PLUVIA, THE FACTS!.... you bashers/shorters have been HAD!
Bounty offered for stock tipster
By Courtney Macavinta
Staff Writer, CNET News.com
September 5, 1997, 11:15 a.m. PT
Someone who goes by "Steve Pluvia" likes to lurk in and out of online investor bulletin
boards,
swapping his stock research and analyses with other market speculators.
That practice is not unusual, as Pluvia is only one of many Netizens who use pseudonyms
on the Net.
But a series of critical comments he made last month sparked a company to offer a $5,000
reward for
the revelation of his true identity. Although Pluvia has since revealed himself, the case has
raised
important issues ranging from securities regulations to the First Amendment.
On August 20, Westergaard Online charged that Pluvia had been spreading
"disinformation designed to drive down the price of Premier Laser Systems'
(PLSIA) common shares." Westergaard put up the bounty as part of a paid
service it offers to Premier, a developer of medical and dental laser equipment.
Pluvia vs. Westergaard has turned into a tangled dispute that unfolded almost
entirely in cyberspace, where those who frequent investor chat rooms acted as both
spectators and
referees. The conflict raises concerns about the reliability of financial information on the Net,
a medium
that makes it easy for investors and publishers to hide their identities, affiliations, and
motives. The
altercation also brings up the issue of libel, as both parties claim they were damaged by
each other's
online comments.
The controversy has acquired even more urgency as the Net is increasingly relied upon for
instant stock
prices, financial news analysis, and real-time trading. A slew of sites are designed for
market players
to exchange advice and debate Wall Street's expectations.
Among their various contentions, both Westergaard and Pluvia accuse each other of driving
a secret
agenda to shape the online community's perception of Premier's stock potential.
Premier paid Westergaard up to $30,000 to build a customized Web site that features
up-to-date stock
prices, commentary, and headlines that are written by Westergaard and other sources. The
service,
dubbed Westergaard Broadcasting Network, publicly launched yesterday.
Under the deal, Westergaard also surfs the Net, sniffing out "bad" information that could
hurt Premier's
stock performance. After identifying "fraudulent" data, Westergaard's lawyers will contact
its source
and attempt to eliminate the information.
"It is very disturbing that Premier Laser Systems, a public company, can hire a stock
promoter like
Westergaard to intimidate persons who present negative information about Premier's
stock," Pluvia
said. "Westergaard was hired to keep the company's stock from being publicly debated."
Pluvia added that his posts to the Motley Fool, Silicon Investor, and America Online's Shark
Attack
section were cautiously crafted and that Westergaard's accusations are ruining his
credibility. He told
CNET's NEWS.COM that he plans file a libel suit against Westergaard.
In turn, Westergaard said it only tried to hunt down Pluvia so it could expose his "mixed
agenda" to
online investors. As part of an independent venture, Pluvia acknowledged that he rented out
the
equipment of Premier's main competitor, Ion Laser Technology (ILT), to at least three
dentists. Although
Pluvia said he owned stock in that company for two days in July, he doesn't own any now.
A week ago, Pluvia disclosed his real identity to Westergaard, but he still asked that his
real name not
be used for this story. Westergaard has since withdrawn some of its accusations. However,
some of
Pluvia's assertions about Premier's sales and product performance already were proven to
be true in a
press release the company issued this week.
"I'm not saying that specific items he said about the company were false, but he did present
an
unbalanced picture. He misrepresented his involvement," said the financial site's founder,
John
Westergaard. "There is a huge problem of false and misleading information being circulated
on the
Internet. This is stock manipulation. People can be damaged and lose a lot of money."
Westergaard and Pluvia aren't the first to fight over the accuracy or legality of investment
information
and user comments on the Net. The Securities and Exchange Commission has filed charges
against
online newsletter publishers that allegedly profited from stock they inflated with upbeat
reports.
"Just as agencies may be concerned about the hyping of stock, there is the same concern
over
business disparagement," said Eric Schlachter, an attorney with Cooley Godward who also
teaches a
cyberspace law course at Santa Clara University's School of Law.
"It isn't just the SEC; sometimes the Federal Trade Commission gets involved," he added.
"So anyone
posting financial misinformation could get in a lot of trouble."
The National Association of Securities Dealers Regulation says while it will "aggressively
pursue
securities fraud or stock manipulation perpetrated on the Internet, it would be an impossible
logistical
task to monitor every investment-related posting at thousands of chat rooms, bulletin
boards,
newsgroups, and home pages."
Instead, NASD Regulation has launched an investor education program to combat the
problem. "Never
make an investment decision based solely upon what you read online," the program states.
"Even if
motives are honest, there are no guarantees that the information is accurate or that the
advice is sound.
The real-time nature of the Internet, combined with its growing base of users, makes it a
prime target
for stock touting and bashing."
Legal battles have also been waged between companies and three major online service
providers over
allegedly libelous posts. From a legal standpoint, there are a few avenues corporations and
stockholders can take to curtail the spread of slanted or inaccurate online investment
information.
Companies can sue on the grounds of trade libel, business disparagement, or unfair
competition, for
example.
In Stratton Oakmont vs. Prodigy, the online service was sued for $200 million after an
unidentified
person used a former Prodigy employee's member account to post claims of fraud against
Stratton
Oakmont, a securities investment banking firm in New York. The firm named Prodigy a
"publisher" in
the libel suit, as the comments were posted in the Money Talk section of the online service.
The case was settled out of court in 1995 with no money exchanging hands, but the judge's
report
stated that Prodigy could be held liable for its customers' activity. However, the Supreme
Court's
Communications Decency Act ruling this summer indicates that service providers aren't
liable,
according to Schlachter.
In another example, CompuServe was sued in 1991 over the contents of a daily newsletter
it hosted
called Rumorville, focusing on media companies and journalists. The plaintiff in the case,
Cubby
Incorporated, competed with the newsletter and alleged that Rumorville published false and
defamatory
statements about its operation. CompuServe was not held responsible for Rumorville's
editorials.
The most recent online libel case involves online gossip columnist Matt Drudge, who was
sued last
Wednesday over admittedly inaccurate statements in his Drudge Report that White House
adviser
Sidney Blumenthal had abused his spouse. Blumenthal is seeking $30 million from Drudge
and
America Online, which hosts the Drudge Report on its service.
"People who defame other parties online are going to be responsible--this is nothing new,"
Schlachter
said. "But if a person feels aggrieved by an anonymous posting online, they can only sue if
they can find
the person who posted the message. When the person can't be found or has no money,
people often
look for the deep pockets instead."
Schlachter said it is doubtful that Congress will pass new laws to prohibit the anonymous
posting of
online financial information. "Anonymous speech is protected under the First Amendment,"
he said.
Still, legislation has been introduced this year to prohibit sending unsolicited junk email
without
including a name and physical address.
As for Steve Pluvia, neither Westergaard nor Premier Laser Systems has brought cases
against him
for the so-called rumors he posted online. On the contrary, it is Pluvia who plans to seek
legal
vindication for invasion of privacy and libel.
"[My online name] is a very important identity to me," he said. "These accusations are
damaging my
reputation."
Westergaard remains unapologetic. "We wanted to see if could pierce his veil of anonymity.
If he wants
to sue me, be my guest. This is all part of defining this lawless world of the Internet." Get
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