Re: 7/14/00 - First Boston Sues Web Hecklers To Defend an Analyst's Honor
July 14, 2000
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First Boston Sues Web Hecklers
To Defend an Analyst's Honor
By AARON ELSTEIN
WSJ.COM
Credit Suisse First Boston wants you to know: Disagreeing with its research analysts can be hazardous to your wealth.
Earlier this week, the big brokerage firm filed a suit seeking $1 million in damages against a New Jersey man and 10 others who posted comments on a Yahoo! Finance message board. Their postings criticized David Maris, the First Boston analyst who follows pharmaceuticals and specifically, an Irish company called Elan Corp.
The "false and defamatory" postings, alleges Credit Suisse First Boston, a unit of Zurich's Credit Suisse Group, have caused "actual, incidental and consequential damage to its reputation and professional and other economic interests," according to the suit, filed Tuesday in federal court in Manhattan.
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The suit, which names Chuan Chang, Colts Neck, N.J., and 10 unknown posters listed as "John Does," isn't unusual in itself. Many companies have filed suit against message-board posters, alleging their negative comments have defamed management or somehow damaged their business.
But First Boston's suit is the first filed against online critics by a major financial institution, says Blake Bell, a New York lawyer who tracks suits involving libel on the Internet. "There have been suits involving brokerages before, but none of this stature," he says.
Indeed, M.H. Meyerson & Co., a Jersey City, N.J., securities firm, filed suit in March 1999 after anonymous Yahoo posters accused its chairman and chief executive, Martin H. Meyerson, of market manipulation and said the firm was going bankrupt. Mr. Meyerson, who denied both accusations, says he has identified the anonymous posters and is proceeding with litigation against them.
In First Boston's case, it is alleging the posters defamed the firm by attacking Mr. Maris, who joined the firm last November from Bear Stearns Cos., where he had been cited for his stock-picking abilities last fall by Institutional Investor magazine.
The posters disagree with Mr. Maris's views on Elan, the Dublin, Ireland, pharmaceuticals maker. The company's American depository receipts closed down $2 to $48.50 Thursday on the New York Stock Exchange, but they have risen some 33% since June 12.
Mr. Maris, to the dismay of many posters, rates the stock a "hold." Although he wrote in a February report that the "news flow is likely to be exceptionally positive over the next six months," he prefers a "wait-and-see position on the execution and market potential for upcoming" drugs.
An Elan spokesman declined to comment on the suit except to say, "This situation is a Credit Suisse First Boston affair and Elan is not involved." First Boston officials declined to comment.
Mr. Chang, a retired materials scientist in his 60s who gives piano lessons over the Internet, says he was stunned to find out he had been sued.
"I was part of message-board conversations where the participants would discuss Elan and the analysts who covered it," he says. "The Credit Suisse First Boston analyst was the most bearish on the stock, and we tried to figure out why his views were so different from the others, but it was all part of normal message-board give-and-take."
In messages First Boston cited in court documents, Mr. Chang said Mr. Maris was "spinning misleading statements to fool uninformed investors" and was "lying" and "evil even to his customers."
Mr. Maris declined to comment.
His "hold" rating on the stock is lower than most other Wall Street analysts. First Call, a Boston firm that tracks analyst ratings, says the consensus rating among the 19 analysts who cover the stock is "buy." But Mr. Maris is not alone is his refusal to embrace the stock; three analysts rate it "hold" or "neutral," including Salomon Smith Barney.
Still, Elan's stock has had an impressive run in the past month amid a series of positive announcement. In late June, the company said it received an "approvable letter" from the U.S. Food and Drug Administration regarding a pain treatment it is developing.
Its stock also rose as investors anticipated that its Alzheimer's vaccine will prove effective. Earlier this week the company said an early-phase trial showed it was "well-tolerated" in 100 patients.
But Mr. Maris wasn't impressed. "While this news about the Alzheimer's vaccine is positive and shows progress, we temper our enthusiasm as the compound is still in its very early stages," he said in a report issued Wednesday.
In any case, First Boston's suit has outraged people who frequent message boards.
David Kaplan, a commercial real-estate broker in Washington who participates on the Yahoo board about Elan but wasn't named in the suit, says he is trying to raise money for a legal-defense fund.
"I find this suit very disturbing," he says. "Disagreeing with an analyst isn't against the law. It seems to me that Credit Suisse First Boston is trying to silence people, and that is really troubling."
Write to Aaron Elstein at aaron.elstein@wsj.com.
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