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CIVIL RIGHTS $6.25M settlement over illegal strip-searches Miami—Thousands of women stand to gain shares of $6.25 million from Miami-Dade County after a federal judge said he’d approve a settlement of a lawsuit alleging that police illegally strip-searched female prisoners. About 10,000 women who were strip-searched after being picked up on prostitution or other minor charges are entitled to receive payments of $1,000 to $3,000 under the settlement. -ALM CLASS ACTION Two investor fraud suits settle for $41.5 million New York—Two mutual fund companies operated by Morgan Stanley and one of its subsidiaries have agreed to pay $41.5 million to settle two class actions alleging that the funds defrauded investors by overvaluing assets. Van Kampen Prime Rate Income Trust, a subsidiary of Morgan Stanley, agreed to the larger of the two settlements, for $31.5 million. That came in a class action filed by investors in 2001 in a Chicago federal suit, involving the Van Kampen Senior Loan Fund. The other settlement, for $10 million, was reached by Morgan Stanley in December 2004, in a suit filed in a New York federal court, involving the Morgan Stanley Senior Loan Fund. – alm CONSUMER PROTECTION Fertilizer maker to pay farmer for burned grapes Fresno, Calif. (AP)—A California state jury ordered a Fresno fertilizer company to pay a raisin grower $7.5 million for causing chemical burns on nearly 1,000 acres of grapes. The jury found Britz Fertilizers Inc. liable for spraying a chemical cocktail that damaged Ahmad Skouti’s crop in 2002 and caused permanent damage to some of his vines. The suit alleged that 25 of Skouti’s ranches suffered after he followed the advice of a Britz Fertilizer employee to mix chemicals that were supposed to mature his grapes rapidly. Leaves and canes were stunted. Berries shriveled, were burnt and dropped from the vines. PATENTS Medtronic pays $1.35B to settle spinal-tech dispute Minneapolis (AP)—Medtronic Inc. ended a long-running patent fight last week by agreeing to pay $1.35 billion to a Los Angeles doctor who invented much of its spinal-treatment technology. The settlement with Dr. Gary K. Michelson and his company, Karlin Technology Inc., calls for Medtronic to pay $800 million to buy spinal-fusion technology and $550 million to settle the legal claims. A jury awarded Michelson $582 million in punitive and compensatory damages last fall [ Medtronic Sofamor Danek v. Michelson (W.D. Tenn.), No. 6 in the NLJ's Top 100 verdicts for 2004], saying that Medtronic broke agreements that cover an implant used to treat damaged or diseased spinal discs. Michelson had claimed that Medtronic breached patent agreements he made with spinal implant maker Sofamor Danek a decade ago before it was acquired by Medtronic in 1999. Under the settlement, Medtronic gets more than 100 patents, 110 patent applications and about 500 foreign counterparts, as well as related contracts and rights. Medtronic said the deal also gives it ownership of Michelson’s spinal inventions for the next 15 years. REGULATORY ACTION KPMG to pay $22.5M to settle SEC audit charges Washington (AP)—KPMG LLP, the U.S. unit of accounting firm KPMG International, has agreed to pay $22.5 million to settle federal regulators’ charges that it allowed Xerox Corp. to manipulate its accounting. The Securities and Exchange Commission in January 2003 sued KPMG and certain of its partners, including the head of the firm’s department of professional practice, in connection with the audits of Stamford, Conn.-based Xerox from 1997 through 2000. The SEC alleged that KPMG and its partners allowed Xerox to manipulate its accounting practices to close a $3 billion “gap” between actual operating results and results reported to the investing public. SHAREHOLDER SUIT Dynegy to pay $468M to settle investors’ claims Houston (AP)—Dynegy Inc. has agreed to pay $468 million in cash and stock to settle a shareholder class action alleging that the company misled investors about a natural gas deal wrongly used to boost cash flow. The lawsuit led by the University of California, a major shareholder, also alleged that Houston-based Dynegy hid an $850 million loan from Citigroup Inc. to preserve its credit rating. Citigroup was dismissed as a defendant last year, but agreed to pay $5 million in exchange for the plaintiffs waiving their appeal rights. The lawsuit was filed in 2002 upon revelations of “Project Alpha,” a 2001 scheme to disguise a loan as $300 million in cash flow to combat Wall Street worries that earnings lagged behind high trading revenues. Kansas utility settles after spinoff plan fails Topeka, Kan. (AP)—Westar Energy Inc., the largest electric utility in Kansas, has agreed to settle a series of shareholder lawsuits for $32.5 million. Investors sued Westar in 2003, claiming they weren’t told key details about a plan to restructure the company in 2001. That plan would have merged Westar’s regulated businesses with a New Mexico utility and spun off its unregulated operations to a separate company called Westar Industries. The shareholders alleged that the new company would have left its debt with the regulated utility and that key executives pushing the deal stood to receive huge cash payments. Kansas regulators eventually rejected the deal, but not before stock prices plummeted.

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