 and specifies the partnership's false
statements and omissions of material facts. The Complaint was filed in
the United States District Court for the Southern District of Texas.
If you purchased stock during the Class Period you may, no later than 60
days from November 29, 1999, move the Court to serve as Lead Plaintiff
of the Class, if you so choose. In order to serve as Lead Plaintiff,
however, you must meet certain legal requirements.
If you wish to discuss this action or have questions concerning this
notice or your rights or interests, please contact William B. Federman
of Day Edwards Federman Propester & Christensen, P.C., at 405-239-2121,
extension 103, or Internet electronic mail at wfederman@oklawyer.com
PLAINS ALL: Milberg Weiss Files Securities Suit in Texas
Milberg Weiss (http://www.milberg.com)announced on November 30, 1999
that a class action has been commenced in the United States District
Court for the Southern District of Texas on behalf of persons who
purchased the limited partnership units ("Units") of Plains All American
Pipeline LP ("Plains" or the "Company") (NYSE:PAA) between November 23,
1998 and November 26, 1999, inclusive (the "Class Period"), including
those who acquired their Units pursuant to the Company's Initial Public
Offering and Secondary Offering Registration Statements/Prospectuses.
If you wish to serve as lead plaintiff, you must move the Court no later
than 60 days from November 29, 1999. If you wish to discuss this action
or have any questions concerning this notice or your rights or
interests, please contact plaintiffs' counsel, William Lerach or Darren
Robbins of Milberg Weiss at 800/449-4900 or via e-mail at
post@mwbhl.com.
The complaint charges Plains and certain of its officers with violations
of the federal securities laws by making misrepresentations about
Plains' business, earnings growth and financial statements and its
ability to continue to achieve profitable growth. During the Class
Period, Plains consistently reported profitable results claiming that it
was successfully executing its plan to expand its crude oil sales
business. While defendants were publicly reporting profits of more than
$35 million for the first, second and third quarters of 1999, Plains
sold over $300 million of Plains Units in two consecutive public
offerings. As Plains continued to report profits from operations, the
price of Plains Units reacted, rising to a Class Period high of $20-3/16
on November 9, 1999.
Then, on November 29, 1999, Plains revealed that it had incurred a loss
of over $160 million which had been concealed since the spring of 1999
as the result of speculative commodity trading and that contrary to its
representations in the Initial Public Offering Prospectus and the
Secondary Offering Prospectus, Plains did not have the ability to and
was not monitoring its hedging activities. In fact, Plains revealed that
it would likely be restating its previously reported financial results
for each of the prior three quarters of fiscal 1999. This revelation
caused Plains Units to fall as low as $9-5/8 per Unit, a decline of 55%
from their Class Period high. Contact: Milberg Weiss William Lerach,
800/449-4900 post@mwbhl.com
PLAINS ALL: Steven E. Cauley Files Securities Suit in Texas
-----------------------------------------------------------
The Law Offices of Steven E. Cauley, P.A. announced on November 30, 1999
that a Class Action has been commenced in the United States District
Court for the Southern District of Texas on behalf of all purchasers of
the limited partnership units of Plains All American Pipeline, LP (NYSE:
PAA) from November 17, 1998 through November 29, 1999, inclusive,
including all persons who purchased units traceable to the Company's
initial offering on or about November 17, 1998 (the "Class Period").
The complaint charges Plains All American Pipeline and certain of its
officers and directors with issuing misleading financial statements that
falsely inflated the Company's earnings.
If you wish to serve as one of the lead plaintiffs in this lawsuit you
must file a motion with the court within 60 days of November 29, 1999.
If you have any questions regarding this lawsuit or how you may be able
to recover for the losses you have incurred, please E-mail or call one
of the attorneys listed below:
Steven E. Cauley, Scott E. Poynter, Gina M. Cothern
2200 N. Rodney Parham Road, Suite 218, Cypress Plaza, Little Rock, AR
72212
E-mail: CauleyPA@aol.com
Toll-free: 1-888-551-9944
PLAINS ALL: Wechsler Harwood Files Securities Suit in Texas
-----------------------------------------------------------
The following statement was issued on November 30, 1999 by the law firm
of Wechsler Harwood Halebian & Feffer LLP:
Notice is hereby given that a class action lawsuit was filed in the
United States District Court for the Southern District of Texas on
behalf of all purchasers of the limited partnership units of Plains All
American Pipeline, LP (NYSE:PAA) from November 17, 1998 through November
26, 1999, inclusive, including all persons who purchased units in, or
traceable to, the Company's initial offering on or about November 17,
1998 (the "Class Period").
If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact Wechsler Harwood Halebian & Feffer LLP (Samuel K. Rosen, Esq.)
toll free at 1-877-935-7400, or via e-mail at srosen@whhf.com.
The complaint charges Plains All American Pipeline, its general partner
and certain of its officers and directors with issuing misleading
financial statements that falsely inflated the Company's earnings.
If you are a member of the class described above, you may, not later
than January 28, 2000, move the Court to serve as lead plaintiff of the
class, if you so choose. In order to serve as lead plaintiff, however,
you must meet certain legal requirements. Contact: Wechsler Harwood
Halebian & Feffer LLP, New York Samuel K. Rosen, Esq., 1-877-935-7400
e-mail: srosen@whhf.com
RIBOZYME PHARMACEUTICALS: Harold B. Obstfeld Files Colo Securities Suit
-----------------------------------------------------------------------
The following is an Announcement by Harold B. Obstfeld, P.C. on November
30, 1999:
A class action lawsuit has been filed in the United States District
Court for the District of Colorado on behalf of all persons or entities
who purchased common stock of Ribozyme Pharmaceuticals, Inc.
("Ribozyme") (Nasdaq: RZYM - news) between the close of trading on
November 15, 1999 and November 17, 1999, inclusive (the "Class Period"),
and were damaged thereby.
The Complaint charges Ribozyme and its president and chief executive
officer with violations of federal securities laws. The Complaint
alleges that defendants misled investors by issuing a false press
release on November 15, 1999 headlined "Colorado Pharmaceutical Co.
Makes Cancer Drug History," stating that Angiozyme, one of Ribozyme's
drugs in development, "has taken an important step forward...making both
clinical history and industry news" and that a press conference will be
held on November 17 at which the Company's "CEO and President ...will
explain Angiozyme and its recent history-making leap, an achievement
which may be of great significance to cancer patients everywhere." As a
result of the false press release, on November 16 the price of
Ribozyme's stock increased to a high of $22 per share, more than double
the closing price on November 15. In fact, Ribozyme had no
"history-making progress" to report at the November 17 press conference,
but merely announced that Angiozyme had entered Phase I/II testing - a
development the Company had twice previously stated would occur before
the end of 1999. Ribozyme shares then declined to close at $9 5/16 per
share on November 17, 1999. The Complaint seeks recovery of damages
suffered by all purchasers of Ribozyme stock during the Class Period.
If you are a member of the class described above, you may, if you so
choose, but not later than January 21, 2000, file a motion with the
District Court to serve as lead plaintiff. If you have any questions,
wish to discuss this matter, or would like to receive a copy of the
complaint and the documents necessary to participate as a named or lead
plaintiff, you may contact:
Harold B. Obstfeld, Esq. of Harold B. Obstfeld, P.C., 260 Madison
Avenue, New York, New York 10016, (212) 696-1212 or (888) 896- 0347 or
via Internet electronic mail at hobsd@erols.com. Contact: Harold B.
Obstfeld, P.C. Harold B. Obstfeld, Esq. 212/696-1212 or 888/896-0347
hobsd@erols.com
SEX OFFENDERS: MA Ruling, the First After New Law, Slows Access to Data
-----------------------------------------------------------------------
A Suffolk Superior Court judge ruled on November 30 that convicted sex
offenders do not have to tell the state where they are living, a
decision that will significantly slow public access to information about
the offenders.
In an 11-page ruling, Judge John M. Xifaras said that convicted sex
offenders have a constitutional right not to reveal their addresses or
current jobs to the state. Under the ruling, Massachusetts will also
become the only state to hold individual hearings before convicted sex
offenders are required to provide any personal data to the Sex Offender
Registry Board. Other states mandate registration first, attorneys said.
Xifaras's ruling, which was in response to a class-action lawsuit filed
by the Committee on Public Counsel Services, was the first judicial
review of the latest version of the controversial sex offender registry
law. Since 1997, the state's highest court has found constitutional
flaws in other versions and forced lawmakers to rewrite the law. This
latest law was approved in September.
To speed up the process, lawmakers required that convicted offenders
self-report. It was viewed as a quick way to identify the 13,000 to
16,000 people covered. People convicted of sex crimes dating back to
1981 - including those no longer imprisoned, on probation, or parole -
are covered by the law.
Once identified, the board is required to hold an evidentiary hearing to
assess the offender's sexual dangerousness. The identities of those
considered most dangerous are then shared with law enforcement and the
public.
The board has 12 employees and a $4 million annual budget but is aiming
toward an 80-person work force. The board is also drafting rules to
operate under.
"The court's decision certainly will make it more difficult for us to
locate them, but fortunately we do have the authority under the new law
to access the tools that will help us find them," said Anne Dawley, the
board's executive director.
Dawley said the agency can scour income tax records, Registry of Motor
Vehicle records, and other state agencies to uncover current addresses
for the thousands affected by the law.
Dawley and Attorney General Thomas F. Reilly's office said they will
appeal Xifaras's ruling. "The board can move foward with the process of
registering convicted sex offenders, but this decision makes it much
more difficult," said Assistant Attorney General Alice Moore, chief of
Reilly's government bureau.
Carol A. Donovan, the attorney for the public counsel services
committee, said the ruling means some convicted sex offenders no longer
need to fear they will be arrested for failing to comply with the
self-reporting requirement. "The practical effect is that for people who
are not incarcerated, not on probation, or not on parole, they can wait
for the government to come to them," Donovan said.
Donovan also noted that sex offenders still face lifetime parole under
the new law and can end up being classified under a separate section as
sexually dangerous persons and be civilly committed for one day to life.
"It's not like we aren't paying attention to this issue" of sexual
predators, she said. "If anything we are overdoing it. The only thing we
are not looking at is rehabilitation." (The Boston Globe Dec-1-1999)
STYLING TECHNOLOGY: Berman, DeValerio Files Securities Suit in Arizona
----------------------------------------------------------------------
Berman, DeValerio & Pease LLP a law firm specializing in representing
shareholders in class action lawsuits, issues the following press
release on December 1, 1999:
Styling Technology Corporation (Nasdaq: STYLE) was sued by a shareholder
in a lawsuit filed in the United States District Court for the District
of Arizona on November 30, 1999. The lawsuit, which seeks class action
status, is brought for violations of sections 10(b) and 20(a) of the
Securities Exchange Act of The class consists of all persons who
purchased the common stock of Styling Technology during the period May
5, 1998 through November 29, 1999.
The lawsuit charges that Styling Technology issued materially false and
misleading financial statements throughout the class period. On November
29, 1999 Styling Technology announced that as a result of various
revenue recognition issues, it would be restating prior financial
statements and that its auditors were withdrawing their audit opinion
for Styling Technology's 1998 audited financial results.
If you purchased Styling Technology common stock during the period May 5
1998 through November 29, 1999 and suffered a loss on your investment,
you may wish to contact the lawyers at Berman, DeValerio & Pease LLP to
discuss your rights and interests:
Jennifer L. Finger, Esq.
Jeffrey C. Block, Esq.
Berman, DeValerio & Pease LLP
One Liberty Square, Boston, MA 02109
(800) 516-9926
E-Mail: bdplaw@bermanesq.com
Website at http://www.bermanesq.com
In addition, under the federal securities laws you may, but not later
than sixty days from November 29, 1999 move the court to serve as lead
plaintiff of the Class, if you so choose. To serve as lead plaintiff,
however, you must meet certain legal requirements. You may contact the
attorneys at Berman, DeValerio & Pease LLP to discuss your rights
regarding the appointment of lead plaintiff.
STYLING TECHNOLOGY: Wolf Popper Files Securities Suit in Arizona
----------------------------------------------------------------
The following is an announcement by law firm Wolf Popper LLP on December
1, 1999:
Pursuant to Section 21D(a)(3)(A)(i) of the Private Securities Litigation
Reform Act of 1995, Wolf Popper LLP hereby gives notice that a class
action complaint has been filed in the United States District Court for
the District of Arizona on behalf of a Class of persons who purchased
the common stock of Styling Technology Corporation (Nasdaq: STYLE) in
the open market during the period May 5, 1998 through November 29, 1999,
inclusive, (the "Class Period") and were damaged thereby.
The Complaint, charges that the Company and certain of its officers and
directors violated federal securities laws by causing STYLE to make
materially false and misleading statements during the Class Period. In
particular, the complaint alleges that each of the financial statements
STYLE issued during the Class Period was materially false and misleading
requiring restatement.
On November 29, 1999, STYLE announced, among other things, that:
* as a result of various revenue recognition issues relating to the
first and second quarters of the current fiscal year as well as the
prior fiscal year, STYLE has been unable to file its third quarter
1999 report on Form 10-Q with the Securities and Exchange Commission;
* STYLE will restate its financial results for fiscal year 1998 and for
the first and second fiscal quarters of 1999;
* the Company's auditors have withdrawn their audit report with respect
to the fiscal 1998 financial statements; and
* the Company's operating results during the third quarter ended
September 30, 1999, have resulted in a default under certain
provisions of its senior
secured credit facility.
Any member of the proposed class who desires to be appointed lead
plaintiff in this action must file a motion with the Court no later than
sixty days from November 30, 1999. Class members must meet certain legal
requirements to serve as a lead plaintiff. If you have questions or
information regarding this action, or if you are interested in serving
as a lead plaintiff in this action, you may call or write:
Paul 0. Paradis, Esq.
Peter Safirstein, Esq.
James A. Harrod, Investor Relations Representative
WOLF POPPER LLP, 845 Third Avenue, New York, NY 10022-6689
Telephone: 212-451-9676, 212-451-9626, 212-451-9642
Toll-Free: 877-370-7703
Facsimile: 212-486-2093
E-Mail: pparadis@wolfpopper.com or psafirst@wolfpopper.com or
IRRep@wolfpopper.com
Website: http://www.wolfpopper.com
TOBACCO LITIGATION: A Study on Women Shows 2nd Hand Smoke Is Dangerous
----------------------------------------------------------------------
The combination of secondhand smoke and a missing gene may make women up
to six times more likely to develop lung cancer if they live with a
smoker, a study found.
Published December 1 in the Journal of the National Cancer Institute,
the study said an analysis of tissue from a group of Missouri female
lung cancer patients who lived in smoking households found that those
lacking a specific gene were 2.6 times to 6 times more likely to develop
lung cancer. ''This is a small pilot study that needs to be confirmed
and extended,'' said Dr. William P. Bennett of the City of Hope National
Medical Center, Los Angeles. ''But if our findings are correct, then ETS
(environmental tobacco smoke) may be significantly more dangerous than
previously thought.''
The Environmental Protection Agency has estimated that exposure to
secondhand smoke increases the risk of lung cancer by 20 percent,
Bennett said. ''If our study is correct, for half of the population that
lacks this gene, then ETS exposure is a much more significant risk,'' he
said. ''The risk is more than doubled.'' Bennett is first author of the
JNCI study.
Dr. Clarice R. Weinberg of the National Institute of Environmental
Health Sciences said the study is intriguing because it supports the
idea that a gene deletion and ETS may work together to increase the risk
of lung cancer. However, Weinberg said the study has a weakness because
it only examined lung cancer patients. To validate the conclusions for
the general population, she said, a larger study is needed that compares
lung cancer patients with a randomly selected group of people without
the disease.
The study is based on the analysis of tissue samples from 106 Missouri
women, mostly rural housewives, who had never smoked but who had been
diagnosed with lung cancer. The tissue was tested for the presence of a
gene called GSTM1, which is known to inactivate carcinogens found in
tobacco smoke. ''This gene is deleted in 50 percent of Caucasians,''
said Bennett. ''It is a very common inherited mutation.''
Researchers interviewed the women to gather information about their
exposure at home to ETS. The study found that ''for those who were
exposed to secondhand smoke and who had the deletion of this gene, their
lung cancer risk was increased 2.6-fold over those who had the gene and
no ETS exposure,'' said Bennett.
As the exposure to ETS increased, so did the risk for women with the
gene deletion. Bennett said, for instance, that such women who were
exposed to 55 pack years of ETS were six times more likely to get lung
cancer. A pack year of ETS exposure comes from living in a household
where one pack of cigarettes is smoked daily for a year. Five packs
smoked daily, perhaps by several individuals, would give 55 pack years
in 11 years.
Bennett said the fact that the study involved only women was not by
design, but by happenstance. ''The study was designed to look at
nonsmokers with lung cancer,'' he said. ''It just turns out that there
are a lot more women nonsmokers (with lung cancer) than men.'' Bennett
said the study must be considered only a preliminary finding because the
sample size, at 106, was small. He said there is a need for a larger,
more comprehensive study.
Attorneys for the tobacco industry have claimed in lawsuits that there
is no scientific proof that secondhand smoke can cause lung cancer.
Lawsuits testing the issue have had mixed results. Juries in Indiana and
Mississippi last year ruled that nonsmokers or their families were not
entitled to damages from the tobacco industry as the result of illness
alleged to have been caused by secondhand smoke.
A federal judge in North Carolina ruled last year in favor of the
tobacco industry in a lawsuit challenging the EPA's 1993 report that
linked secondhand smoke and cancer. An appeal is expected.
But also in 1998, the tobacco industry reached a $349 million dollar
settlement in a class-action secondhand smoke lawsuit brought by airline
flight attendants. (AP Online Dec-1-1999)
TOBACCO LITIGATION: Govt, Industry Argue in Sp Ct over Authority of FDA
-----------------------------------------------------------------------
The epic fight over tobacco moves Wednesday into the marble confines of
the U.S. Supreme Court, which will determine whether the federal
government has authority to regulate cigarettes and smokeless tobacco.
The industry and its opponents are united on one fundamental point:
Cigarettes are not safe. The agreement stops there, and both are making
that point to bolster their clashing arguments.
The implications of the court's ruling are enormous. Tobacco opponents
are calling the case the most important public health issue to reach the
court in decades. They maintain that government regulation could help
save lives because proposed restrictions on the sale and marketing of
tobacco would deter children from using dangerous and sometimes deadly
products.
"It is the right thing and the only way to prevent a virtual explosion
of new cancer cases in the country," said John Seffrin, chief executive
officer of the American Cancer Society.
But the industry says nothing less than its future is at stake, arguing
that federal regulation ultimately will lead to a ban of tobacco
products. Because cigarettes cannot be considered safe products, the
government would have no choice but to ban them, they argue. "This is a
significant issue-- whether an unelected bureaucracy of the federal
government can singlehandedly ban a legal product of a major American
industry," said industry spokesman Scott Williams.
The case comes as the industry fends off attacks from all sides. Tobacco
lawyers are battling the threat of a potentially crippling punitive
damage award in a Florida class action case that could total billions of
dollars. The federal government is seeking more than $20 billion a year
to recover costs of treating smoking-related illnesses through federal
health programs. And other lawsuits are percolating across the country
by individual smokers.
That's in addition to the $206 billion settlement the industry reached
with 46 states to cover their costs of treating smoking-related
illnesses. Four other states also reached settlements totaling $40
billion. Industry officials decline to speculate on which legal assault
stands to do the most damage, but they say the Supreme Court showdown
could have far-reaching effects.
Food and Drug Administration regulation of tobacco products could
include restrictions on marketing, advertising and, ultimately, nicotine
levels--all of which could have huge implications for the millions of
smokers and the economy, they maintain.
The case stems from the FDA's 1996 decision that it had the authority
under existing law to regulate tobacco products as drugs and
drug-delivery devices. Federal law authorizes the FDA to regulate
products as drugs or devices when they are "intended to affect the
structure or any function of the body."
The agency long had declined to regulate nicotine as a drug, despite
repeated requests from tobacco opponents. Dr. David Kessler, the former
FDA head, suggested in a recent briefing that the sheer power of the
industry had played a role in keeping the agency out of tobacco. "In
1991, a small group of us at the FDA began to ask a very simple
question: could the FDA regulate tobacco?" Kessler said. "Wherever we
went, we got the same answer, that they are too powerful. Nobody said at
the time that the agency didn't have the legal authority over the
industry, but that the industry just had too much influence in
Washington."
But then came new evidence, the agency said, that changed the picture.
It said secret industry documents indicated the industry knew about the
effects of nicotine and intended for its products to have those effects.
Evidence showed manufacturers acted to manipulate nicotine levels,
particularly in low-tar cigarettes and smokeless tobacco, according to
the agency. That helped convince the agency that tobacco products fit
the law's definition of a drug or device that the FDA had authority to
regulate.
The FDA then issued regulations designed to curtail underage smoking,
such as limiting vending machine sales to adult-only locations and
restricting tobacco advertising. It also required product labeling to
bear the statement, "Nicotine-Delivery Device for Persons 18 or Older."
The tobacco companies, advertisers and retailers immediately challenged
the FDA's newly asserted regulatory role. A district court judge largely
ruled for the FDA, finding it had authority to regulate tobacco but
holding that advertising restrictions violated the 1st Amendment.
But last year, the industry prevailed in the U.S. Court of Appeals for
the 4th Circuit, which ruled that the FDA had no authority to regulate
tobacco products under existing law. The appeals court panel said
tobacco products simply do not fit into the overall regulatory scheme of
the federal Food, Drug and Cosmetic Act.
The Clinton administration, which asked the high court to reverse that
decision, argues that tobacco products clearly meet the law's definition
of "drug" and "device" and that the effects of tobacco are similar to
those of other products the FDA regulates.
Furthermore, the administration maintains that the agency wouldn't have
to ban cigarettes, since the law authorizes the continued sale of risky
products if the benefits outweigh the dangers.
A ban would cause withdrawal symptoms and lead to use of more dangerous
black market products, the administration argues.
And, finally, it notes that the FDA shouldn't be required to stick to
its earlier position-- agencies always are free to change their views in
light of new evidence.
Congress' failure to expressly authorize FDA regulation is meaningless,
as well, since it didn't expressly exclude tobacco from FDA regulation,
either. Forty states, including Illinois, are supporting the
administration. They say the federal oversight is part of the
"comprehensive effort that is needed to address this important health
issue."
But the industry argues that the appeals court was correct. It says
Congress never intended for the FDA to regulate cigarettes. "This case
is about who has the power to make national policy for the regulation of
tobacco products," R.J.Reynolds Tobacco Co. argues in its brief to the
Supreme Court.
The industry maintains that the language of the Food, Drug and Cosmetic
Act shows Congress didn't intend for tobacco to be regulated. The act is
designed to ensure that all marketed drugs and devices are effective and
safe, and tobacco surely doesn't qualify, it says. As such the FDA would
have to ban cigarettes, "a result contrary to congressional intent and
unacceptable even to FDA," the industry argues in court papers. "FDA is
saying they alone, without any votes cast, can make decisions to repeal
tobacco products," said one industry lawyer in a recent background
briefing on the case.
The industry also points to other tobacco-specific statutes on labeling
and advertising that it says cuts against FDA regulation and shows
Congress intended to have the final say on tobacco. (Chicago Tribune
Dec-1-1999)
TOBACCO LITIGATION: Smoking Caused Cancer, Doctor Testifies
-----------------------------------------------------------
A pulmonologist from the University of Florida testified Tuesday that
lung cancer afflicting a woman representing hundreds of thousands of
sick Florida smokers was caused by cigarette smoking. Dr. Eloise Harman,
head of the division of pulmonary care at Shands Hospital in
Gainesville, testified about nurse Mary Farnan's lung cancer.
In 1996, doctors discovered a tumor in the top part of Farnan's left
lung. A needle biopsy confirmed the tumor had cancer cells, Harman said.
Farnan, who testified earlier this month, and Orlando clock maker Frank
Amodeo were chosen to represent up to 500,000 ill Florida smokers in the
landmark class-action lawsuit. Amodeo was expected to testify later.
Harman disputed tobacco lawyers' argument that Farnan suffered from an
unusual type of cancer called bronchioalveolar carcinoma, or BAC, that
is not caused by smoking. When asked by smokers' attorney Stanley
Rosenblatt what she thought caused the north Florida woman's lung
cancer, Harman said: "It's caused by cigarette smoking."
Jim Young, an attorney representing R.J. Reynolds Tobacco, questioned
Harman on other possible causes of Farnan's cancer, inquiring whether
her exposure to X-rays at work or to the known carcinogen Radon might be
responsible. (Sun-Sentinel (Fort Lauderdale, FL) Dec-1-1999)
TRUSTEE BANKS: Bank One, Suntrust Sued for Servicing Failed Venture
-------------------------------------------------------------------
A group of investors in California that lost millions of dollars in a
failed investment venture have sued Bank One Corp. and SunTrust Banks
Inc., claiming they provided trust services to the venture despite
knowing it was connected to a convicted felon who had been cited by
regulators for illegally selling securities to the public.
According to court filings, about 1,800 people in California, Florida,
and Texas bought securities in 1995 and 1996 from now-bankrupt First
Lenders Indemnity Corp., a company alleged to have been backed by
Jonathan Pierpont Boston, a man who served prison time under another
name in the late 1980s on a conviction for federal bank fraud. The
lawsuit seeks to recover the $72 million that was invested in the
securities, plus damages.
The case is the latest example of a major financial institution being
held up to scrutiny for the activity of a customer or a business
partner.
In August, Bear Stearns Cos. agreed to pay $38.5 million to settle
criminal and civil charges that it helped facilitate improper trading in
customer accounts managed by a client of its clearing operations, A.R.
Baron & Co.
In September, Republic New York Corp. said Japanese authorities were
investigating its securities unit for a relationship with Martin A.
Armstrong, an investment manager also alleged to have operated a Ponzi
scheme. The investors stand to lose as much as $500 million.
Republic was not charged with wrongdoing, but the investigation delayed
its merger with HSBC Holdings PLC of London.
The California investors contend that by serving as trustees for the
securities issued by First Lenders, Bank One, and SunTrust lent a
measure of respectability that made the investments seem safer, court
documents say. Investors bought the securities, in parcels ranging from
$25,000 to $1 million, in response to a marketing effort that promised a
10% return, court documents added.
The lawsuit says Bank One and later SunTrust agreed to be trustees
despite knowing about First Lender's connection with Mr. Boston. Court
documents say the banks knew Mr. Boston had changed his name from John
R. Marsella after his release from prison in 1989 and that he was later
investigated by the Securities and Exchange Commission for the sale of
similar investments in the early 1990s.
The lawsuit also contends that the sale of the securities by First
Lenders was illegal because they were not registered with the SEC. A
spokesman for Bank One declined to comment, as did a spokeswoman for
SunTrust. The investors have asked for class action status in the suit.
A trial could begin next year.
The arrangement was to work this way: First Lenders would sell notes to
investors through a network of small town insurance agents, and the
bank, acting as trustee, would receive the money into an escrow account.
Once the transactions were authorized, the bank would transfer the funds
into First Lenders' trust account. The bank would also administer the
payment of interest to the investors.
The lawsuit says that First Lenders was instead running a Ponzi scheme.
First Lenders, court documents contend, used some of its income from
auto loans it purchased to pay off investors. But most of the money used
to pay older investors came from selling notes to newer ones.
The suit also charges that First Lenders diverted investor money,
including $3.3 million that went to buy a 12-acre BMW auto lot in
Florida for an affiliated company.
A California Superior Court judge ruled in September that the services
of Bank One's outside counsel in 1994, when the first trustee agreement
was prepared, "were used to enable the commission of a fraud."
In 1990, Mr. Boston established a company called First Boston Acceptance
Corp. that specialized in selling notes backed by automobile and other
consumer loans. Proceeds from the sale of the securities were supposed
to be used to buy more auto loans, according to court documents. After
being sued by New York investment bank CS First Boston in 1994, Mr.
Boston dropped the "First" from his company's name.
Boston Acceptance Corp.'s efforts to sell notes to investors in a 1993
issue proved difficult because the firm lacked an agreement with a
well-known bank to act as trustee, court documents say. Boston
Acceptance Corp. approached Bank One in the spring of 1994 about
becoming trustee for a new $50 million issue.
By July 1994, court documents say, Bank One executives and its outside
counsel became aware of Mr. Boston's criminal conviction and name
change. Court papers also say Bank One knew that Mr. Boston and some of
his associates were being investigated for fraud by the SEC in
connection with the 1993 securities offering, in which they allegedly
did not disclose Mr. Boston's criminal history.
Despite that, Bank One signed the trustee agreement in December 1994,
court papers say. But that agreement was made with First Lenders
Acceptance Corp., an Orlando, firm run by two individuals: James
Cunningham and Shirley Faino. Bank One's disclosure document listed
Boston Acceptance Corp. as the "primary source of vehicle loans to be
acquired" by First Lenders but described Boston Acceptance Corp. as
"separate and independent," court documents say. In fact, the lawsuit
says, though Mr. Boston's name was not mentioned in the Bank One
disclosure, he was married to Ms. Faino. Court papers say Mr. Boston was
co-founder of both Boston Acceptance Corp. and its "alter ego," First
Lenders Acceptance Corp.
First Lenders' president, Mr. Cunningham, was one of the associates of
Mr. Boston who was under investigation by the SEC.
The SEC investigation into the 1993 offering concluded in September
1996, and Mr. Boston, Mr. Cunningham, and others were fined $85,000 on
charges of illegally selling unregistered securities with false and
misleading offering materials, court papers say.
The current suit claims Bank One and SunTrust both mentioned the 1993
securities sale in disclosure materials for First Lenders "to
demonstrate a track record of prior success" without disclosing the
outcome of the SEC investigation.
SunTrust, which entered the scene after Bank One canceled its
relationship with First Lenders, did disclose Ms. Faino's ties to First
Lenders and Boston Acceptance Corp. But, like Bank One's disclosure
documents, SunTrust failed to identify Ms. Faino as Mr. Boston's wife
and failed to fully detail Mr. Boston's history, court papers say. By
1997, First Lenders was forced into bankruptcy. Mr. Boston is believed
to be living in Mexico, court documents say. (The American Banker
Dec-1-1999)
WATER HEATERS: Missouri Judge Gives Preliminary Approval to Settlement
----------------------------------------------------------------------
A federal judge has given preliminary approval to a settlement that
makes more than 14 million water heaters eligible for repairs because of
a defective piece of plastic pipe called a dip tube.
The order by Judge Howard F. Sachs of the U.S. District Court in Kansas
City will remain preliminary until a hearing in April. But it allows
consumers to immediately begin filing claims and in some cases
immediately receive repairs in what is expected to be the most expensive
effort ever by the water heater industry to fix a product defect.
Sachs, in the order, said the settlement had the appearance of "being
fair, adequate and reasonable." Alan Hilburg, a spokesman for the water
heater manufacturers, said publicity of the settlement would start next
week, including notices to be published in more than 800 newspapers, a
consumer education video to television stations and letters to all
consumers who can be identified as owning one of the defective water
heaters. "We want to meet the needs of the consumers," he said.
The agreement aims to settle about two dozen class-action lawsuits from
across the country that have been filed since the first of the year on
behalf of consumers who have one of the defective dip tubes.
The dip tube is a piece of plastic pipe, which costs a manufacturer less
than $ 1, that funnels cold water to the bottom of the tank so it can be
heated. Perfection Corp., the company that makes most of the dip tubes
for the water heater manufacturers, has previously said that from August
1993 to October 1996 it made the tubes without a key chemical
ingredient.
The result was that many of the tubes started to disintegrate, causing
the water heater to produce less hot water. In addition, plastic chips
from the defective tubes clogged pipes, faucets and appliances.
The settlement offers to replace all 14 million defective dip tubes,
even those that have not begun to dissolve. Previously, the
manufacturers refused to replace those that were not breaking apart.
The preliminary order allows Crawford & Co., the company hired to
administer the settlement, to accept claims to make the repairs. A
toll-free telephone number, (800) 329-0561, and a Web site,
www.diptubesettlement.com, are now in operation.
Water heaters with dip tubes that have already begun to dissolve will be
able to get immediate help and won't have to wait for the settlement to
become final. Others will have to wait until after the April hearing,
although claims can be filed now.
Those who have already paid for dip tube repairs will be reimbursed at
least up to $ 175. Those who haven't had the tube replaced will receive
a certificate that will be given to the plumber making the repair.
Additional expenses or work, such as replacing a faucet clogged with
plastic chips, will have to be approved by a panel of plumbers that is
part of the settlement.
Consumers seeking reimbursement will have until June to file a claim.
Those still needing the necessary repairs will have until next December.
Plumbers were recently notified of the settlement and were asked to help
in replacing the dip tubes and making other repairs. They will be paid $
185 for replacing a dip tube and flushing out the plastic chips, and a
lesser amount for replacement of a dip tube that has not started to
disintegrate.
Ken McClain, attorney for Humphrey Farrington & McClain in Independence,
which was the first law firm to file a dip tube class-action lawsuit,
said the judge's approval, though preliminary, was important, especially
in allowing the settlement to be publicized.
Jim O'Reilly, visiting professor of law at the University of Cincinnati
and the author of several books on class action, said the problem with
the dip tubes was ideal for a class-action lawsuit because individual
lawsuits were uneconomical.
In addition, the dip tube settlement actually offers to fix the problem.
Many class-action settlements have been criticized for doing more to
benefit the company charged with causing the problem. For example, a
cruise line settled one class-action suit by offering coupons for $ 15
off a future cruise. "This is certainly better than the coupon
settlements," Ray Warner, a professor of law at the University of
Missouri-Kansas City, said of the dip tube settlement.
Nevertheless, there are still suspicions among some consumers that the
water heater industry, which seemed to downplay the problem with the dip
tubes and never ordered a recall, won't do everything it can to fix it.
Marilyn Kimberline of Liberty was able to get her water heater's dip
tube replaced last month, but the manufacturer offered little help. "All
I can say is, you have to keep at them," she said. (The Kansas City Star
Dec-1-1999)
*********
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. Theresa Cheuk and Peter A. Chapman, editors.
Copyright 1999. All rights reserved. ISSN 1525-2272.
This material is copyrighted and any commercial use, resale or
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