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                C L A S S   A C T I O N   R E P O R T E R

                Thursday, December 9, 1999, Vol. 1, No. 217

                                 Headlines

AUTO INSURANCE: Conn. Suit Says Travelers & Hartford Use Inferior Parts
GUN MANUFACTURERS: CNN Coverage on Clinton Administration’s Action
GUN MANUFACTURERS: Il. Suit Goes on; Govt Backed National Suit Upcoming
HOLOCAUST VICTIMS: German Envoy Warns Of Consequences If Talks Break Up
MEGO FINANCIAL: Contests 2nd Amended Securities Complaint in Georgia

MEGO FINANCIAL: Faces Appeal to Settlement for Nevada Securities Suit
MEGO FINANCIAL: Lot Owners Appeal in Nevada Suit over Betterment Deal
MEGO FINANCIAL: NY Ct Approves Voluntary Dismissal of Shareholders Suit
MID-STATE BANK: Keystone Will Pay for Devon Mishandling of School Funds
NAVARRE CORP: Issues Press Release on Securities Lawsuit

PHYAMERICA PHYSICIAN: Fla Ct Denies Class Status to Suit over Invoices
REXALL SUNDOWN: Will Vigorously Defend Securities Suits in Florida
TOBACCO LITIGATION: NJ Super. Ct Denies Class Status to Casino Workers
UNITED PETROLEUM: Faces Tenn Securities Suits; Bankruptcy Stay Expires
WALGREEN CO: Sued in TX over Handling of Partially Filled Prescriptions

WALMART INC: Car Crash Victim Charges Overbilling on Prescription Drugs
WAR VICTIMS: WW2 POWs File CA Suit V. Nippon Steel & Other Japanese Cos
XL CAPITAL: NY Sp Ct Dismisses Suit by Shareholders

* Disability Act for Inmates under Debate: Measure May Cut off Services

                             *********

AUTO INSURANCE: Conn. Suit Says Travelers & Hartford Use Inferior Parts
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The Travelers Insurance Co. and The Hartford Financial Services Group
are among the latest targets of class-action complaints charging
insurers with requiring the installation of inferior replacement parts
in car repairs.

The complaints allege that "aftermarket" parts -- also known in the
trade as "Taiwan tin" -- do not restore wrecked cars to their pre-loss
condition. Cheaper parts also reduce a car's resale value and may
endanger passenger safety, the complaints say.

The complaints were filed Oct. 12 in Stamford Superior Court against
Travelers, the nation's eighth-largest insurer of private passenger
cars, and The Hartford, which ranks 13th in the country. Both insurers
are headquartered in Hartford.

Travelers' spokesman Dennis Schain calls the complaint "ill-advised and
ill- informed." Cynthia Michener, a Hartford spokeswoman, says the
insurer is confident it will be vindicated.

Dalfino v. The Hartford and Musumeci v. Travelers are among a number of
class-action complaints filed nationwide in the wake of the stunning
$1.2 billion verdict against State Farm Insurance, the country's largest
writer of passenger car policies. State Farm, based in Bloomington,
Ill., has temporarily suspended the use of aftermarket parts and is
appealing the Oct. 4 decision. State Farm's senior vice president, Jack
North, warns the verdict could lead to a monopolistic parts industry and
higher insurance rates.

The team of attorneys who were victorious in Snider v. State Farm has
since filed similar class-actions against seven other major insurers,
including Allstate, Liberty Mutual and GEICO. Attorneys around the
country have filed similar complaints against other insurers in recent
weeks.

Dalfino and Musumeci are the first such complaints against Travelers and
the Hartford. Dennis C. Alex of New Britain is local counsel in both
cases. He is joined by the New York City firm of Goodkind, Labaton,
Rudoff & Sucharow, the Philadelphia firm of Sheller, Ludwig & Badey, and
Louisiana attorney Daniel E. Becnel Jr.

The plaintiffs, who are from Connecticut, are claiming violations of the
Connecticut Unfair Trade Practices Act as well as breach of contract.
They are seeking damages and injunctive relief. Alex and James W.
Johnson, of New York's Goodkind, Labaton, say they intend to seek
certification as a national class.

At issue in the class-action complaints is the use of auto body parts,
such as replacement fenders, hoods, door panels and bumpers, which are
not made by a car's original manufacturer. These are called aftermarket
or non-OEM (original equipment manufacturer) parts. Insurers can save
money by using aftermarket parts, which are much cheaper than
factory-authorized parts.

The plaintiffs' position finds support from two representatives of the
state's car repair industry. Bill Denya is past president and Michael
Wilkowski is the current president of the Connecticut Auto Body
Association, which represents 350 auto repair shops in the state.
Neither puts much stock in aftermarket replacement parts. "The Auto Body
Association has been telling customers and insurance companies for over
10 years these parts are inferior parts, and will not put a vehicle into
pre-loss condition," says Denya, who owns Denya's Auto Body in Meriden.
Wilkowski, owner of Stanley's Auto Body in Waterbury, notes that CAPA
tests aftermarket replacement parts for fit, not for crash-worthiness.
He says the car owner should decide whether to use aftermarket or
original manufacturer parts. "Let it become a consumer choice, not a
mandate from an insurer," he says.

Denya and Wilkowski acknowledge that some repair shops do charge
insurers for parts made by the original manufacturer while actually
installing the cheaper alternatives. "I'm not proud of that fact,"
Wilkowski says, but "yes, it does happen. I tend to think to a far
lesser degree than the insurance industry would like to say it happens."
Both men also say they have seen no evidence that insurance companies
pass any savings on to their policy holders. "I personally feel the
profit motive becomes more of an issue with an insurance company than
the quality of repair," Wilkowski says. "An insurance company looks only
at the bottom line."

Travelers spokesman Schain declines to comment on whether the company
has reduced its premiums, citing the pending litigation. Schain,
however, says Travelers' repair policy is to use only original equipment
parts on cars less than two years old, "and when repair involves the
safe performance of a vehicle." "When guidelines permit the use of
*aftermarket replacement* parts, we deal with policy holders and repair
shops they've selected on a case by case basis to make sure policy
holders will be satisfied," he says. He declines to say whether a policy
holder's consent is required before aftermarket replacement parts are
used. "We really do have an outstanding reputation for the settlement of
claims," Schain adds. "Our success as a company is based on making
certain customers are satisfied."

Schain says Travelers has retained Day, Berry & Howard as its outside
counsel. Day, Berry's Thomas J. Groark, who will act as lead counsel,
could not be reached for comment.

The Hartford notes in a prepared statement that the plaintiffs in
Dalfino " do not appear to be at all familiar with our company. If they
were, they would know that The Hartford has one of the highest “original
manufacturer” parts usage rates in our industry." The Hartford claims it
generally uses original manufacturer parts for " sheet metal or
safety-related parts," and aftermarket parts only for " cosmetic items
such as hubcaps." (The Connecticut Law Tribune, November 22, 1999)


GUN MANUFACTURERS: CNN Coverage on Clinton Administration’s Action
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Broadcast on Cable News Network on December 8, 1999; Wednesday 7:00 am
Eastern Time, Transcript # 99120801V08

    CAROL LIN, CNN ANCHOR: Well, for the first time, the Clinton
administration is preparing a lawsuit against gun makers. The White
House hopes the threat of a national lawsuit will pressure gun makers to
negotiate with cities already suing them. The Department of Housing and
Urban Development is preparing the class-action suit. It alleges that
guns have contributed to violence in public housing projects.

This is how the HUD and the White House are taking aim against gun
makers: pressuring them to crack down on disreputable gun dealers, stop
marketing fingerprint-resistant guns and but safety locks on guns.

CNN's Kelly Wallace joins us now live from the White House with more on
this plan.

    KELLY WALLACE, CNN CORRESPONDENT: Well, Carol, the Clinton
administration has been pressing Congress to pass tougher gun-control
measures, such as starting background checks for all gun dealers, but
lawmakers deadlocked on this issue.

Now, Bruce Reed, the president's domestic-policy adviser, says that the
administration will continue to fight Congress to get these measures
passed. But at the same time, this threat of a national lawsuit will
hopefully, according to the administration, get the gun industry to
settle claims that have been filed against it by a number of cities and
settle these suits and make changes. Reed says that the -- if the
industry does not settle, more than 3,000 public housing authorities and
their three million public housing residents are prepared to put a
class-action suit against the gun industry.

Now, gun-ownership advocates, for their part, say there are already a
number of gun-control measures on the books and that more laws and
further lawsuits are not needed -- Carol.

    LIN: Kelly, the president's having a news conference today. What are
you expecting out of that?

    WALLACE: Well, that's right. Certainly, this issue is likely to come
up, as well as a number of other domestic and foreign policy issues when
the president holds what will be his fifth news conference of 1999,
later this afternoon at 2:30. Now, White House Press Secretary Joe
Lockhart says the president would like to focus on his agenda for his
last year in office, and that includes trying to get Congress to pass
measures that failed to pass this year, such as an increase in the
minimum wage, passing a patient's bill of rights, and, of course,
tougher gun-control measures, as we pointed out.

Also, there appears to be a feeling in White House that perhaps the
media, the press, hasn't been focused enough on some of the
administration's accomplishments over these past few months. Those
include the administrations wins, according to its analysis, in the
budget negotiations with Congress, also the WTO deal with China and also
possible peace in Northern Ireland. So, there's a feeling the White
House would like to put that all together for reporters when the
president comes to this news conference, later this afternoon, because,
perhaps with his wife's upcoming Senate campaign and the vice
president's presidential campaign, there may be a feeling that some of
the administration's accomplishments may not be getting as much
attention.

Kelly Wallace, reporting live at the White House.

    LEON HARRIS, CNN ANCHOR: All right, thank you, Kelly.

December 8, 1999; Wednesday 7:33 am Eastern Time, Transcript #
99120804V08

    LEON HARRIS, CNN ANCHOR: Joining us live from the White House with
more on the administration's plan to reduce these medical mistakes is
Bruce Reed, his White House domestic policy adviser.

Good morning, sir. Thank you for coming out and talking to us, today.

    BRUCE REED, DOMESTIC POLICY ADVISER: Good morning.

HARRIS: Who is going to make up this panel, and how long will it take
before any recommendations they make are actually going to be put in
place?

    REED: Well, this issue is not new for us. The president actually
established a quality commission more than two years ago that helped to
develop the Patient's Bill of Rights, which has been debated in the past
year in Congress, and which also made -- has set up a quality panel. The
president asked that panel to report back to him and to the vice
president within 60 days to review the Institute of Medicine's
recommendations and put together a plan.

    HARRIS: Well, how long before that plan is actually put into place?

    REED: Well, the president announced that we're already going to be
taking some steps right away, that -- for example, the Office of
Personnel Management will make clear that the 300 medical plans that
cover the nine million people involved in the federal health benefits
plan will start carrying out quality improvement and error reduction
techniques right away. He also asked the agencies that oversee Medicare
and Medicaid to evaluate and, where feasible, implement quality and
error-reduction techniques.

    HARRIS: Well, any investigation that takes place with this panel is
going to count on the cooperation of the hospitals, but the hospitals
have a totally different incentive, if you will. If they admit mistakes,
they can be held liable to lawsuits. How can you be sure that hospitals
will cooperate with you fully?

    REED: Well, I think we all have the same interest here. People in
the health-care industry don't always agree on everything, but they do
agree that first and foremost we should do no harm. And this is not
about blaming people for mistakes. Often it's systemic error; for
example, not having the right kind of computers in place to make sure
that when one doctor prescribes one drug and another doctor's
prescribing a different drug, that the hospital is aware of the possible
transaction.

    HARRIS: All right, I want to ask you, if we can, a couple of
questions this morning, quickly, about this new class-action lawsuit the
White House is going to be authorizing against gun makers.

Why is the White House taking this particular tack, seeing as it's had
mixed results in the court so far?

    REED: We want to do everything we can to keep guns out of the wrong
hands. We applaud the efforts of the cities and states, so far, and
we're going to press hard to see if we can get the gun industry to reach
a strong settlement, and, if necessary, the public housing authorities
are prepared to take them to court.

    HARRIS: There are a lot of people who believe that this kind of
attack means that you're encouraging just a multitude of lawsuits with
the ultimate goal, that being driving gun makers out of business.

    REED: That's not our objective at all. Our goal, first and foremost,
is to make America a safer place. We think that there are things that
the gun industry can do to help that by changing the way it distributes
guns, by making its products safer, by ending any advertising that's
target to -- at children or at criminals. So, we're going to press the
industry to make those changes.

    HARRIS: All right, Bruce Reed, White House policy adviser, we thank
you much for your time, this morning.

    REED: Thank you.

Broadcast Wednesday 9:00 am Eastern Time, Transcript # 99120801V09

This morning, CNN interviewed Housing and Urban Development Secretary
Andrew Cuomo who happens to be at a homeless shelter because, today, a
new national study on homelessness was released. Here's what he had to
say about what the administration is trying to do in upping the ante in
the war on guns.

(BEGIN VIDEO CLIP)

    ANDREW CUOMO, HUD SECRETARY: We're saying, before we get to the
courtroom, we want to get to the negotiating room. And the federal
government coming in can actually allow a settlement -- what we call a
global settlement. We want to invite all the parties: the gun
manufacturers, everyone who has a lawsuit. Let's get around the same
negotiating table, let's try to resolve the issues that we need to
resolve and never get to a courtroom. And we think we can do that.

(END VIDEO CLIP)

    WALLACE: The White House and HUD would like to see gun makers crack
down on gun dealers whose guns end up in the hands of criminals. They
would also like to see gun makers make guns safer and stop advertising
fingerprint-resistant guns. Now, as for the gun makers, we haven't
gotten any reaction yet. But in the past, they have said that what's
needed is better enforcement of existing laws, not new laws, and
certainly not lawsuits.

Now as for the Clinton administration, if it scores a victory here by
getting the gun industry to negotiate, it would be a -- certainly, a big
victory because Congress did not pass measures that the White House had
been pushing for, tougher gun control measures that would mandate
background checks for purchases at gun shows -- Daryn.

     KAGAN: Kelly Wallace, reporting live at the White House. Thank you,
Kelly.

December 8, 1999; Wednesday 12:00 am Eastern Time, Transcript #
99120801V11

    FRANK SESNO, CNN ANCHOR: There is a new battle brewing between gun
makers and the U.S. government. The Clinton administration is going to
line up behind a class-action lawsuit patterned after those brought
against the gun industry by 29 cities and counties. A few hours from
now, President Clinton will hold a news conference.

Joining us with a look at ahead -- what's ahead is CNN White House
correspondent Chris Black.

Chris, first to the guns.

    CHRIS BLACK, CNN WHITE HOUSE CORRESPONDENT: Frank, the Clinton
administration has decided to throw its weight behind a potential
lawsuit that could be filed by the more than 3,100 federal housing
authorities across the country. The more than 3 million people who live
in federal housing are among the most frequent victims of gun violence,
with 10,000 gun crimes and 500 deaths a year.

The president's domestic policy adviser, Bruce Reed, earlier today told
CNN that the purpose of this intervention is to convince the gun
manufacturers to reach an out-of-court settlement in a similar suit
filed by more than two-dozen cities, and get them to agree to some
things that the Republican Congress has been unwilling to mandate.

(BEGIN VIDEO CLIP)

    BRUCE REED, WHITE HOUSE DOMESTIC POLICY ADVISER: We want to do
everything we can to keep guns out of the wrong hands. We want to press
the industry to change the way it does business and to do everything it
can to take responsibility for how guns are distributed, how guns are
marketed, see if we can make the country a safer place.

(END VIDEO CLIP)

   BLACK: The administration is looking for certain concessions, like
safety locks on hand guns, and end to the practice of advertising
fingerprint-resistant guns, and better controls on dealers -- Frank.

   SESNO: Chris, what else is likely to come up in this news conference
today, likely the last one of the year for the president, looking ahead
to his final year in office? BLACK: All those things, Frank. This is the
president's fifth and final solo press conference of the year. White
House officials say -- note that it has been a busy year for the
president. He began this year with the impeachment trial in the United
States Senate, moved to U.S. intervention to the conflict in Kosovo, and
ended with a budget deal. White House officials say we can expect to
hear the president crow a little bit about achieving the funding of his
priorities without busting the budget with a big tax cut. We also expect
the president to take some credit for improvements in the Middle East
and Irish peace talks.

And, finally, the president will look ahead to his final year in office
and his unfinished agenda. Familiar topics, again, Frank: Social
Security and Medicare reform, more gun control, and a patient bill of
rights.

    SESNO: Chris Black at the White House, thanks.

And the president's news conference is expected to begin at about 2:30
p.m. Eastern time. CNN plans live coverage, of course, of the event.


GUN MANUFACTURERS: Il. Suit Goes on; Govt Backed National Suit Upcoming
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Report on AP Online says that a judge has refused to throw out a lawsuit
alleging that gun makers' marketing tactics contributed to three Chicago
deaths, a decision gun opponents hope is part of a trend. ''This is a
home run,'' said Lawrence Rosenthal, a lawyer for the city of Chicago,
which is among at least 28 U.S. cities and counties that have filed
their own separate lawsuits against gun makers. ''We now have a neutral
party in a black robe with no axe to grind and this is what she sees
looking at Illinois law.''

Cook County Circuit Court Judge Jennifer Duncan-Brice rejected the gun
industry's attempt to have the lawsuit dismissed. The suit was filed by
the families of three Chicago residents killed by guns, including a
police officer. The judge said the complaints ''sufficiently allege that
the citizens of Chicago have a public right to be free from disturbance
and reasonable apprehension of danger to themselves and their
property.'' She called the lawsuit ''significantly different'' than
earlier attempts to hold manufacturers responsible for the damage guns
do.

The ruling is one of several to go against gun makers this year. In
February, a federal court jury in New York ordered three gun companies
to pay $4 million in damages to a gunshot victim and the families of six
others. In September, a California appeals court reinstated a lawsuit
against the maker of the gun used in 1993 killings at a San Francisco
law firm.

Columbia University law professor John Coffee says it will take more
than one or two state court judges' rulings to set a trend. But, he
adds, enough of those decisions may cause gun makers to think twice as
tobacco companies and some drug makers have. ''This litigation once it
starts to linger creates this cloud that eventually has to be faced as a
business problem, as well as a legal problem,'' Coffee said.

The Clinton administration confirmed this week that it is helping
prepare a class-action suit against gun makers, alleging that guns and
how they are marketed have contributed to violence in public housing.
The move is an attempt to pressure the industry to negotiate with cities
that have filed lawsuits against it.

The city suits which, like the private Chicago suit, allege that gun
makers have created a ''public nuisance'' by flooding the market with
high-powered handguns are getting mixed judicial responses. In October,
a state judge allowed Atlanta's lawsuit to proceed, while an Ohio judge
dismissed Cincinnati's lawsuit.

Chicago's lawsuit against gunmakers and shops seeks $433 million.
Rosenthal said he hopes the ruling is a sign that another Cook County
judge, Stephen Schiller, will rule similarly on a motion to throw out
the city's lawsuit. A lawyer for a gun maker named in the private
Chicago lawsuit said Duncan-Brice's ruling doesn't guarantee a courtroom
loss.

Anne Kimball argues that Smith & Wesson, which made the gun that killed
Chicago Police Officer Michael Ceriale, couldn't possibly be held
responsible for a shooting that happened years after the gun was sold
legally. ''The law is clear, and to the extent that we didn't make it
clear (to the judge), we will,'' Kimball said Tuesday.

               White House Joins Suit on Gun Companies

The Clinton administration hopes the threat of a new, national lawsuit
will persuade gun makers to negotiate with cities that accuse them of
negligently allowing guns to fall into the hands of criminals. The White
House is helping prepare a class-action suit against gun makers,
alleging that guns and how they are marketed have contributed to
violence in public housing projects, administration officials said
Tuesday.

The lawsuit would be filed by some or all of the nation's 3,100 local
housing authorities and would be patterned on suits filed against the
industry by 29 cities and counties, the officials said. Those suits
claim that gun manufacturers have sold defective products or marketed
them in ways that increase the likelihood that they will be used to
commit crimes. ''The administration intends to work aggressively to ...
try to work to reach a settlement with the industry,'' White House
domestic policy adviser Bruce Reed said. ''If settlement is not
possible, then the public housing authorities are prepared to go forward
with their suit.''

A negotiated agreement would allow the administration and gun control
advocates to claim a victory at a time when Congress has rejected
writing into law new firearms restrictions sought by President Clinton.
Administration officials said the White House and the Department of
Housing and Urban Development were helping prepare the suit even though
the actual plaintiff would be independent local authorities that run
federal housing programs.

The White House and HUD want gun makers to agree to a code of conduct
that includes cracking down on disreputable gun dealers and making safer
guns. The administration also wants gun makers to agree to end practices
such as marketing guns that are impervious to fingerprints. ''The legal
theory is the same as the cities have been pursuing the bottom line is
the gun manufacturers have not been properly supervising their
distribution channels,'' and otherwise failing to promote safety, a HUD
official said. ''It's the traditional liability theory that is applied
to every other product negligence and product liability,'' the official
said, speaking on condition of anonymity.

The official would not detail any previous outreach to gun makers but
said new talks were planned. The gun makers have acknowledged the talks,
but objected to the characterization of the meetings as
''negotiations.''

The New York attorney general is already holding discussions with gun
makers aimed at curbing the sale and distribution of handguns. The White
House informed New York Attorney General Eliot Spitzer that Clinton will
announce, possibly as early as today, that he wants to enter the New
York talks, Spitzer spokesman Darren Dopp said Tuesday night.

Among the companies reportedly involved in the discussions with Spitzer
have been Smith and Wesson, Sturm, Ruger and Co., Colt's Manufacturing,
O.F. Mossberg and sons, Taurus, Glock and Beretta. New York officials
have threatened to sue the manufacturers unless they agree to a similar
code of conduct governing the sale and distribution of their products.

Some gun makers have declared bankruptcy in the wake of the suits by
local governments, and others have scaled back their product lines and
decreased advertising, according to a countersuit.

The suits have had mixed success in the courts. A judge dismissed
Cincinnati's suit in October, but another judge allowed Atlanta's suit
to proceed and ordered the industry to open its files. Alan Gottlieb,
founder of the Bellevue, Wash.-based Second Amendment Foundation, said
if the housing authorities sue, his group likely would file another
countersuit on behalf of gun makers. Gottlieb claimed that the
administration was encouraging suits against the gun industry in hopes
of bankrupting gun companies. The idea, he said, was ''file as many
suits as possible. The industry can't fight hundreds of lawsuits it
would bankrupt them.''

                NRA Criticizes National Gun Lawsuit

The National Rifle Association condemned on December 8 a threatened
class-action lawsuit against gun manufacturers on behalf of public
housing projects as ''a frightening holiday greeting from Bill Clinton
and Al Gore.''. The White House is helping prepare the suit, alleging
that guns and how they are marketed have contributed to violence. ''No
lawful industry is safe. Who will they sue next? Automobile makers? The
distiller industry? Manufacturers of baseball bats and kitchen knives?''
said James J. Baker, an NRA official. White House spokesman Joe Lockhart
said the suit is intended to pressure gun makers to respond to 28 states
and cities that are seeking to recover the cost of gun violence. (AP
Online, December 8, 1999)

According to The New York Times of December 8, 1999, the White House and
the Department of Housing and Urban Development have been laying the
groundwork in recent months for the suit on behalf of the three million
people who live in public housing projects, where shootings have taken a
heavy toll for years.

But Mr. Cuomo said the federal goal was a settlement, not a drawn-out
lawsuit. "If all parties act in good faith, we'll stay at the
negotiating table," he said. "If not, we are prepared to litigate. We
feel we're in a strong position." Mr. Cuomo said that if no settlement
was reached, the suit would be filed in Federal District Court. The
nation's 3,200 public-housing authorities, which will lodge the suit,
have an enormous stake in the issue, Mr. Cuomo said, because of violence
in the projects, where the government spends $1 billion a year on
security, but where many children are so afraid of stray bullets that
they sleep in bathtubs. "Enough is enough," he said.

Two representatives of the firearms industry said that the threat of a
suit would not improve prospects for a settlement. "My initial reaction
is one of frustration and surprise," said Robert T. Delfay, president of
the National Shooting Sports Foundation, who said his group had been
meeting with the Bureau of Alcohol, Tobacco and Firearms on ways to make
weapons safer. "To be working with one arm of the federal government and
then have another arm of the federal government say they're going to sue
you is very frustrating," Mr. Delfay said.

Paul Jannuzzo, general counsel for the Glock gun company, said better
enforcement of gun laws would do more good than more lawsuits. Mr.
Jannuzzo is a former prosecutor in Monmouth County, N.J.

Mr. Delfay's group has been conferring with Attorney General Eliot L.
Spitzer of New York on a gun-industry code of conduct in the hope of
heading off a lawsuit that Mr. Spitzer has threatened.

Mr. Spitzer said that he welcomed the federal intervention. "This is a
tremendous boost to the effort," he said, "and should lead to
substantial additional pressure being put on the industry." He compared
the threat of his lawsuit to a dagger, saying, "The Feds' is a meat ax."

Mr. Reed said that more than 500 murders were committed in a typical
year among the 100 largest housing projects, with 70 percent of those
involving firearms. These statistics, as well as accidental shootings
involving children who find hidden guns, give the housing authorities
strong legal standing to sue, he asserted. Mr. Reed said the federal
government, like the cities that have sued the firearms industry, sought
curbs on advertising; compulsory child-safety locks on handguns and
stricter rules on sales and distribution. "One percent of the gun
dealers sell 50 percent of the guns that turn up in crimes," he said.

A lawyer for the housing department said that he had talked to Mr.
Spitzer; Richard Blumenthal, the Connecticut attorney general who has
also been involved in the campaign against the firearms industry, and to
most of the mayors of cities that have sued gun makers. "Unanimously,
they were enthusiastic about our coming in," the lawyer said.

Mr. Cuomo and Mr. Reed said their goal was a "global settlement" not
unlike that reached with the tobacco industry. And like the tobacco
settlement, a general settlement with the firearms industry would not
preclude smaller settlements involving particular companies and cities,
they said.

The officials said lawyers for the housing agency had been conferring
with their counterparts in the White House, the Justice Department and
the Treasury Department, whose firearms bureau regulates segments of the
gun industry. Any wide-ranging settlement -- or lawsuit, if an agreement
cannot be reached would almost inevitably involve such familiar names as
Sturm, Ruger & Company, Smith & Wesson, Colt's Manufacturing, Beretta,
Glock and Mossberg & Sons. Those companies have been in discussions with
Mr. Spitzer.

In a situation not unlike the tobacco negotiations, two big gun makers
were said last summer to be negotiating with Mr. Spitzer. That might
have broken the solidarity of the gun interests -- much as cigarette
manufacturers disagreed on their strategy -- but the gun companies have
since closed ranks.

Any settlement talks probably would cover limits on how many guns could
be bought at one time; better record-keeping, an independent monitor to
see that safety regulations are enforced and better protection for
children. "You have safety caps on aspirin bottles, but not on guns?"
Mr. Cuomo said. "Where's the logic?"

If a federal settlement does produce significant new gun controls, the
executive branch would accomplish through legal pressure what the
legislative branch could not accomplish through politics. Both houses of
Congress agonized for weeks over gun control proposals after the school
shootings in Littleton, Colo., but were unable to agree on anything of
substance.

The cities that have sued gun makers include Atlanta, Boston,
Cincinnati, Cleveland, Newark, New Orleans, St. Louis and San Francisco.
As with the tobacco industry, there is an uneven history of litigation
involving gun interests. Often, the firearms makers and dealers have
won, but not always. New York is not among the two dozen cities that
have sued, but in February, a Federal District Court jury in Brooklyn
found 15 firearms makers negligent in a case involving illegally
obtained handguns. The private plaintiffs argued that the companies
fostered illegal trafficking because of their marketing practices.

The Washington Post of December 8, 1999 says that to some degree, the
threatened litigation could allow the Clinton administration to use the
courts to achieve gun control measures that have failed in Congress. The
architects of the current wave of litigation against gun manufacturers
are openly seeking quasi-legislative remedies: They want gunmakers to
agree to distribute their products only to dealers who will not sell at
gun shows; not to sell an individual more than one gun at a time; not to
sell more than one gun a month to a buyer; and to cut off any dealers
who have a disproportionate number of guns traced to crimes.

Other concessions being sought include manufacturers including safety
locks on new guns; mechanisms that keep a gun from firing when the
magazine is removed; and technology that personalizes guns so that only
the owners may fire them.

Gun ownership advocates say there already are plenty of laws on the
books, including bans on gun sales to minors and convicted felons, and
further litigation is unnecessary and unfair. "The federal government
licenses people to make and sell guns," said James P. Dorr, an attorney
for several gun companies. "These are products that are regulated by the
government. To sue someone they have authorized to sell those products
has no basis in the law."

However, some manufacturers have been involved in periodic, so far
unsuccessful negotiations to settle such lawsuits out of court. Lawyers
for the cities say several courts have ruled that makers of "inherently
dangerous products," such as guns, can't ignore what happens once the
products leave their plants and go to retailers. "Because the industry
and manufacturers take no action to curb irresponsible sales by
retailers, you have a situation by which the distribution system itself
aids and abets criminal conduct," said Dennis Henigan, legal director
for the Center to Prevent Handgun Violence, a party in the ongoing
negotiations with manufacturers.

Pressure on the gun manufacturers has been mounting in recent weeks on
various fronts. Last week in New York, the gun companies asked that a
lawsuit filed against them by the NAACP be stayed until there is a
decision on whether to overturn what is known as the Hamilton case.
Hamilton is the landmark case in which a jury held some gun companies
responsible for negligent marketing. The judge denied the stay. In
addition, many insurers of gun companies have notified their clients
that they will not pay for their legal defense.

"The administration's intervention in the cities' cases will quicken the
pace for settlement," said Josh Horwitz, director of the Firearms
Litigation Clearinghouse, which is supporting the lawsuits against the
companies.

While Attorney General Janet Reno has been an outspoken advocate of
tougher federal gun laws, a Justice Department official said that
department officials have not been involved in discussions regarding a
possible lawsuit by the housing authorities against gun manufacturers.
Even though senior HUD officials are convinced that the housing
authorities across the country have a viable legal case, they are being
encouraged to continue their negotiations with gun manufacturers because
"a comprehensive negotiated settlement would be far superior to any
protracted litigation," a Justice official said.

According to Los Angeles Times of December 8, 1999, although the case
could be filed by early next year, administration officials cautioned
that the timing was uncertain and that no final decision had been made
to go forward.

But the mere threat of U.S. involvement is sure to inject a note of
urgency into nascent settlement talks between the gun makers and local
governments, including the city and county of Los Angeles. "I think it's
a very positive development," said Los Angeles City Atty. James K. Hahn,
adding that federal involvement would help "get some real meaningful
reforms from the manufacturers." "This substantially ups the ante for
the industry," said Dennis Henigan, legal director for the Center to
Prevent Handgun Violence and co-counsel to many of the cities and
counties that have filed lawsuits. "I think it is a watershed
development."

Beginning with New Orleans 14 months ago, 29 governments have sued
handgun makers, accusing them of promoting sales to juveniles and
criminals by flooding the market with more firearms than legitimate
buyers could possibly absorb. The suits have also accused the companies
of failing to incorporate safety features, including technology that
could prevent guns from being fired by curious children or by criminals
who obtain them by theft. A similar case has been filed against the
industry by the National Assn. for the Advancement of Colored People,
citing the disproportionate harm to African Americans from what it
termed the industry's "hear no evil, see no evil" approach to firearm
sales.

While arguing they are not responsible for criminal misuse of firearms,
the companies have entered settlement talks with municipal
representatives. However, a meeting held Tuesday in Washington was the
first since talks began in late September, and negotiators for the
municipalities have chafed at the slow pace of negotiations.

The prospect of federal involvement is likely to change the dynamics of
the talks because the industry consists of mostly small to mid-size
companies that may be unable to resist a protracted legal siege.

A federal attack on gun makers would parallel the massive lawsuit filed
in the fall by the Justice Department against the tobacco industry. But
Big Tobacco has many times the size and staying power of the handgun
makers.

Financial strain induced by the wave of lawsuits already appears to be
contributing to a shakeout in the industry. Pistol maker Davis
Industries of Chino filed for bankruptcy in May, due at least in part to
the lawsuits. Another Southern California maker of cheap handguns,
Lorcin Engineering of Mira Loma, recently announced its closure.

And in October, Colt's Manufacturing Co. of West Hartford, Conn., a
storied name in firearms, said it would stop producing some of its less
profitable models. "We have had to face the harsh reality of the
significant impact which our litigation defense costs are having on our
ability to operate competitively in the marketplace," the company said
in a letter to distributors. The threat of federal action "puts just
enormous new pressure on the handgun industry" to settle the pending
cases, Henigan said.

The cities and counties have been joined in settlement talks by New York
Atty. Gen. Eliot Spitzer and Connecticut Atty. Gen. Richard Blumenthal,
who have threatened to sue if the companies don't settle.


HOLOCAUST VICTIMS: German Envoy Warns Of Consequences If Talks Break Up
-----------------------------------------------------------------------
The German government's envoy to negotiations over compensation for
Nazi-era forced and slave laborers has warned of ''many individual
lawsuits'' against German companies operating in the United States if
talks fail. In an interview to be published December 9 in the
mass-circulation Bild newspaper, Otto Lambsdorff said the fallout of a
collapse in the talks would also have negative consequences for
U.S.-German trade and relations.

On Tuesday, lawyers sent a rejection letter to Lambsdorff and U.S.
Deputy Treasury Secretary Stuart Eizenstat, the U.S. envoy, turning down
an 8 billion mark ($ 4.2 billion) offer on the eve of a Wednesday
deadline set by Lambsdorff. Lambsdorff's office said Wednesday they were
still waiting to get an official response to the offer from Eizenstat.

In their rejection letter, the lawyers say they are available to
continue negotiations about offers from 10 billion to 15 billion marks
($ 5.2 billion to $ 7.9 billion).

But Lambsdorff told Bild that there would be no increase in the
industry's 5 billion mark ($ 2.6 billion) portion of the offer. The
government is contributing the rest. Lambsdorff also called on more
firms to join the fund, which now has only 60 members only about 20 of
which have gone public.

A government spokeswoman said Wednesday that Germany wants the talks to
reach a conclusion. ''Nobody has interest in a breakdown,'' Charima
Reinhardt said. Still, the spokesman for the industry fund warned
Wednesday of a total collapse to the process. The firms established the
foundation in February under pressure of U.S. class-action lawsuits, and
are seeking total legal immunity in exchange for making the payments.
Wolfgang Gibowski told German television that some firms are considering
opting out of the fund and determining their own means to compensate
victims. (AP Worldstream, December 8, 1999)


MEGO FINANCIAL: Contests 2nd Amended Securities Complaint in Georgia
-------------------------------------------------------------------
On February 23, 1998, an action was filed in the United States District
Court for the Northern District of Georgia, Civil Action
No.1:98CV0593-CAM, by Robert J. Feeney, plaintiff, as a purported class
action against Mego Mortgage Corporation (MMC), a former subsidiary of
the Company now known as Altiva Financial Corporation, and Jeffrey S.
Moore, the former President and Chief Executive Officer of MMC. The
complaint alleges, among other things, that the defendants violated the
federal securities laws in connection with the preparation and issuance
of certain of MMC's financial statements. The named plaintiff seeks to
represent a class consisting of purchasers of the common stock of MMC
between April 11, 1997 and December 18, 1997, and seeks such other
relief as the Court may deem just and proper.

An amended complaint was filed in such matter on or about June 29, 1998,
which amended complaint, among other things, adds Mego Financial as a
defendant, adds John Cole, Trent Hildebrand, Burt W. Price and Frank J.
Murphy as plaintiffs and alleges an expansion of the purported class to
certain purchasers of MMC's common stock from April 11, 1997 through May
20, 1998. However, the Company was not the parent company of MMC at the
time when the majority of the matters which are cited in the
above-described action occurred.

On April 8, 1999, the court conditionally dismissed the Amended
Complaint and ordered plaintiff to move the Court for leave to file a
second amended complaint. On May 10, 1999, plaintiff filed a Second
Amended Class Action Complaint. In response, on July 19, 1999,
defendants filed a motion to dismiss the Second Amended Class Action
Complaint, which motion is still pending. The Company does not believe
that any judgment obtained will have a material adverse effect on the
Company's or PEC's business or financial condition.


MEGO FINANCIAL: Faces Appeal to Settlement for Nevada Securities Suit
---------------------------------------------------------------------
Following the Company's November 10, 1995 announcement disclosing
certain accounting adjustments, an action was filed on November 13,
1995, in the United States District Court, District of Nevada (Court) by
Christopher Dunleavy, as a purported class action against the Company,
certain of the Company's officers and directors and the Company's
independent auditors. On November 16, 1995, a second action was filed in
the Court by Alan Peyser as a purported class action against the Company
and certain of its officers and directors.

Each complaint alleged, among other things, that the defendants violated
the federal securities laws in connection with the preparation and
issuance of certain of the Company's financial reports issued in 1994
and 1995, including certain financial statements reported on by the
Company's independent auditors. The Dunleavy complaint also alleged that
one of the director defendants violated the federal securities laws by
engaging in "insider trading." The named plaintiff in the Dunleavy
action sought to represent a class consisting of purchasers of Mego
Financial's common stock between January 14, 1994 and November 9, 1995.
The named plaintiff in the Peyser action sought to represent a class
consisting of purchasers of Mego Financial's common stock between
November 28, 1994 and November 9, 1995. Each complaint sought damages in
an unspecified amount, costs, attorney's fees and such other relief as
the Court may deem just and proper.

On or about June 10, 1996, the Dunleavy and Peyser actions were
consolidated under the caption "In re Mego Financial Corp. Securities
Litigation," Master File No. CV-9-95-01082-LD (RLJ), pursuant to a
stipulation by the parties.

On December 26, 1996, a third action was filed in the Court by Michael
Nadler as a purported class action. The Nadler complaint asserts claims
substantially similar to those in the Dunleavy and Peyser Actions. On
April 23, 1998, counsel for the plaintiffs in the Dunleavy and Peyser
actions, and counsel for the defendants filed in the Court a Stipulation
and Agreement of Settlement (the Settlement Agreement) in accordance
with a prior Memorandum of Understanding dated May 12, 1997. The
Settlement Agreement, which was subject to a number of conditions,
including approval by the Court, calls for certification, for settlement
purposes only, of a class consisting of all purchasers of Mego Financial
stock (excluding the defendants and their respective directors,
executive officers, partners and affiliates and their respective
immediate families, heirs, successors and assigns) during the period
from January 14, 1994 through November 9, 1995, inclusive, for creation
of a settlement fund of $1.725 million to be distributed to the class,
for the dismissal of all claims asserted in the actions with prejudice
and for certain releases to defendants. The Company contributed $225,000
of the settlement amount, which payment did not have a material adverse
effect on the Company.

On October 19, 1998, the Court issued a Final Judgment and Order of
Dismissal with Prejudice, approving the Settlement Agreement, which will
not become final until the Effective Date, which is the date following
either the expiration of any appeal period without appeal, the date
following the affirmation of the Final Judgment on appeal, and on which
such Final Judgment is no longer subject to further judicial review. On
November 13, 1998, Michael Nadler, who had filed objections to the
settlement, filed a Notice of Appeal from the Final Judgment and Order
of Dismissal with Prejudice and certain other orders of the Court. In
the event, for any reason, the Final Judgment is vacated, the Company
believes that it has substantial defenses to all of the complaints that
have been filed against it described above. However, the Company
presently cannot predict the outcome of this matter.


MEGO FINANCIAL: Lot Owners Appeal in Nevada Suit over Betterment Deal
---------------------------------------------------------------------
On August 27, 1998, an action was filed in Nevada District Court, County
of Clark, No. A392585, by Robert and Jocelyne Henry, husband and wife
individually and on behalf of all others similarly situated against PEC,
PEC's wholly-owned subsidiary, CNUC, and certain other defendants. The
plaintiffs' complaint asked for class action relief claiming that PEC
and CNUC were guilty of: breach of contract; unjust enrichment; customer
fraud; and bait and switch tactics as a result of a solicitation of
betterment fees pursuant to a letter sent to certain lot owners by PEC
on January 26, 1995 (Letter). The Letter was sent to approximately 1,400
lot owners stating that their lots would be buildable by April 1, 1995
as a result of sewer and water lines being run near their respective
lots. The Letter offered to accept a betterment fee payment in the
amount of $2,380 per lot prior to an increase in betterment fees. The
plaintiffs paid the fee and claimed they did not have a buildable lot as
sewer and water lines did not reach their property.

The court determined that plaintiffs had not properly pursued their
administrative remedies with the Nevada Public Utilities Commission
(PUC) and dismissed plaintiffs' amended complaint, without prejudice,
pending plaintiffs' exhaustion of their administrative remedies before
the PUC. Notwithstanding plaintiffs' appeal of the dismissal, plaintiff
filed for administrative relief with the PUC. On November 17, 1999, the
PUC found that CNUC, the only defendant over which the PUC has
jurisdiction, was not in violation of any duties owed the plaintiffs or
otherwise in violation of CNUC's approved tariffs. Only approximately
350 customers accepted the offer presented in the Letter and a number of
those customers own lots that are currently buildable.


MEGO FINANCIAL: NY Ct Approves Voluntary Dismissal of Shareholders Suit
-----------------------------------------------------------------------
On May 10, 1999, an action was filed in the Supreme Court of the State
of New York, County of New York, No. 99-109707, by Mo Yossin, as a
purported class action against the Company and certain of its officers
and directors. The Complaint alleged that the defendants are breaching
or have breached their fiduciary duty by acting to put their interests
ahead of the interests of the Company's public shareholders,
specifically by failing and refusing to attempt to maximize stockholder
value and failing to seek a purchaser of the Company and/or any and all
of its various assets or divisions at the best price obtainable.

The Complaint seeks preliminary and permanent injunctive and declaratory
relief preventing defendants from depriving plaintiff of his right to
realize the full and fair value of his stock and unspecified monetary
damages. In October 1999, the plaintiff and the defendants executed a
stipulation, voluntarily discontinuing and dismissing the action, which
stipulation was approved by order of the court on October 25, 1999.


MID-STATE BANK: Keystone Will Pay for Devon Mishandling of School Funds
-----------------------------------------------------------------------
Keystone Financial, Inc., (Nasdaq: KSTN) announced on December 8 an
agreement in principle under which it will pay approximately $30 million
to a group of 43 school districts and local governments to settle a
class-action suit they filed against Mid-State Bank in Altoona, a
Keystone subsidiary now part of Keystone Financial Bank, N.A. The
settlement is subject to the consent of Keystone's insurance carrier,
the parties signing a formal written agreement and to the approval of
Blair County Judge Hiram A. Carpenter III.

The settlement does not resolve four other pending lawsuits filed by a
total of seven school districts that did not join in the class-action
litigation. Active discussions on this matter are continuing. Keystone
has offered to settle with these plaintiffs on the same basis as the
class action settlement and has reserved approximately $21 million for
such claims.

The class-action plaintiffs filed the civil suit in 1997 in the Blair
County Court of Common Pleas to recover investment losses. They claimed
that the bank should have known that the school districts' investment
advisor, Devon Capital Management, had allegedly mishandled the
investment of school district funds. Mid-State Bank provided custodial
services to Devon Capital Management. Devon's principal, John Gardner
Black, has been indicted, pleaded innocent and is awaiting trial in
federal court on 134 counts including alleged fraud.

Keystone Chairman and CEO Carl L. Campbell said that the bank was just
as much a victim as the school districts. "This is a unique situation
involving a single customer," Campbell said. "Mr. Black and his
companies created a complex situation. The bank and the school districts
wound up pitted against each other in sorting it out."

Campbell added, "We reached this decision because of the uncertainties
of litigation not to mention the time, cost and distraction associated
with such cases. We were concerned that this case could have taken our
attention away from serving our customers. We believe settling in this
way is the most responsible action for all parties involved -- for the
school districts and local governments, our shareholders, our customers
and our associates. This allows us to move forward."

Campbell said the costs associated with resolving this litigation would
not have a detrimental effect on the company's financial stability. An
undetermined portion of the payment may be recovered under claims filed
with Keystone's insurance carrier.

Keystone Financial, Inc., with assets of approximately $7 billion, is
the fourth-largest financial institution headquartered in Pennsylvania.
Its subsidiary, Keystone Financial Bank, N.A., serves customers in
Pennsylvania, Maryland, and West Virginia. Source: Keystone Financial,
Inc.


NAVARRE CORP: Issues Press Release on Securities Lawsuit
--------------------------------------------------------
Navarre Corporation issues the following press release on December 7,
1999:

The Company has been advised that a news release was issued December 6
announcing the filing of a class action lawsuit against Navarre
Corporation and its board of directors. The Company believes it has
abided by all securities laws regarding disclosure of information. The
Company further believes that the lawsuit is without merit and the
Company intends to vigorously defend its position.

Navarre Corporation, a Russell 2000 Index and Russell 3000 Index stock,
operates one of the first "business to business" Internet E-Commerce web
sites www.navarre.com and provides fulfillment for retail sites through
traditional, E-Commerce and Digital technologies, and has an ownership
position in NetRadio.com


PHYAMERICA PHYSICIAN: Fla Ct Denies Class Status to Suit over Invoices
----------------------------------------------------------------------
(Former Conformed Name: Coastal Physician Group Inc., conformed as of
May 24, 1995)

In October and November 1996, three cases styled Ortiz v. Coastal
Physician Services of Broward County, Inc., et al., Higgins v. Coastal
Emergency Services of Ft. Lauderdale, Inc. et al., and Dukenik v.
Coastal Emergency Services of Ft. Lauderdale, Inc. et al. were filed in
the Circuit Court for Palm Beach County, Florida seeking damages for
alleged violations of Section 559.79 of the Florida Consumer Collection
Practices Act as a result of invoices mailed for medical services
rendered by contracted physicians. The invoices contained language
indicating various actions that might be pursued in the event of
non-payment, including references to the Attorney General. Plaintiffs
sought to have the matter certified as a class action.

On October 28, 1999, the trial court denied plaintiffs' motion for class
certification, leaving claims of the three individual plaintiffs for
$500 in statutory damages plus reasonable attorneys' fees as awarded by
the Court. The order of the trial court denying class certification is
subject to interlocutory appeal. The Company (Phyamerica Physician Group
Inc.) believes that it has several defenses to the lawsuit and intends
to continue to vigorously defend the action but at this stage of the
litigation, the exposure to the Company cannot be determined.


REXALL SUNDOWN: Will Vigorously Defend Securities Suits in Florida
------------------------------------------------------------------
In fiscal 1999, several class action complaints alleging violations of
the Federal securities laws were filed against the Company and certain
of its officers and directors. These suits purport to be on behalf of
all persons who purchased the Company's common stock between March 19,
1998 and November 5, 1998. The suits have been consolidated into one
action styled In re: Rexall Sundown, Inc. Securities Litigation, Case
No. 98-8798-CIV-Dimitrouleas in the United State District Court for the
Southern District of Florida.

The Company and the named officers and directors believe that the
allegations contained in this action are without merit. Although the
Company and the named officers and directors will vigorously defend
against this action, there can be no assurance that they will ultimately
prevail in their defense. The Company and the named officers and
directors have filed a Motion to Dismiss all claims which remain
pending. All discovery has been stayed pending resolution of the Motion
to Dismiss by the Court.


TOBACCO LITIGATION: NJ Super. Ct Denies Class Status to Casino Workers
----------------------------------------------------------------------
A state superior court in New Jersey has denied class certification to a
group composed of casino workers seeking medical monitoring relief from
the tobacco industry for all non-smoking employees who claimed they were
at an increased risk of disease as a result of exposure to environmental
tobacco smoke.

The case has been referred to as the Avallone case, after plaintiffs
Joseph Avallone, Robin Taylor, and Joseph Yaniak who sought class action
certification for a lawsuit against the tobacco industry on behalf of
themselves and "all others similarly situated." In denying class action,
Judge Marina Corodemus cited numerous previous rulings. The Judge
concluded: "Because differences of exposure, and the nexus between
exposure and injury lead to disparate applications of legal rules,
including matters of causation, comparative fault, and the types of
damages available to each Plaintiff, this Court finds that the present
class is not cohesive. Therefore, this Court holds Plaintiff's Motion
for Class Certification ... is denied."

"This decision is yet another affirmation that smoking and health
lawsuits should not be treated as class actions," said Brown &
Williamson Tobacco Corporation.


UNITED PETROLEUM: Faces Tenn Securities Suits; Bankruptcy Stay Expires
----------------------------------------------------------------------
In March 1997, a putative class action lawsuit (the "Pisacreta Action")
was filed by John Pisacreta, a purchaser of the Debtor's Common Stock,
in the Tennessee Federal Court, purportedly on behalf of all purchasers
who purchased shares of Common Stock during the period of May 1, 1996
through January 16, 1997. This suit was filed against Ronald Berkovitz,
Infinity Investors Limited, Dan Dotan, Fairway Capital Limited, Lake
Management LDC, Laurel Angela MacDonald, Seacrest Capital Limited and
Mohamed Ghaus Khalifa as discussed more fully below. In or around
October 1997, Mohamed Ghaus Khalifa and Dan Dotan were dismissed from
the Pisacreta Action. In the lawsuit, the plaintiff alleges that the
defendants, in acquiring and disposing of certain of the Debentures,
participated in a fraudulent and manipulative scheme in violation of
certain provisions of the securities laws of the United States. The
plaintiff also alleges that the defendants committed fraud and deceit
under common law and breached a contract between the defendants and the
Debtor. The defendants filed a motion to dismiss the complaint for
failure to state a claim upon which relief can be granted. The Tennessee
Federal Court granted the motion in part, dismissing one of the two
federal securities law claims, as well as the claim for common law
fraud. Following a July 16, 1999 hearing before the United States
Magistrate Judge for the United States District Court for the Eastern
District of Tennessee at Knoxville, an order was entered denying John
Pisacreta's request for class certification.

In November 1997, Lisa Tucci, a purchaser of the Debtor's Common Stock
and the daughter of John Pisacreta, filed a putative class action
lawsuit (the "Tucci Action") in the Tennessee Federal Court against
Clark K. Hunt ("Hunt"), purportedly on behalf of all persons and
entities who purchased Common Stock from May 1, 1996 through January 16,
1997. The lawsuit was based on factual allegations identical to those
set forth in the Pisacreta Action, described above. The plaintiff claims
that Hunt is the controlling person of certain of the purchasers of the
Debentures and is secondarily liable under the securities laws of the
United States for the violations alleged in the Pisacreta Action.

In January 1998, the defendant filed a motion to dismiss for failure to
state a claim or alternatively to dismiss the complaint for improper
venue. In April 1998, the Tennessee Federal Court dismissed the Tucci
Action for improper venue. In May 1998, the plaintiff filed a notice of
her intent to appeal the court's ruling to the United States Court of
Appeals. After the appeal was filed in the Tucci Action, the plaintiff
in the Pisacreta Action filed a motion to amend his complaint to add
Hunt as a defendant under the theory of controlling person liability.
The motion was ultimately granted and Hunt was added as a defendant in
the Pisacreta Action. The Debtor believes that the appeal in the Tucci
Action has been abandoned and that the order dismissing that matter has
become final.

In December 1998, Hunt answered the complaint in the Pisacreta/Tucci
Action and impleaded the Debtor as a third-party defendant, alleging
that the Debtor is liable for any claims of the plaintiffs under
theories of indemnity and contribution. Thereafter, the Tennessee
Federal Court entered an agreed order permitting Infinity, Fairway, and
Seacrest to assert similar causes of action against the Debtor. Pursuant
to order of the Tennessee Federal Court dated June 3, 1999 the
plaintiff's motion to sever the third party claims asserted against the
Debtor from the claims asserted against the defendants in the
Pisacreta/Tucci Action was granted.

These parties' claims for indemnification and contribution rest, in the
first instance, upon provisions in the Subscription Agreements wherein
the Debtor covenanted to indemnify and hold harmless the Infinity
Parties in the event the Debtor breached any of the provisions of the
Subscription Agreements. While the Debtor vigorously disputes that it
has committed any such breach, the Infinity Parties have alleged that
the Debtor made certain misrepresentations regarding use of proceeds to
induce the Infinity Parties to execute the Subscription Agreements.
Additionally, the Infinity Parties allege that to the extent Pisacreta
ultimately succeeds on his claim that the Subscription Agreements were
non-compliant with Regulation S, the Debtor is liable to indemnify the
Infinity Parties for damages arising therefrom. Infinity's claims in
this regard stem from the contention that compliance with exemptions to
registration is the obligation of the issuer/seller of the securities,
not of the Infinity Parties.

The Debtor denies that it has any obligation for indemnity or
contribution to the Infinity Parties in connection with the
Piscreta/Tucci Action. However, if the Infinity Parties succeed in their
claims for indemnity and contribution against the Debtor, the Debtor
would ultimately be liable for all or part of any award rendered in
favor of the Plaintiffs in the Pisacreta Action.

Pisacreta currently has articulated three separate claims pending in the
Tennessee Federal Court: (i) alleged violations of the Securities and
Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated
thereunder; (ii) breach of contract; and (iii) controlling person
liability against Clark K. Hunt under Section 20(a) of the 1934 Act for
the purported violations of Section 10(b) by Infinity. Investors Limited
("Infinity"), Fairway Capital Limited ("Fairway") and Seacrest Capital
Limited ("Seacrest").

With respect to claims arising under Section 10 (b) 5 of the 1934 Act,
Pisacreta's claim for market manipulations are based upon allegations
that Infinity, Seacrest and Fairway converted their debentures and
thereafter sold their holdings of the Debtor's Stock in such a way as to
cause an artificial inflation in the price of the Debtor's Stock. The
Infinity Parties have asserted that Pisacreta lacks standing to assert
claims under Section 10(b) against Infinity, Fairway and Seacrest and
that he did not rely on statements of any of the Defendants in the
Pisacreta Action in purchasing securities of the Debtor. Assuming that
they prevail in the foregoing defense, the Infinity Parties believe that
the lack of liability for Infinity, Seacrest and Fairway will similarly
dispose of the "controlling person" claim against Clark K. Hunt.

Pisacreta's breach of contract claim is based on alleged breaches of the
Subscription Agreements entered into by and between the Debtor and each
of the defendants in the Pisacreta Action (except for Clark K. Hunt).
Pisacreta's claims in this regard are largely predicated upon
allegations that Fairway and Seacrest are not true offshore entities,
such that these parties' representations in the Subscription Agreements
regarding compliance with Regulation "S" were false. In addition,
Pisacreta asserts (and the Tennessee Federal Court has ruled) that
Pisacreta and all holders of the Debtor's Common Stock are third-party
beneficiaries of the Subscription Agreements.

The Infinity Parties assert that, even if Pisacreta is a third-party
beneficiary under the Subscription Agreements (a point the Infinity
Parties dispute and expect to appeal), Pisacreta lacks standing to sue
the Infinity Parties thereunder because the Debtor -- from whom
Pisacreta's rights derive -- has previously released Infinity, Seacrest
and Fairway. Finally, the Infinity Parties vigorously dispute the
proposition that Infinity, Fairway and Seacrest are not offshore
entities.

Finally, the Debtor believes that the relief sought in the causes of
action presently asserted by the plaintiff in the Pisacreta/Tucci Action
is derivative in nature and that such claims properly belong to the
Debtor. The Debtor believes that the securities law claim asserted in
the Pisacreta/Tucci action is not premised on unique harm or injury to
any particular stockholder, but rather, is based on the argument that
the defendants' conduct improperly diluted the interests of all
stockholders. The breach of contract claim is based on the Infinity
Parties alleged breach of a contract with the Debtors, not the
plaintiffs. As a result, the Debtor believes that the claims asserted in
the Pisacreta/Tucci Action belong to the Debtor's chapter 11 estate and
that the plaintiffs are stayed from prosecuting the claims. The
Pisacreta/Tucci Plaintiff disputes Debtor's characterization of its
claims as derivative in nature and believes that the claims asserted in
the Pisacreta/Tucci Action are direct claims and not derivative. There
can be no certainty that a Court will agree with the Debtor's
characterization. Perhaps more importantly, based on the Debtor's
assessment of the value of the claims asserted in the Pisacreta/Tucci
Action, the Debtor believes that such claims are appropriately resolved
pursuant to the settlement contained in Article XIV of the Plan between
the Debtor and the Infinity Parties.

On February 4, 1999, the Debtor commenced an action in the Bankruptcy
Court to stay the Tennessee Litigation, and for a determination of
whether the claims asserted in such action are derivative in nature.
After briefing and a hearing on February 22, 1999, the Bankruptcy Court
ruled that it would "not enjoin [the plaintiff]...from pursuing the
Tennessee Litigation," but that it would "issue a very modified
injunctive order," restricting the prosecution of the Tennessee
Litigation to (i) continued prosecution of plaintiff's motion to sever
the debtor from the Tennessee Litigation, (ii) continued prosecution of
plaintiff's motion to compel production of documents and (iii)
continuing plaintiff's efforts to take the deposition of Mr. Clark Hunt.
At the February 25, 1999 hearing the Judge also stated that the issue of
whether Pisacreta's claims were derivative or direct was "sufficiently
subject to serious debate" that he could not conclude that the Debtor
was likely to prevail on that issue. Additionally, the Bankruptcy Court
specifically ruled that its order would expire on the later of May 25,
1999 or confirmation of the Debtor's Plan. On May 24, 1999, the Debtor
moved the Bankruptcy Court for an extension of the preliminary
injunctions. On June 14, 1999, the Bankruptcy Court denied the Debtor's
motion, freeing the plaintiff to pursue the Tennessee Litigation.
Nevertheless if the Plan is confirmed, the claims asserted in the
Tennessee Litigation would be channeled into, and so long as the UPC
Trust remains funded, could be pursued only against the UPC Trust.

Dan Dotan ("Dotan") and Mantel International Investments, Ltd.
("Mantel") have advised the Debtor that they assert claims against the
Infinity Parties related to or arising from the Debentures or the
restructuring thereof, which, as discussed under "X. The Plan - B.
Classification and Treatment of Claims - 2. Classified Claims - (e)
Class 5 - Debenture Claims" with respect to claims asserted against the
Debtor, are not Securities claims and are not subject to the channelling
injunction into the UPC Trust. Dotan and Mantel have advised the Debtors
that they may also assert claims against the Infinity Parties which
would constitute Securities Claims, which claims may impact upon the
Court's consideration of the proposed Infinity Settlement. No action has
been commenced with respect to such asserted claims. Such claims are
disputed by the Debtor and Infinity Parties.


WALGREEN CO: Sued in TX over Handling of Partially Filled Prescriptions
-----------------------------------------------------------------------
On September 29, 1999, the company was served with an action based on
the company's handling of partially filled prescriptions for private
third-party plans by the Board of Trustees of the Carpenters &
Millwrights of Houston & Vicinity Welfare Trust Fund, Civil Action No.
599CV216, which was filed in the United States District Court for the
Eastern District of Texas. The complaint seeks certification as a class
action, as well as damages and treble damages in excess of $1,000,000.

On September 14, 1999, the company settled the following cases relating
to partially filled prescriptions and other governmental actions
relating to the same conduct for $7.6 million: State of California, ex
rel. Louis H. Mueller vs. Walgreen Corporation, Case No. 976292, which
was filed in Superior Court of the State of California, County of San
Francisco; State of Illinois, ex rel. Louis H. Mueller vs. Walgreen
Corporation, Case No. 96L02373, which was filed in the Circuit Court of
Cook County, Illinois; and United States ex rel. Louis H. Mueller vs.
Walgreen Corporation, Case No. 96-84-Civ-T-23E, which was filed in
federal court in Tampa.


WALMART INC: Car Crash Victim Charges Overbilling on Prescription Drugs
-----------------------------------------------------------------------
A Harrisburg man has filed a lawsuit against Wal-Mart Inc., claiming the
retailer has broken state laws by overbilling car accident victims for
prescription drugs. If certified as a class-action, the Cumberland
County Court complaint lodged by Nicholas Ressetar could involve tens of
thousands of plaintiffs.

Ressetar claims the pharmacy charged him the full price for drugs
prescribed for him after a car crash, even though the 1990 Motor Vehicle
Financial Responsibility Law limits the cost that can be imposed on
insured auto accident victims to "80 percent of the (medicine)
provider's usual and customary charge."

Wal-Mart claims Ressetar has not provided proof that it was required to
accept his insurance coverage, nor has he shown "why he was entitled to
a special price for prescriptions at Wal-Mart." (Carlisle, Pa., The
Associated Press, December 7, 1999)


WAR VICTIMS: WW2 POWs File CA Suit V. Nippon Steel & Other Japanese Cos
-----------------------------------------------------------------------
Eleven U.S. soldiers who were Japanese prisoners-of-war during World War
II filed lawsuits on December 7 in Los Angeles and San Francisco,
alleging they were forced into slave labor for Japanese companies. The
two lawsuits allege the soldiers were "enslaved and forced to work for
years under inhumane conditions" for private Japanese business entities,
including Nippon Steel Corp and Ishihara Sangyo Kaisha. The lawsuits,
filed on the anniversary of the Japanese attack on Pearl Harbor, seek
unspecified restitution.

A second lawsuit filed in Los Angeles Superior Court seeks class-action
status for heirs of former World War II POWs. Melody Solis alleges that
her father, Edward Ray McIntyre, was forced to work without pay for
Nippon Steel while he was a prisoner of war. That lawsuit could involve
as many as 20,000 heirs, said lawyer David Casey who is representing the
plaintiffs in all three lawsuits.

The lawsuits were filed in California because it is the only state to
extend the statute of limitations for filing World War II-era slave
labor cases through December 2010, said Jim Parkinson, another of the
plaintiffs' attorneys.

Nippon and chemical company Ishihara both have business operations in
California, the attorneys said. Nippon officials could not be reached,
and an Ishihara spokesman said the company had no comment.

The lawsuits are among nearly a dozen filed against Japanese companies
by former POWs and their survivors, the attorneys said. Separately,
lawyer Michael Fagan filed a class-action suit on behalf of another
group of workers forced to work for Japanese companies during the war.
"There have been individual suits against Japanese companies for slave
labor, but no one has ever filed a sort of global case as we just did,"
said Fagan, who has handled cases seeking compensation for Holocaust
victims from European insurance companies. "We're focusing on the exact
same thing that happened with the Germans, but this time it's Japanese
companies," he said.

Senator Orrin Hatch of Utah, chairman of the Senate Judiciary Committee
said he supports former POWs including Harold Poole, 80, and Vivian
Johnson, 79, both of Utah, as they filed their lawsuits. "This should
have been resolved long before now," Hatch said at a news conference
outside the county courthouse. "I promise to leave no stone unturned
until we see what can be done here to bring justice to these and other
people who suffered like this during the war." (AFX European Focus,
December 8, 1999)


XL CAPITAL: NY Sp Ct Dismisses Suit by Shareholders
---------------------------------------------------
XL Capital was incorporated with limited liability under the Cayman
Islands Companies Act on March 16, 1998, as EXEL Merger Company. As
discussed below, the Company was formed as a result of the merger of
EXEL Limited ("EXEL") and Mid Ocean Limited ("Mid Ocean" or "MOL") on
August 7, 1998, and was renamed EXEL Limited on that date. EXEL and Mid
Ocean are companies that were incorporated in the Cayman Islands in 1986
and 1992, respectively. At a special general meeting held on February 1,
1999, the shareholders of the Company approved a resolution changing its
name to XL Capital Ltd. The Company, through its subsidiaries, provides
insurance and reinsurance coverages and financial products to
industrial, commercial, and professional service firms, insurance
companies and other enterprises on a worldwide basis.

The Company, Mid Ocean and the directors of Mid Ocean were named as
defendants in a purported class action lawsuit (the "Shareholder
Action") filed in connection with the Arrangements in the Supreme Court,
County of New York, State of New York (the "Supreme Court"). Harbor
Finance Partners Vs Newhouse, et al., C.A No. 1998/601266.

The Shareholder Action alleges that the defendants breached their
fiduciary duties to the Mid Ocean shareholders by failing to exercise
independent business judgement (due to their alleged conflict of
interest) and by agreeing to sell Mid Ocean at an unfair and inadequate
price. The Shareholder Action was brought on behalf of a purported class
of persons consisting of Mid Ocean shareholders other than the
defendants. As relief, the Shareholder Action seeks, among other things,
an order enjoining consummation of the Arrangements, or, in the event
the Arrangements are consummated, rescission of the Arrangements, and an
award of compensatory damages in an unspecified amount, as well as
costs, including fees for plaintiffs' counsel and experts' fees and
expenses.

On January 25, 1999, the Supreme Court granted the defendants' motion to
dismiss the Shareholder Action on the grounds that the Shareholder
Action (i) failed to state a claim upon which relief may be granted
under Cayman Islands law and (ii) was not brought in an appropriate
forum (FORUM NON CONVIENS). The Supreme Court's decision is subject to
appeal.


* Disability Act for Inmates under Debate: Measure May Cut off Services
-----------------------------------------------------------------------
Jail and prison inmates would be exempt from state civil rights law
under legislation that passed a House committee November 30.

Opponents said the measures would let the state cut off services to
disabled inmates, such as paid helpers for prisoners in wheelchairs,
books on tape for the blind and more time to get around for inmates who
use walkers. "I shudder to think how difficult it'll be for prisoners to
get these accommodations if these bills pass," attorney Maia Justine
Storm of Prison Legal Services of Michigan told the House Constitutional
Law and Ethics Committee.

Democrats and prisoner rights advocates said the protections guaranteed
under the Persons with Disabilities Civil Rights Act and the
Elliott-Larsen Civil Rights Act are needed so prisoners can get
accommodations for their disabilities.

But bill sponsor and committee chair Rep. Mike Bishop, R-Rochester, said
the civil rights acts were not meant to apply to prisons when passed in
1976. He said prisoners could still file a complaint under federal law
that their civil rights were being violated. "To suggest this will cut
off every accommodation in the future is misleading," he said.

The bills passed on a 5-4 party line vote and would amend the civil
rights acts retroactively. That could eliminate any lawsuits pending
against the state that cite those acts.

Lawyer Barbara Levine, who is part of a class-action lawsuit brought by
women prisoners claiming their civil rights were violated when they were
subjected to sexual harassment, said the state wants to avoid solving
the problems in the corrections system. "It's a way to avoid it by
slamming the courthouse door," she said.

The bills now go to the full House for consideration. Republican leaders
said they hope to pass them into law before the end of the year to
discourage further lawsuits.

Democrats on the committee objected to the speedy approval of the bills.
Committee hearing on December 1 was announced the afternoon before. Rep.
Liz Brater, D-Ann Arbor, said many concerned about the bill could not
make it to the meeting on such short notice. "This legislation is being
rammed through with 18 hours notice," she said. "Why are we abdicating
our state responsibility and taking away the state court's rights to
deal with this issue?"

The measures exempting prisoners from the state civil rights acts are
House Bills 4475 and 4476. (The Detroit News Dec-31999)


                               *********


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

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