Re: Day Trader Arrested for Posting Fake Lucent Earnings Warning (LU)
March 30, 2000
Day Trader Arrested for Posting Fake Lucent Earnings Warning
By JUSTIN DINI
NYTimes.com/TheStreet.com
A day trader was arrested Thursday on charges that he violated federal securities laws by posting a fake press release on the Internet last week that caused the stock Lucent Technologies to fall, slicing $7.1 billion off its stock market value.
Fred Moldofsky, 43, was arrested Thursday in Houston on criminal fraud charges filed by the U.S. Attorney in Manhattan federal court. The Securities and Exchange Commission has filed civil charges of its own.
Moldofsky posted the bogus press release March 22 on a Yahoo! message board that said in part, "Based on preliminary estimates, [Lucent] expects operating results for its second fiscal quarter of 2000 to be lower than analysts' estimates," according to the criminal complaint.
The bogus release was modeled on a press release that Lucent actually issued in January warning investors that its first-quarter results would not meet Wall Street's expectations, an announcement that sent Lucent's shares plunging.
Prosecutors said the bogus press release, which was posted after the stock market had closed, led to another selloff in Lucent, sending its stock down 3.6% the next day. Moldofsky, however, had traded approximately 6,000 Lucent shares on the same day that he posted the release, according to the criminal complaint.
During the afternoon of March 22, Moldofsky, using the screen name "kauna_and_the_brain" posted several messages reporting rumors that Lucent would not meet expectations, according to the civil complaint.
Later that evening, using the screen name "hot_like_wasabe", Moldofsky posted a message on the Lucent bulletin board on the Yahoo! Finance site that said Lucent had released its earnings warning and attached the fake release, according to the criminal complaint.
Using a different screen name -- "Floydian_us," which was designed to resemble a screen name used by a frequent commentator on Lucent stock on the message board -- Moldofsky posted numerous messages with links to the fake release, prosecutors said. One message included a caption that said: "LUCENT WARNS! I'm going to cut my throat."
Moldofsky waived his right to a preliminary hearing in Houston Thursday and will be transported to New York, said Steven Peikin, the assistant U.S. attorney who is prosecuting the case. Caroline French, a federal public defender and Moldofsky's lawyer, did not immediately return a call.
"Obviously, we took this matter very seriously, we cooperated with the authorities, and we're pleased that this person has been identified," said Jeff Baum, a Lucent spokesman, who said the company contacted the SEC the day the release was posted.
The charge in the criminal complaint carries a maximum sentence of 10 years and a fine $1 million or twice the gross gain resulting from the crime. The SEC charges carry civil fines as well.
nytimes.com
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March 23, 2000
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Lucent Denies Message Board Buzz
About Profit Woes, Lifting Its Shares
By JANET WHITMAN
Dow Jones Newswires
MURRAY HILL, N.J. -- Lucent Technologies Inc. shares gained 4.3% Thursday after the phone-equipment maker said it had no plans to issue a warning for its second-quarter earnings.
Rumors that Lucent would issue a profit warning began circulating in Internet chat rooms Wednesday and pushed the company's stock down 6.5% by the close of trading.
A fake company news release posted on a Yahoo! Inc. message board later Wednesday fed the rumors, and Lucent shares fell further at the start of trading Thursday. They reached an intraday low of $60.375, but changed course after the company denied any earnings trouble. The shares were up $2.6875 to $64.9375 in 4 p.m. trading on the New York Stock Exchange.
"We've issued no change in our guidance for the fiscal second quarter, nor do we plan to," Lucent spokesman Jeff Baum said.
Analysts expect Lucent to report second-quarter earnings of 22 cents a share, according to a First Call/Thomson Financial survey.
Lucent became aware of the fake statement Thursday about an hour before the start of trading, Mr. Baum. "These postings tend to be anonymous. We don't know who it was, but it was a fake."
Lucent contacted Yahoo! about the fake release, he said. "We have no comment on what actions we may or may not take."
When asked whether Lucent had contacted the Securities and Exchange Commission about the false release, Mr. Balm said: "We've been in touch with various parties, but I don't want to comment beyond that. Certainly we take this very seriously."
interactive.wsj.com
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SEC looks into fake Lucent profit warning
By Bloomberg News
March 23, 2000, 11:10 a.m. PT
WASHINGTON--The U.S. Securities and Exchange Commission said it's investigating a fake profit warning designed to look like a release from Lucent Technologies that was posted on a Yahoo message board.
"We are aware of the situation and are looking into it," SEC enforcement director Richard Walker said.
Lucent spokesman Jeff Baum said the company contacted the SEC about the phony warning. The posting, which first appeared yesterday, was prepared to look like a PRNewswire release and uses language copied from a January warning by the phone-equipment maker. It said the company expects to report sales of $8.6 billion to $8.7 billion and earnings of 14 cents to 17 cents a share in the fiscal second quarter, which ends March 31. Analysts polled by First Call/Thomson Financial expect profit of 22 cents in the quarter.
"It's a fake," said Lucent representative Lynn Newman. "We haven't changed the guidance, and we don't plan to."
Shares of Murray Hill, N.J.-based Lucent, which had fallen as much as $2.25 to $60.37, rose $2.25 to $64.87 at midday.
Someone using the name "hot_like_wasabe" posted the fake warning yesterday at 3:57 p.m. PST.
Later versions by "f1oydian_us" contained a line that readed "this is a joke you idiots" in a standard disclaimer found in genuine Lucent press releases. The line was buried toward the end of the posting.
Lucent said it learned of the posting today about 5:30 a.m. PST.
Yahoo declined to comment specifically on the posting. The company said it doesn't monitor its message boards, and it will consider removing a posting that violates its service agreement with users.
Lucent did warn on Jan. 6 that sales and profit for the quarter would fall short of analyst estimates at that time. It said sales will be $9.8 billion to $10.1 billion and earnings will be 21 cents to 23 cents a share.
It's not the first time someone has posted phony news on Yahoo. PairGain Technologies shares rose as much as 31 percent on April 7, 1999, after a bogus story appeared on a Yahoo message board saying the company agreed to be acquired by Israel's ECI Telecom. The story was made to look like an item on the Bloomberg News Web site.
Copyright 2000, Bloomberg L.P. All rights reserved.
yahoo.cnet.com
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