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Milberg Weiss Case Highlights

EXCERPT: As the government's demands for waiver of privilege in white-collar prosecutions have sparked the ire of attorneys worried about the sanctity of client communications, the waiver issue in the Milberg Weiss Bershad & Schulman case is presenting an especially prickly problem. The recent announcement that a grand jury had indicted the securities class action giant and two of its partners was a triumph for prosecutors in the ongoing investigation. The government alleges that the firm paid clients more than $11 million in kickbacks to serve as plaintiffs in as many as 150 class action and derivative lawsuits. But Milberg Weiss' case, while in some ways typical of recent corporate corruption prosecutions, also involves a key distinction -- because it is a law firm -- which some experts say makes the potential infringement on attorney-client communications all the more grave. 'The privilege issues are much more complicated, much more expansive,' says Jonathan Polkes, a former federal prosecutor who practices white-collar defense at New York's Weil, Gotshal & Manges. 'You're talking about a defendant that lives and dies by privilege.' The issue of waiver in what have become run-of-the-mill prosecutions against corporations has raised the hackles of both defense and plaintiffs attorneys. In April, American Bar Association President Michael Greco issued a statement saying that the attorney-client privilege was 'under attack' by prosecutors coercing corporations to waive their protections to qualify for leniency by the government. In addition, a bipartisan group of lawmakers is considering asking the U.S. Department of Justice to change its policy of demanding waivers as evidence of defendants' cooperation. . But the action against Milberg Weiss in some ways is 'worse' than the Arthur Andersen case, says Greenberg Traurig attorney Leslie Corwin, whose practice focuses on ethical issues and business law. In Milberg Weiss' case, a waiver could give prosecutors access to the law firm's strategy in pursuing its class action litigation and other details about clients' representation, a situation that would violate 'the most sacred right we have in the legal profession,' he says. 'It involves the mental impressions, conclusions and legal theories of an attorney,' Corwin says. He added that the federal rules preclude prosecutors from going after such information.

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WashingtonPost.com, June 11, 2006
NYSE In Europe? Investors Won't Notice Much Change At First
By: Brooke A. Masters and Paul Blustein
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EXCERPT: For small investors, the New York Stock Exchange's $10 billion plan to buy Paris-based Euronext NV, owner of four European stock exchanges, holds a lot of far-off promise but relatively little in the short term. Later, investors may benefit from new investment opportunities and lower transaction costs. But for now, the "merger of equals" will do little more than create a holding company that operates equities markets in New York, Lisbon, Amsterdam, Paris and Brussels, a derivatives market in London and the electronic Archipelago cash and options market. U.S. regulators will continue to oversee the U.S. markets, and European regulators will oversee the European markets. Stocks that are listed in both markets will have extended trading hours because of the different time zones, but most U.S. small investors won't have much direct access to stocks that are listed on the Euronext markets unless they are also listed in the United States. (Though there is not an absolute ban on Americans buying foreign stocks directly, most American brokers do not sell such shares to small investors because of legal requirements that investments be suitable for their customers.) For the medium term, small investors will benefit from the deal in two ways. They will probably get new investment choices, such as exchange traded funds that include Euronext stocks as well as derivatives and options contracts. And, their transaction costs may fall as the exchanges save money by merging operations, and the larger transatlantic pool of capital leads to more efficient matching of buyers and sellers. New York Stock Exchange chief executive John A. Thain, in an interview, predicted that the two companies will be able to cut $250 million from their $650 million annual technology budgets, making it possible to cut user fees. Small investors probably will not save much, but institutional investors such as mutual funds and hedge funds are more likely to, and they could pass those savings on to their small-investor customers. The really interesting questions raised by the NYSE-Euronext merger -- and other proposed cross-border mergers such as the Nasdaq Stock Market Inc.'s so-far unsuccessful bid to acquire the London Stock Exchange -- will come in context of investor protection. Many newly public foreign companies do not list their stocks in the United States, in part because of the strong financial controls required by the 2002 Sarbanes-Oxley law. Last year, 23 of the 24 biggest initial public offerings worldwide were not registered in the United States, and U.S. listings by foreign-based companies declined from 100 in 2000 to 35 last year, according to NSYE Chairman Marshall N. Carter. The NYSE-Euronext deal was structured specifically to keep Euronext companies exempt from Sarbanes-Oxley, but the issue is clearly going to come up if -- as most analysts expect -- the two companies try to completely integrate their markets. The question will be whether the Securities and Exchange Commission should relax the rules on selling foreign-registered equities to Americans, or exempt foreign-registered companies from the accounting and other controls put in place after the scandals at Enron Corp. and WorldCom Inc. "No matter what the SEC does, there will be criticism," said Benn Steil, director for international economics at the Council on Foreign Relations.

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Forbes.com, June 12, 2006
Reforming Disclosure
By: Liz Moyer
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EXCERPT: The U.S. Securities and Exchange Commission may add disclosure of backdated stock options to a list of executive compensation disclosure reforms it is finalizing. Christopher Cox, who is nearing his one-year anniversary as chairman of the agency, says the public needs better disclosure of executive compensation, including how board committees decide how much to pay senior executives in a given year. The SEC is considering "further adjustments to our executive compensation proposal to deal with the issue of backdating options," Cox said during a dinner speech in New York Thursday evening. Options backdating has tripped up at least 30 companies over the last year. The Justice Department and the SEC have been probing whether companies manipulated the dates on which options were granted to senior executives to boost their compensation. The allegations have focused on whether backdating allowed executives to date options when their company stock prices were low and then profit from a run-up and not disclose the matter to investors. The issue has incensed corporate governance watchdogs. "Specific legislation is needed to control the opportunistic timing of stock-options grants and/or the release of financial news," says the Corporate Library, a governance research firm in Portland, Me., that released a study on options timing on June 6. The study, based on a small sample of large companies, found that some companies had a pattern of announcing positive earnings days after options were granted to senior executives or announcing bad news just days before a grant. Either way, the effect would be that the options would immediately be in the money. "Some of the evidence appears to raise red flags," said Alex Higgins, the author of the study. Lawmakers have also noticed. On Thursday, Sen. Richard Shelby, R-Ala., the chairman of the banking committee, told reporters in Washington that backdating was tantamount to fraud and "helps destroy the integrity of the marketplace." Dozens of companies have been ensnared in the controversy, including McAfee, Affiliated Computer Services, UnitedHealth Group, Comverse Technology, Caremark Rx and Vitesse Semiconductor. Corporate governance experts say they expect dozens more companies to get caught up in the issue as regulators widen their probes. Cox has been on a crusade to make companies disclose far more about executive compensation, including details that are difficult for ordinary investors to sift out of current financial disclosures. Retirement pay is often obscure, he says. It isn't always clear what perks and other payments executives are receiving. And companies should have to disclose the pay of the three highest-paid employees who would not be listed in a proxy as among senior management.

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Securities Regulation & Law Report, June 12, 2006
SEC Antifraud Exemption For Foreign Private Issuers Upheld
By: Staff Writer
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EXCERPT: The Securities and Exchange Commission did not exceed its authority in promulgating Rule 3a12-3, which exempts foreign private issuers from the proxy antifraud strictures contained in 1934 Securities Exchange Act Section 14(a), the U.S. Court of Appeals for the Second Circuit affirmed June 1 (Schiller v. Tower Semiconductor Ltd., 2d Cir., Docket No. 04-5295-cv, 6/1/06). The plaintiff's challenge to the 1934 Act rule, although "perhaps 'novel,' " is ultimately unpersuasive, Judge Richard Wesley found for the court. Wesley said that Rule 3a12-3 "weathers this storm not because of its impressive longevity." Rather, Rule 3a12-3 survives the plaintiff's challenge "because it was promulgated pursuant to the Commission's statutory mandate" and thus is a "valid Commission rule." Semiconductor Fabrication Facility Gregory Schiller individually appealed the dismissal of a shareholder class action filed against Israeli concern Tower Semiconductor Ltd., its directors, and certain Tower investors. In 2000, Tower began to secure financing for the construction of a semiconductor fabrication facility--Fab 2--in Israel. To this end, Tower entered into agreements with two sets of companies--collectively the Fab 2 investors--which agreed to provide Tower with approximately $305 million in financing in exchange for stock and credits toward the purchase of semiconductors. The agreements divided the promised financing into installments and conditioned the payment of each installment upon attainment of a construction milestone. . Based on the 1965 notice, the court said, "we are easily able to discern the Commission's decision path." In determining whether an exemption from Section 14(a) was appropriate, the court noted, the commission took into account the available protections for investors in foreign securities--the quality of foreign corporate law, the nature of foreign stock exchange rules, and the amount of information voluntarily disclosed by foreign issuers. Then, the court found, the commission determined that these protections were adequate in light of the important goal of maintaining existing markets in foreign securities. "Accordingly, the Commission must have concluded that Rule 3a12-3 ... was not inconsistent with the public interest or the protection of investors," according to the court.

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Securities Regulation & Law Report, June 12, 2006
Proxy Group Recommends Elimination Of 'Broker Voting' On NYSE
By: Kip Betz
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EXCERPT: The New York Stock Exchange's Proxy Working Group recommended rule changes June 5 that would make the election of directors at listed companies a "non-routine" matter and would remove a provision allowing brokers to vote uninstructed shares in such elections. The 14-member PWG distributed its final report and recommendations on these and other proxy related issues to listed companies after voting the week before to seek their input. "[T]he working group believes the election of directors can no longer be considered a 'routine' matter and for this reason brokers should not be allowed to vote uninstructed shares with respect to such elections," the report said. The group noted that it "is fully aware that its consideration of these issues takes place during a time of fundamental changes in technology and evolving understandings of 'best practices' of corporate governance, both of which may have broad impact on the proxy process." Reexaminiation According to the report, under so-called broker voting, which has existed since the 1930s, brokers can vote on "routine" issues if the beneficial stock owner has not provided voting instructions at least 10 days before a scheduled meeting. Routine issues include the uncontested election of directors, and ratification of auditors. "With all the changes in corporate governance in the last two years, the NYSE thought it was time to reexamine some of these issues," an observer familiar with the board's report told BNA. The NYSE created the working group in April 2005. The issues have gathered urgency of late due to a number of high profile instances of broker votes swinging the outcome of the election of company officers, the observer noted. As much as 80 percent of all public companies shares are held not by the beneficial share owners but in "street name"--meaning that the "record owner" is a broker, bank, or other depository, the report noted. These shares are subject to broker voting.

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Securities Regulation & Law Report, June 12, 2006
Minutes Of Audit Committee Meeting Protected By Attorney/Client Privilege
By: Staff Writer
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EXCERPT: The U.S. District Court for the District of Nebraska, presiding over a class securities fraud suit alleging market manipulation, declined May 17 to compel production of the unredacted minutes of a meeting of the defendant board's audit committee which the company's outside counsel was present (Desert Orchid Partners LLC v. Transaction System Architects Inc., D. Neb., 8:02cv561, 5/17/06). In a ruling by Magistrate Judge Thomas D. Thalken, the court concluded that the defendants met their burden of showing that the redacted portion of the minutes included material that was subject to the attorney-client privilege, and was not--as the plaintiff contended--limited to "a recounting of business transactions." Unredacted Minutes The court recounted the pertinent facts as follows. Desert Orchid Partners LLC and others brought suit against Transaction System Architects Inc. and various officers and directors, contending they made comments about TSA's financial condition during the class period that artificially inflated the price of the company's stock. In their motion to compel discovery, the plaintiffs asked the court to order the defendants to produce unredacted minutes of an Aug. 6, 2002, meeting of the audit committee of the TSA board. According to the court, the minutes "involve discussions of a 'review' of certain 'transactions' with Digital Courtier Technologies Inc." In their complaint, the plaintiffs alleged that a series of agreements between TSA and Digital in 1999 and 2000 "are related to TSA's restatements of previously reported financial results." During the Aug. 6 meeting, the court continued, the audit committee decided to meet again on Aug. 9 " 'to continue its deliberations' about the transactions. Prior to disclosing the minutes, the defendants redacted the central description of what the audit committee discussed." They claimed that the redacted material was protected by the lawyer/client privilege. According to the court, there is no dispute that TSA's lawyer was present at the Aug. 6 meeting. However, the plaintiffs maintained that the meeting "merely concerned business discussions rather than confidential legal communications." . It concluded that the defendants sustained their burden of showing that the lawyer/client privilege protects the redacted portion of the minutes. In particular, it "appears from the evidence before the court that the redacted portion of the minutes contain[s] material which is subject to the attorney-client privilege as the recording of communications between TSA and its attorney who was acting in the capacity of an attorney by giving legal advice." The court added that because the plaintiffs' motion was "substantially justified," no sanctions are warranted.

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Forbes.com, June 12, 2006
Nasdaq's Hard Sell
By: Erika Brown
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EXCERPT: David P. Warren has his work cut out for him. Warren is the executive vice president and chief financial officer of the Nasdaq Stock Market, home to more than 3,200 stock listings, many for technology companies. In his keynote speech at the International Business Forum's annual Venture Capital Investing Conference in San Francisco, Warren proudly boasted that Nasdaq, with $900 million in revenue, added 126 companies to its roster last year. That's the good news. The bad news is that Nasdaq is besieged by increasing competition from the New York Stock Exchange, as well as from international markets in London, Tokyo and elsewhere. Exacerbating the problems are a host of new U.S. Securities and Exchange Commission regulations aimed to keep publicly traded companies from behaving badly. Smaller companies in particular have felt the sting, and many are balking at listing their initial offerings on Nasdaq (see: "London Calling"). In a private interview with Forbes, Warren discussed his thoughts on the side effects of overregulation and the fight to be the world's most powerful stock exchange. Forbes: What are your thoughts on the globalization of the financial markets? Is it good or bad? Warren: There is a lot of talk about companies fleeing our shores because of excessive regulation. Clearly, there are opportunity costs related to Sarbanes-Oxley because companies have to focus a lot of resources on compliance. But I don't think there's enough emphasis on the premium people are willing to pay to be listed in the U.S. Do you think people want to pay a premium just to list here? We have proved that companies will get the best valuations if they list in the U.S. People aren't focused on that enough. They tend to focus so much on the IPO, but you need to think about what happens after a company starts trading. You need to make sure your investors have access to liquidity. If a market does not have enough liquidity to support trading, it will not survive. Smart investors always make sure they have an exit strategy.

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New York Law Journal, June 13, 2006
Viewing The Corporate Office As A Crime Scene
By: Ronald L. Marmer and Andrew Weissmann
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EXCERPT: Since the demise of Enron in the winter of 2001, prosecutors around the country have devoted much attention to white-collar investigations and prosecutions. And with the advent of these sophisticated white-collar investigations, as well as the rapid demise of Arthur Andersen, much attention also has been paid by companies and their counsel to document retention policies -- what should be saved, how it should be saved and when it should be saved. Less attention has been devoted to the production of documents in such cases. A gap often exists between the expectations of the government and corporations when it comes to document production. Failure to understand the world views of prosecutors and regulators can lead to corporations making decisions they later may regret. When a corporation and its employees become the subjects or targets of a governmental investigation, whether by the Department of Justice, the Securities and Exchange Commission, or other regulators, trained investigators will look at the office as a potential crime scene. This is particularly true with respect to criminal investigations, where the focus is on evidence of individual liability -- the actions and intent of corporate employees. Indeed, even where the corporation itself is in the government's crosshairs, it is only through the actions of its employees that the company can be held criminally liable. Thus, the location of documents in a particular office or on a specific computer will be an important source of evidence for the criminal prosecutor in order to determine the knowledge and intent of a corporate employee. The problem, of course, is that none of us thinks of our office as a potential crime scene. Prior to Enron, the typical investigation would be civil or regulatory in nature, and the willfulness of individual employees was far less frequently the center of attention. Even post-Enron, depending on the timing of an investigation, the corporation may have little reason to be thinking about preservation of crime scene evidence in an employee's office. Typically, corporate counsel will be tasked with undertaking an internal investigation into an allegation of employee misconduct as a result of one of two events: either the company has itself uncovered a potential issue, or the company learns of the issue from a governmental source, often in the form of a subpoena or request for documents. In either case, the manner of documenting what is found in a particular office can be crucial, but can be overlooked by an internal investigation.

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The Recorder, June 14, 2006
In 'Reverse Auction' Fight, Plaintiffs Firm Goes After Skadden Arps And Robbins Umeda
By: Staff Writer
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EXCERPT: It's probably best not to think too hard about this one: A group of plaintiffs lawyers is being sued in L.A. federal court for breaching their fiduciary duty -- to a company whose board they were suing. "Suing the people suing the company for breach of fiduciary duty; I haven't seen that before," said Steven Williams, a partner at the Burlingame, Calif., firm Cotchett, Pitre, Simon & McCarthy who represents plaintiffs in securities and derivative suits. The convoluted case -- possibly a first, several lawyers said -- grows out of long-running securities litigation against Tenet Healthcare, and the competing state and federal derivative suits against the Tenet board of directors that were filed on its heels. Lawyers from the Arkansas plaintiff firm Cauley, Bowman, Carney & Williams filed a derivative suit in federal court around the same time a separate group of plaintiffs filed parallel state court claims. That, Cauley lawyers argue, let Tenet's board, and its lawyers with Skadden, Arps, Slate, Meagher & Flom, engage in what plaintiffs lawyers call a reverse auction: a situation in which a defendant facing competing suits chooses to settle with the plaintiff asking for the smallest recovery, killing the costlier parallel claims. In a complaint filed late last month in L.A. federal court, Cauley partner Joseph (Hank) Bates III says that after spending two years litigating derivative claims in federal court -- and even having detailed settlement talks -- Tenet decided the federal plaintiff's demands were too high, and turned to the state plaintiff, who quickly settled the case. That deal jettisoned the federal suit, and resulted in $5 million in attorney fees for the plaintiffs firms Faruqi & Faruqi and Robbins Umeda & Fink. This left the Cauley lawyers irate. "State derivative lawyer defendants had no substantial investment of involvement in the three-year prosecution of claims on behalf of Tenet," Bates wrote. "Thus, it comes as no surprise that they were willing to settle in one day," he continues. "In essence, state derivative counsel received a fee of $5 million for one day of work."  Derivative actions -- in which a stockholder sues on behalf of a company to recoup cash from an allegedly corrupt board of directors -- often follow securities fraud suits. When successful, they result in monetary or injunctive relief for the company at hand, and the plaintiffs lawyers collect fees. ."There's always been an issue as to whether you can be sued for settling a case inadequately," said Jordan Eth, a partner at Morrison & Foerster who represents defendants in securities and derivative suits. Joseph Grundfest, a professor at Stanford Law School who specializes in securities law, said that seems to be an open question. "To the best of my knowledge, this is a first," he said.

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Securities Mosaic, June 14, 2006
Options Scandal Hits Companies Hard
By: Staff Writer - Newsday
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EXCERPT: Just when it seemed that an era of corporate wrongdoing might have reached closure with the recent convictions of top Enron executives, a new scandal is brewing on the American business scene. More than 45 companies have disclosed that they are the subject of regulatory, criminal or internal probes into whether they tried to improperly inflate executives' pay through a practice known as backdating stock options, and experts say the number is likely to grow. Options give their owners the right to buy shares in the future for a ``strike price,'' which typically is the same as the stock's market price when the option was granted. Backdating them, usually to a time when a company's stock was unusually low, can make them more valuable because the profit on options depends on the ``spread'' or difference, between the ``strike price'' and a stock's market price when the option is exercised. On a large options grant, backdating can result in millions of dollars of extra pay. ``Backdating strikes everyone as the ultimate unfair ploy, which is essentially taking an award and adjusting it so you can make more money,'' said Ann Yerger, executive director of the Washington, D.C.-based Council of Institutional Investors, an organization of large pension funds. ``It's an egregious abuse of executive privilege, it's an abuse of shareholders, and at a time when folks are upset about executive pay levels, to know that some of this has been rigged is particularly upsetting.'' James Cox, a law professor at Duke University, said that based on the number of companies caught up in it so far, the options backdating scandal is the biggest since state and federal regulators accused mutual funds of allowing improper trading earlier in this decade. Although the dollar amounts gained from options backdating ``are probably not as significant'' as the gains from improper mutual fund trading, options backdating ``actually erodes more public confidence'' in companies than the earlier scandal did, Cox said. That's because while late trading of mutual funds broke rules that some experts considered unclear, backdating options, which are supposed to tie an executive's pay to stock performance, ``isn't a question about `Whoops, I may have (accidentally) crossed a line here,''' Cox said. ``It's a question of knowingly betting on a race that's already been run."

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The New York Times, June 15, 2006
NYSE's Coup Stirs Political Opposition In Europe
By: Jenny Anderson and Heather Timmons; Carter Daugherty contributed
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EXCERPT: A trans-Atlantic deal that looked like a strategic coup for the newly public NYSE Group -- its proposed acquisition of the pan-European stock exchange Euronext -- appears to be turning into a quagmire. The NYSE Group's traction has slipped as politicians in Europe have lined up in favor of a domestic alternative to the deal. The opposition reflects fears among European companies that they might be subject to American securities regulations if the acquisition is completed. Euronext, which comprises the exchanges in Paris, Brussels, Lisbon and Amsterdam, and NYSE Group have entered into a definitive agreement to merge, pending approval by shareholders.  Companies listed on the European exchanges have raised concerns about whose regulations would govern them. They are particularly worried that they could be subject to the Sarbanes-Oxley Act, which imposes strict reporting requirements on executives. Annette L. Nazareth, one of two Democrats on the five-member Securities and Exchange Commission, said yesterday that the deal would not alter the regulatory framework.  ''The mergers as proposed will not subject foreign markets or their listed companies to U.S. regulation,'' she said, adding that United States regulations applied only to markets that transacted business in the United States. ''The notion that this is a backdoor means of exporting Sarbanes-Oxley requirements internationally is completely misguided. ''Market forces should drive these merger transactions rather than political or regulatory imperatives.'' . The political storm adds a layer of complexity to the commercial question of which deal is better. ''The problem with the politicians getting involved is that it turns this from a commercial deal to a political deal, and that is not what this is all about,'' said Lynton Jones, head of Bourse Consult, a London consulting firm, and the former head of Nasdaq International. Ultimately the deal will be decided by Euronext shareholders who will have the right to vote at an as-yet-unscheduled meeting.


SETTLEMENTS & DISMISSALS (10)

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The Daily Deal, June 9, 2006
Judge Approves Refco Settlement
By: Terry Brennan
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EXCERPT: The $263 million settlement will cancel a $312 million preferential transfer lawsuit that creditors had filed against a portfolio fund of PlusFunds. A bankruptcy judge approved a $263 million settlement Thursday, June 8, between Refco Inc.'s creditors and a portfolio fund of PlusFunds Group Inc. Judge Robert Drain in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the deal that Refco's creditors forged with Sphinx Managed Futures Fund SPC over a dozen objections by fund investors, said Luc Despins, creditors' committee counsel at Milbank, Tweed, Hadley & McCloy LLP in New York. The $263 million settlement will cancel a $312 million preferential transfer lawsuit that Refco's creditors had filed against Sphinx while Sphinx, in turn, will drop its $312 million claim against bankrupt Refco affiliate, Refco Capital Markets Ltd. The agreement will take effect 10 calendar days after Drain submits his order, which is expected Friday, June 9, unless an appeal is lodged with the U.S. District Court for the Southern District of New York in Manhattan, Despins said.

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Boston Business Journal, June 9, 2006
Raytheon Files To Issue 12M Stock Shares To Fund Class Action Settlement
By: Staff Writer
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EXCERPT: Raytheon Co. filed papers with the U.S. Securities and Exchange Commission to issue 12 million shares of stock to fund a $200 million settlement of a securities class action case. The Waltham, Mass.-headquartered Raytheon (NYSE: RTN) plans to issue the warrants, which have an exercise price of $37.50 per share, by June 23. The litigation covered shareholders who bought Raytheon Class A and B common stock between Oct. 7, 1998 and Oct. 12, 1999. Raytheon's share price, which closed at $43.90 yesterday, ranged from $36.34 to $47.27 during the past year. In an SEC filing, Raytheon also said it plans to use an expected $451 million in proceeds from the stock sale for general corporate purposes.

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Securities Regulation & Law Report, June 12, 2006
Class Suit Charging Veritas Software With Accounting Improprieties Proceeds
By: Staff Writer
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EXCERPT: The U.S. District Court for the District of Delaware May 23 ruled that class plaintiffs may proceed with a securities fraud suit based on alleged accounting misconduct by Veritas Software Corp. and its officials that rendered representations as to the company's revenue, income and earnings false and misleading (In re Veritas Software Corp. Securities Litigation, D. Del., Civ. No. 04-831-SLR, 5/23/06). Denying the defendants' motion to dismiss, Chief Judge Sue L. Robinson found that the allegations contained in the complaint "are sufficient to pass muster" under the Private Securities Litigation Reform Act. . Thus, the court concluded, the defendants' motion to dismiss the complaint must be denied.

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Securities Regulation & Law Report, June 12, 2006
Court Appoints New Lead Plaintiff, Citing Flaw In Earlier Loss Calculation
By: Staff Writer
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EXCERPT: The U.S. District Court for the Northern District of Ohio May 24 removed the City of Philadelphia as lead plaintiff in a class securities fraud suit against Dana Corp. and certain of its officers and instead appointed the Pension Trust Fund Group (Frank v. Dana Corp., N.D. Ohio, No. 3:05cv7393, 5/24/06). Chief Judge James G. Carr said that in his earlier ruling, he erroneously determined that the city had the largest financial losses. The Private Securities Litigation Reform Act "directs that the party with the largest financial interest shall represent the class," the court noted. LIFO Calculation The court explained that several plaintiffs filed this securities fraud suit against Dana Corp. and some of its officers alleging that the company misstated its earnings, artificially inflating the value of its stock. Pension Trust Fund Group (PTFG) and the City of Philadelphia purchased Dana securities between March 23, 2005, and Sept. 14, 2005. Some time before March 23, 2005, both parties alleged that Dana, whose business had suffered due to price increases in raw materials, began to misstate its net income to meet earnings expectations. Both claimed they purchased Dana securities in reliance on these inaccurate financial records and suffered damage accordingly. On March 27, the court explained, it granted the city's motion to be appointed lead plaintiff in the securities class action pursuant to PSLRA. The court said that in applying the statute it adopted a "last in, first out," or LIFO accounting methodology to determine the litigants' financial interest and relied on the city's LIFO calculations, the only ones submitted using that methodology. .The court said that the city's chart listed line items for the Plumber & Pipefitters National Pension Fund; the SEIU Pension Plans Master Trust; and West Virginia Laborers Pension Trust Fund. "These entities are all part of the PTFG, not individual applicants for lead plaintiff status. Consequently," the court said, it "should have considered their losses in the aggregate, and therefore erred in interpreting the City's chart the way" it did. .The court rejoined that the city's claims concerning PTFG's losses "are not well-founded. In its reply memorandum, the PTFG notes that it suffered a loss even on its holdings of Dana securities that pre-dated the alleged fraud. ... Accordingly, though the PTFG may have been a net seller, it should have no trouble proving damages and, therefore, is qualified to serve as lead plaintiff." Thus, the court concluded, PTFG is appointed lead plaintiff and its selection of Lerach, Coughlin, Stoia, Geller, Rudman & Robbins to serve as class counsel is approved.

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AFX International Focus, June 13, 2006
Judge Dismisses Suit Vs. Merrill Lynch
By: Staff Writer
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EXCERPT: A federal judge has dismissed a lawsuit against Merrill Lynch & Co. over incentives paid to allegedly steer investors into certain families of mutual funds and over excessive fees allegedly charged once they invested in those mutual funds. In an opinion made public Tuesday, U.S. District Judge Richard Owen found that the plaintiffs failed to identify 'a single statement, by any broker to an investor or otherwise, that is misleading' and that the investors failed to establish that they suffered a loss as result of the alleged misrepresentations. 'Defendants disclosed the fees and commissions charged to shareholders,' the judge said in an 11-page opinion. 'The precise allocation of those fees is not material information under securities laws.' The lawsuit had alleged that Merrill Lynch and its related units violated securities laws and their fiduciary duty to clients by failing to properly disclose an incentive structure allegedly designed to encourage brokers and branch managers to improperly push investors to certain mutual funds, known as 'shelf space' funds. The lawsuit also alleged that investors were charged 'undisclosed' and 'excessive' fees once they were placed in those funds. The complaint had sought class-action status for investors in Merrill Lynch mutual funds from May 1999 to May 2004.

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HUGIN AS, June 13, 2006
Bernstein Litowitz Berger & Grossmann LLP Announces $311 Million Settlement In The Williams Securities Class Action
By: Staff Writer
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EXCERPT: Bernstein Litowitz Berger & Grossmann LLP ("BLB&G") announced today an agreement to settle the Williams Securities Litigation against all defendants for $311 million in cash. BLB&G is Court-appointed Lead Counsel in the action which is pending in the United States District Court for the Northern District of Oklahoma. BLB&G represents Court-appointed Lead Plaintiffs, the Arkansas Teacher Retirement System and the Ontario Teachers' Pension Plan. This settlement comes after intensive litigation and shortly before trial. As part of this action, BLB&G engaged in a massive discovery effort which included taking more than 150 depositions and reviewing in excess of 18 million pages of documents. At the time of the settlement, Lead Plaintiffs and BLB&G were preparing for trial which was scheduled for August 2006. Commenting on the settlement, partner Chad Johnson stated: "This recovery of $311 million is an extraordinary result. It is among the largest recoveries ever in a securities class action in which the corporate defendant did not restate its financial results. This settlement is also proof that the combination of a vigorous litigation strategy and committed institutional Lead Plaintiffs results in outstanding recoveries."

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AFX International Focus, June 13, 2006
Ex-Tyco Shareholders May Proceed With Suit
By: Staff Writer
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EXCERPT: Former shareholders of Tyco International Ltd., whose former chief executive and chief financial officer were convicted of fraud, have been certified as a class to sue the company and its accounting firm, PricewaterhouseCoopers. Judge Paul Barbadoro made the ruling Monday in securities fraud cases consolidated in U.S. District Court in New Hampshire. However, he removed one lead plaintiff, Voyageur Asset Management, saying it could not prove it was harmed. The lawsuit alleges that former executives and board members, including former Chief Executive Dennis Kozlowski and former Chief Financial Officer Mark Swartz, operated the company as a criminal enterprise to enrich themselves. Making the case a class action means anyone who bought Tyco stock between Dec. 13, 1999, and June 7, 2002, is eligible to share in any judgment or settlement. According to some estimates, investors lost $60 billion. Shareholder lawyer Jay Eisenhofer said Tuesday there had been no significant settlement talks, but it would be in the company's best interests to settle. 'The scope of the potential liability puts the company at risk,' Eisenhofer said. 'Nobody has any desire to do that, but that's the position they find themselves in now.' Tyco spokeswoman Sheri Woodruff said the company was disappointed by the ruling, but would continue defending itself. The merits of the shareholders' claims have not been considered yet. The ruling comes a year after Kozlowski and Swartz were convicted in a New York state court on multiple counts of grand larceny, conspiracy, securities fraud and falsifying business records. . Barbadoro likewise dismissed Tyco's argument that former shareholders constituted several classes based on whether they sold their stock before or after several disclosures by the company that caused its stock price to plummet. Tyco also argued that making the case a class action would be too unwieldy. Barbadoro acknowledged the case's complexity, noting that 70 million documents have already been produced in answer to requests for evidence and that lawyers plan to take sworn statements from more than 200 people.

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New York Law Journal, June 14, 2006
Western District To Hear Consolidated Securities Fraud Class Actions Against Bausch & Lomb Inc.; Laborers Local 100 and 397 Pension Fund v. Bausch & Lomb Inc., 06 Civ. 1942
By: Staff Writer (Judge Baer)
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EXCERPT: Consolidated class actions against Rochester, New York-based Bausch & Lomb Inc. (BLI) asserted securities fraud claims for artificial stock price inflation through statements failing to disclose accounting and other irregularities at BLI's Brazilian and Korean subsidiaries. They also claimed that BLI downplayed diagnoses of potentially blinding eye infections arising from use of its contact lens solution. The court held that convenience and the interests of justice warranted the actions' transfer to the Western District of New York. It noted that the actions dealt with substantially the same events, that key facts involved statements from BLI's Rochester headquarters, and that only two plaintiffs--in the derivative actions--resided in the Southern District, wherein BLI had no offices or employees. The court doubted whether those plaintiffs could allege that a substantial portion of events, as to the misstatements, took place in the Southern District.

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PR Newswire, June 15, 2006
Plaintiffs Dismiss Class Action Lawsuit Against NYFIX
By: Staff Writer
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EXCERPT: NYFIX, Inc. (Pink Sheets: NYFX) today announced that, on June 13, 2006, the U.S. District Court for the District of Connecticut dismissed the class action lawsuit, Johnson v. NYFIX, Inc., as to NYFIX and all other defendants based on a stipulated Notice of Dismissal, filed by the parties on June 9, 2006, in which plaintiffs agreed to the dismissal without costs or attorneys' fees or any consideration of any kind being paid to any party.  Begun in May 2004, the lawsuit alleged violations of the federal securities laws based on NYFIX's issuance of a series of allegedly false and misleading financial statements and press releases concerning, among other things, NYFIX's investment in NYFIX Millennium.

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Milwaukee Journal Sentinel, June 15, 2006
Lawsuit Against Great Wolf Resorts Dismissed
By: Staff Writer
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EXCERPT: Madison-based Great Wolf Resorts Inc. said Wednesday that a class-action securities fraud lawsuit, filed in U.S. District Court last year, has been dismissed. The suit represented people who bought Great Wolf stock from Dec. 14, 2004, which was the day before the company began trading, to July 28, 2005, when it reported its second-quarter earnings. Great Wolf stock, which went public at $17, closed at $13.65 -- a decline of $6.12 -- on July 28, 2005, when the company reported a loss of $2.5 million, or 8 cents a share. That loss, which Chief Executive Officer John Emery called "embarrassing," was more than twice the expected loss of $1 million, or 3 cents a share. The lawsuit claimed that Great Wolf provided misleading earnings guidance based on its unreliable calculation of earnings before interest, taxes, depreciation and amortization. The company said the suit was without merit. Emery said a decline in business at Great Wolf resorts in Michigan and Ohio, and lagging business at the Blue Harbor Resort in Sheboygan, caused that second-quarter loss.