St. Louis Post-Dispatch from St. Louis, Missouri • Page 79

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r. J.i. faJlittjMA MONDAY, JANUARY 23, 1989 (3) I.M. Simon, Touche Ross In $11 Million Suit By Adam Goodman Of the Post-Dispatch Staff A defunct St. Louis brokerage firm and the St.

Louis office of a national accounting firm are entangled in an $11 million lawsuit arising out of the financial troubles of a bankrupt retirement home in South Bend, Ind. The I.M. Simon Co. brokerage firm, its former partners, the accounting firm of Touche Ross as well as other defendants, face a class-action lawsuit seeking to recover the principal and interest lost by more than 800 investors when the St Paul's Retirement Community in South Bend defaulted on $7.8 million worth of notes in 1985. The lawsuit alleges that Simon, which under wrote and sold the notes in 1983, and the St Louis office of Touche Ross, which performed a feasibility study on the project for Simon, misrepresented and omitted significant facts in the offering statements and sales literature sent tq investors.

The lawsuit also alleges that Simon brokers sold the notes to some investors without showing the buyers the official offering statements or explaining to them that the retirement home was issuing the notes to refinance its default on an earlier $8 million bond issue. "I think these investors were duped," said Boston lawyer Edward F. Haber, an attorney with the Boston law firm of Shapiro Grace Haber, who is representing the three note hold ers who filed the lawsuit. "What they were sold were worthless securities." Among the specific allegations of omissions and misrepresentations included in the lawsuit: The offering statements did not disclose that the firm managing the retirement home in 1983 was unwilling to state that the sales forecasts used in Touche Ross' feasibility study were reasonable. The offering statements did not disclose that the retirement home's regular accounting firm in South Bend declined to back Touche Ross' feasibility study.

The statements did not disclose that there, were no funds available with which to market See SIMON, Page 2 j00'mm -co- jpW New Propfan Engine May Change Aviation port plane. The engine system was made by the Pratt Whitney division of United Technologies Corp. and the Allison Gas Turbine Division of General Motors Corp. It is the second propfan engine to be tested on the MD-80 test plane. In September, Mc Douqlas Aircraft Co.

This (inducted fan-type propfan engine made by General Electric Co. was flown on a McDonnell Douglas MD-80. WITH: Kent Druyvesteyn, staff vice president of ethics for General Dynamics Corp. General Dynamics hired Druyvesteyn, who had been director of the MBA program and dean of students at University of Chicago, in October 1985 following a series of highly publicized federal investigations and sanctions that rocked the company and its management. ABOUT: Ethics in business.

Ethics Codes Help Raise Awareness Do businesses today really need to be concerned about writing a code of ethics? A One piece of advice that I would give anyone is that it is very important to establish some clear, simple guidelines for everyday business conduct. You cannot assume that in all situations your employees will recognize the pitfalls that may lay before them. And you cannot assume that all employees will interpret instructions that have been given them in a consistent manner. Q. Do you believe an ethics code can insure ethical be- See TALKING, Page 25 0 By Robert Sanford Of the Post-Dispatch Staff McDonnell Douglas Corp.

has entered a second phase of testing a new airliner engine called a propfan. The new form of propulsion might change the sights and sounds of commercial aviation or it might remain just an idea slightly ahead of its time. Propfan engines have shown in tests that they save fuel in comparison to conventional jets. Demonstrator engines have achieved fuel savings of 25 percent; much larger savings are predicted as engines are refined. Whether the preplans gain wide use will depend on how attractive they are to airlines or how important it is to save fuel.

If the price of fuel goes up, the propfan plane becomes more attractive. At this time, fuel prices are relatively low, so there is no great pressure to take the step to propfan propulsion. McDonnell Douglas begins flight tests this month on a new propfan engine mounted on an MD-80 trans- Donnell Douglas completed several months of test flights with an unduc-ted fan engine made by General Electric Co. The flights included a trip to England and back. General Electric has estimated that the cost of developing the new engine will be about $1 billion.

That's a fairly accurate rule-of-thumb cost for developing a new jet engine, a spokesman said. McDonnell Douglas expects to spend about $500 million in developing a propfan-powered airliner. The plane, called the MD-90 series, would be a derivative of the MD-80. The development cost would be about one-sixth as much as developing a new plane from scratch, said Kim Still, vice president and general manager of the MD-90 program. "Interest in the propfan-powered See PROPFAN, Page 18 Douglas Aircraft Co.

A Pratt Whitney-Allison propfan engine installed on the same MD-80 for testing beginning this month. mutiny," Selling Off? One of St. Louis' biggest home builders is reportedly in discussions to sell to a major national rt (Qh home builder. Keeping Posted 2 Enterprise 3 Minding Business 7 Career Strategist. 8 Tax Report ..9 Computer File 10 Bottom Line 1 Business Lunch 13 Taking Stock i V.

1 17 Time Bomb A proposed new accounting rule on retirees' health and pension benefits may decrease com- rt Jr panies' profits. Cat's Meow Ralston Purina Co. is getting ready to pounce on the nation's cat food markets with six new VI products. fiyi Making Money St. Louis banks improved profits slightly and made considerable progress on problem loans last quarter.

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