interactive.wsj.com
February 28, 2001
E*Trade Sues Posters
Of Bogus Messages
By CASSELL BRYAN-LOW
Staff Reporter of THE WALL STREET JOURNAL
Last October, someone logged onto E*Trade Group Inc.'s Yahoo! message
board and wrote: "I made a killin on my stock options!" adding that he was
"sorry" investors lost money in the stock.
That and similar messages were posted by
"christos_cotsakos" and
"christos_m_cotsakos."
But they weren't written by Christos
Cotsakos, E*Trade's chief executive. Instead, they were posted by an
imposter, and the bogus board postings are at the heart of a suit filed in a
California superior court by E*Trade against various unnamed defendants.
The online-trading firm, whose stock plunged 75% last year from its March
high, asserts that anonymous posters used pseudonyms to "mislead the public
into believing that" Mr. Cotsakos "posted the messages" -- all in a bid to
drive down E*Trade's stock.
There were "numerous other postings using obscene language regarding [the
company] and their investors and customers, all the while impersonating
E*Trade Group's CEO," according to the complaint, which was filed in
November but hasn't received publicity. In a similar vein, other messages
were posted using the alias "jerrygramaglia," the name of the company's
president and chief operating officer, according to the suit.
What investor would actually believe that Messrs. Cotsakos or Gramaglia
would post such messages? "Anybody that frequents the message boards
knows that you are reading information posted by anonymous speakers," and
"is not necessarily reliable information," says Lyrissa Barnett Lidsky, a
University of Florida law professor who studies chat-room suits. Postings
are "like water-cooler gossip that you know to take with a grain of salt," she
says. They "are filled with hyperbole, exaggeration and profanity. It is not
button-down analysis."
It is no news that companies are suing
anonymous message posters, of course. More
than 150 such suits have been filed, specialists
estimate. But it is unusual for postings to
impersonate executives of the company. That
said, the New York Stock Exchange did file a suit in the summer alleging
that posters had impersonated NYSE Chief Executive Richard Grasso on an
online message board. The NYSE says only that the suit is pending.
Companies typically sue alleging libel, or argue in some instances that an
employee has violated a confidentiality agreement, or that a trader has tried
to manipulate the stock. Most of these legal battles end up being resolved out
of court or the company decides to drop the case. "In the majority of cases,
the objective is to deter criticism," contends David Sobel, general counsel at
the Electronic Privacy Information Center, a Washington advocacy group.
"It appears the idea is to identify the individuals and intimidate them into
silence."
For its part, E*Trade, Menlo Park, Calif., says the issue in its recent case is
piracy, not privacy. Its suit seeks an injunction to prevent the individuals from
again posing as E*Trade executives. "We're not attempting to impede
anyone's right to free speech, and we're not stopping anyone from criticizing
the company, but we do believe posting messages in the name of senior
officers is inappropriate," says spokeswoman Heather Fondo.
Just last week, in a ruling free-speech advocates consider a significant
victory, a California federal court ruled in favor of defendants in one such
"cybersmear" case. In the case, Global Telemedia International, Inc., which
had filed suit against several individuals for posting critical messages, the
court found that the message board was a forum for the exchange of
opinions, and therefore was protected under the first amendment. (That
case, however, didn't include allegations of posters impersonating firm
executives.)
"The message board, or any computer screen, is no less important than the
front page of a national newspaper, and it should be treated the same," says
Jonathon Bentley-Stevens, president of Global Telemedia in Newport Beach,
Calif. "If some of these comments had been placed on the front page of any
newspaper, then there would have been a decision in our favor."
While previous rulings had focused on specific statements, this ruling "has
broader implications," because it extends the context in which those
messages are protected, says Megan E. Gray, a Los Angeles lawyer who
specializes in Internet libel and represented one of the defendants in the
case. The ruling, says Ms. Gray, "doesn't directly cover impersonation, but it
does definitely encompass it."
In the E*Trade case, chat-room posters received notification of the suit last
week, after Yahoo! Inc., Santa Clara, Calif., was served with a subpoena,
dated Feb. 12, requiring the disclosure of information related to the posters,
including any pseudonyms they use. Yahoo!, which says it doesn't comment
on specific cases, has until Monday to turn over the data it has about the
posters, according to E*Trade.
At least one E*Trade poster already has stepped up. E*Trade says an
individual who identified himself as "The Donk" has responded through
outside counsel to E*Trade's lawyers, saying they are ready to discuss the
issue.
Another chat-room user, who says he used Jerry Gramaglia as an alias to
post messages and received notification of the subpoena last week from
Yahoo!, says the use of the names of E*Trade executives was "purely for
entertainment." The 40-year-old transport-company employee, who goes by
the Internet handle "Gus," insists his messages were "never anything that
anybody could ever believe was being said by that person on a message
board." He adds that investors know "50%" of message-board postings are
"just nonsense."
Shareholders were just venting their frustrations about the decline in
E*Trade's stock, the user says. "We thought it would be fun to imagine or
post as if we were those people to defend the stock and why it was
continually going down." Says the E*Trade spokeswoman: "There are a lot
of shareholders out there that don't know it is a joke. It is misleading."
"Gus" has since sold his 10,000 E*Trade shares, when the stock climbed
back up to about $15 a few weeks ago. Shares of E*Trade were at $9.99,
down 7%, or 76 cents, as of 4 p.m. in composite trading on the New York
Stock Exchange.
"We lost so much money we thought we'd better make a joke of it," the user
says. When things were going well, there was talk of a "120 party," he says
-- when E*Trade's stock hit $120 the posters were going to go to Hawaii
and celebrate.
There still is talk about the 120 party, he says. But now it has changed to
"the 1.20 party."
Write to Cassell Bryan-Low at cassell.bryan-low@wsj.com
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