Sabratek Files $90M Suit Vs Online Critic, Publisher --
By Michael Rapoport
NEW YORK (Dow Jones)--Sabratek Corp. (SBTK) filed a $90 million lawsuit Tuesday against a harsh online critic of the company and a newsletter publisher, alleging that both have bad-mouthed Sabratek in an illegal bid to knock down its stock price to benefit themselves.
Sabratek and its chairman and chief executive, K. Shan Padda, filed the fraud and defamation lawsuit against Steven Alan Keyser, who the company said is known online as "Pluvia," and Mark Roberts, who publishes "Off Wall Street," a Cambridge, Mass., investment advisory newsletter.
Both men have repeatedly slammed Sabratek, claiming it's misleading investors, the company said - Keyser in message-board postings on Internet forums like Silicon Investor and Raging Bull, and Roberts in conversations with Sabratek shareholders and in his newsletter.
But the company maintains that the two men's statements are false and defamatory - and that Keyser and Roberts made them knowingly in a calculated attempt to push down Sabratek's stock. Keyser has bought Sabratek put options and Roberts has shorted Sabratek, the company said - both market bets that Sabratek's stock price would decline - and so Keyser and Roberts allegedly had a vested interest in making sure it would.
A message sent to an e-mail address listed for Pluvia on Silicon Investor was not immediately returned. Roberts declined to comment on the suit, which was filed in federal court in Manhattan. The company doesn't allege that the two men acted in concert with one another.
The lawsuit spotlights a recent trend of companies going to court against the critics, shielded by screen names, who bash them on online message boards. HealthSouth Corp. (HRC), for instance, has filed multiple suits against some of its online critics.
"It's hard to fight wraiths over the Internet," said Doron Levitas, Sabratek's vice chairman and chief administrative officer. "People believe anonymity over the Net allows them to behave in what I believe to be an illegal and unconscionable fashion."
But others say "Pluvia" and other online critics are needed to help make sure companies stay on the straight and narrow. In January, for instance, the Securities and Exchange Commission temporarily suspended trading in six small stocks in one day - shortly after Pluvia had criticized four of them online.
In his online postings, "Pluvia" has claimed Sabratek is involved in accounting fraud and urges holders to sell their shares. The company denies any wrongdoing, and says Pluvia purports to be citing a "report" on Sabratek's conduct when he's actually just repeating unproven allegations contained in a shareholder lawsuit.
In a July 28 posting on Silicon Investor, for instance, Pluvia says Sabratek officials "will be forced to disclose their scumbag activities" - and that CEO Padda will "feel my fist."
But the postings don't disclose that Keyser bought Sabratek put options in June, the company said, and that he stood to profit from a drop in the company's stock. The suit also alleges that Keyser has "repeatedly" been in trouble with authorities.
Roberts, meanwhile, secretly shorted Sabratek stock at least four times, through an investment vehicle he controls, before and during the time when he was criticizing the company, Sabratek said.
Among other things, the company said, Roberts has called Padda a "pathological liar" and urged the company's chief financial officer to quit, suggesting he could get the CFO a job at another company if he did so. All the false criticism, Sabratek alleges, has caused its market value to plunge by more than $90 million.
As reported, the stock tumbled 30% on Monday for another reason: Sabratek said its second-quarter earnings will be below expectations. Sabratek lost another 4.7% Tuesday, closing at 13 7/8.
-Michael Rapoport, 212-227-2017, michael.rapoport@cor.dowjones.com
(END) DOW JONES NEWS 08-03-99 04:09 PM- - 04 09 PM EDT 08-03-99
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