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Business Week Challenging Court Order Barring Article : Media: Magazine was forced to pull story on P & G’s lawsuit against Bankers Trust.

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From Reuters

McGraw-Hill Cos., publisher of Business Week magazine, said Thursday that it is challenging a U.S. District Court judge’s order that halted publication of a story.

The article was an investigative piece about recent developments in a lawsuit filed here last year by consumer products giant Procter & Gamble Co. against Bankers Trust New York Corp. over derivatives losses.

“We are deeply, deeply troubled” by the court order, Business Week Editor-in-Chief Stephen Shepard said. “We felt we were and are acting under our First Amendment rights to print information without any prior restraint from anybody.”

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Late Wednesday the court said that documents in the case are sealed under a previous order, adding that it appears “the parties will suffer irreparable harm if the contents . . . are released at this time.”

Judge John Feikens faxed his order to Business Week on Wednesday just as the magazine was going to press, Shepard said. “We decided . . . to comply with the order and not be in contempt of court but to challenge the court order,” Shepard said in a phone interview.

Shepard said the article refers to documents the magazine obtained lawfully. The documents relate to a recent P & G amendment to its case and detail allegations against Bankers Trust.

A P & G spokesman confirmed that early this month P & G amended its suit to include a claim under the U.S. Racketeering Influenced and Corrupt Organizations (RICO) law.

RICO may be invoked in civil cases regarding corporate matters and it does not necessarily imply any organized crime involvement, a U.S. government spokesman said.

Bankers Trust said Thursday in a statement that P & G’s amendment “is another attempt to divert attention from the facts of the case. As we have maintained from the outset, P & G’s litigation against Bankers Trust is without merit.”

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Bankers Trust believes P & G fully understood its transactions and “chose a particular risk profile in pursuit of its financial objectives,” the bank said.

“We are confident that this RICO claim . . . will be defeated if the court grants permission for it to be heard,” Bankers Trust said.

A P & G spokesman said it believes the amendment is appropriate. “It’s clear you do not need criminal conduct or racketeering in the ordinary sense to bring such a claim,” P & G said. “The issue here is Bankers Trust’s selling practices.”

The P & G case is expected to come to trial by year-end. P & G is seeking $195 million in compensatory damages.

Bankers Trust’s leveraged derivatives transaction business came under federal scrutiny after P & G, Cincinnati-based Gibson Greetings Inc. and others disclosed derivatives losses. In December, 1994, Bankers Trust, while not admitting wrongdoing, agreed to pay a $10-million settlement relating to the sale of derivatives. In addition, Bankers Trust last year agreed that the Federal Reserve Bank would oversee its leveraged derivatives transaction business.

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