interactive.wsj.com
April 6, 2001
Value Line Strikes Again
With a Cybersmear Suit
By AARON ELSTEIN
WSJ.COM
Value Line Inc. has sued another former employee for criticizing its chief
executive on the Internet.
The venerable money manager and fund
researcher filed suit in a Manhattan state
court against Mark DaSilva, a former Value
Line research analyst, and 10 anonymous
parties listed as "John Does." The March 21 suit alleges that the defendants
libeled and defamed the firm and its CEO, Jean Bernhard Buttner, who
owns 86% of the company.
Value Line, based in New York, seeks $10,000 in relief and $1 million in
punitive damages. Court documents don't specify how or where Mr.
DaSilva and the other unidentified defendants defamed Value Line or Mrs.
Buttner, or why Mr. DaSilva was the only defendant listed by his actual
name.
But Value Line Treasurer David Henigson
confirmed that the company's legal
proceedings are intended to root out those
who are anonymously assailing the company
and Mrs. Buttner on Internet message boards.
Mrs. Buttner wasn't available to comment, and
Value Line's lawyer, Irwin Echtman, declined to comment.
Mr. DaSilva didn't return calls to his home in Coram, N.Y. Value Line
officials confirm that he once worked for the firm as a research analyst, but
wouldn't say when or why he left.
Two years ago, Value Line sued Christopher Bischoff, a former
co-manager of the Value Line Aggressive Income Fund, after he called
Mrs. Buttner, 65 years old, an "old dodo," among other things, on an
Internet message board. Value Line contended that Mr. Bischoff's
messages were intended to destroy Mrs. Buttner's reputation. The parties
are working toward a settlement, says Mr. Bischoff's lawyer, Agnes
McKeon.
Legal experts estimate that some 120 cybersmear suits have been filed
across the country. But the only other Wall Street firm known to have filed
such a suit is Credit Suisse First Boston, the investment-banking unit of
Zurich's Credit Suisse Group. Last July, CSFB sued a New Jersey
scientist and several others for saying on a Yahoo message board that a
pharmaceuticals analyst was "lying" to customers. The case was settled in
December after the scientist, Chuan Chang, agreed to no longer post any
false or defamatory statements.
Cybersmear suits typically allege that message-board postings have libeled
companies or their top executives. After filing suit, the companies
subpoena Internet-service providers such as Yahoo! Inc. or AOL Time
Warner Inc. to learn the identities of those writing offending messages.
News of Value Line's latest cybersmear suit
has circulated on a Yahoo message board.
Since March 23, three people say they have
been notified about subpoenas served by
Value Line.
Among them is Richard Ozaroff, a 75-year-old former Value Line vice
president who lives in Greenacres, Fla. Mr. Ozaroff, who says he worked
at Value Line for 20 years, says he posted a message last year criticizing
Mrs. Buttner and her management abilities, but removed the post at the
request of Mr. Henigson, Value Line's treasurer. Mr. Henigson confirmed
that account.
Unlike many Wall Street firms, Value Line is controlled by a single
shareholder. Mrs. Buttner, the daughter of the company's founder, owns
an 86% stake and rules a seven-member board that includes three
employees who report to her and one outside director who is her brother.
At 4 p.m. Thursday, Value Line shares were unchanged at $39.25 on the
Nasdaq Stock Market. Unlike many financial stocks, Value Line shares
have been spared in the recent market downturn, trading near their
52-week high of $43.
Jon Foster, president of Howard Capital Management, owns more than
114,000 shares in Value Line, or a 1.1% stake. "It hasn't lost me money in
the last 12 months," Mr. Foster says, and he applauds Mrs. Buttner for
keeping the balance sheet cash-rich and debt-free. But he wishes she were
more aggressive in marketing the company's mutual funds and publications.
"Value Line is historically one of the strongest brands in financial services,"
Mr. Foster says. "In the hands of a bigger marketing machine, it could be
really be something."
In business since 1931, Value Line is known for strong stock research and
turning out Wall Street talent. Jeffrey Vinik, former manager of the Fidelity
Magellan Fund, and Zalman Bernstein, founder of the investment firm
Sanford C. Bernstein & Co., both started at Value Line.
The company's core product is the weekly Value Line Investment Survey,
which contains reports from the firm's analysts about some 1,700 stocks. It
is widely read by professional money managers. The firm also runs 15
mutual funds with $5.8 billion of assets, according to its most recent annual
report.
But growth has stalled amid growing competition in both
money-management businesses and financial publishing. For example,
while Value Line charges $345 a year for its mutual fund survey,
Morningstar Inc. offers similar mutual-fund analysis free on the Web. Value
Line said in regulatory filings that the availability of free and low-cost data
on the Internet "is believed to have had a negative impact on revenue
growth."
For the quarter ending Jan. 31, Value Line earned $11.8 million, or $1.19
a share, on revenue of about $25 million, compared with a profit of $14.1
million, or $1.41 a share, and revenue of $24.1 million in the year-earlier
period.
Write to Aaron Elstein at aaron.elstein@wsj.com
KJC |
