Re: 5/26/00 - [INVT] Lawsuit targets company's Internet critics
Lawsuit targets company's Internet critics
Friday, May 26, 2000
A Utah company has filed a lawsuit against as many as 14 people it accuses of trying to manipulate its stock price through a campaign of on-line insults.
But InvestAmerica Inc. faces one big hurdle in its effort to collect damages from the people who ridiculed it in a chat room run by Raging Bull in Andover - it doesn't know who they are.
The company's suit, filed this week in U.S. District Court in Boston, names the defendants by such on-line aliases as ``DizzyG,'' ``Tekrules'' and ``Uraloser.''
InvestAmerica says the chatters made libelous and defamatory statements in the chat room in an effort to drive down the company's stock price. They're also accused of violating the same racketeering statute often used to prosecute gangsters.
The company believes the chatters may have been ``selling short,'' in effect borrowing shares that would net them profits if the stock price fell.
Among the offending remarks: Tekrules allegedly said the company ``is a scam'' and ``is run by crooks.'' A chatter named Gogogadget called the company a ``fraud,'' and DizzyG said InvestAmerica's stock had been artificially inflated through a ``pump and dump'' scheme - in which promoters hype a stock and then sell it before its price collapses.
And a chatter named ``Illinois-Option'' said the InvestAmerica's management had lied to investors.
The company said it believes some of the aliases may actually represent the same person.
``Some or all of them are acting together,'' said the company's lawyer, Brandon Davis in New York.
He said he planned to speak with Raging Bull officials about what information they may have regarding the chatters. People who post on Raging Bull must first fill out an on-line form.
``Raging Bull has information as to who these people are,'' he said. ``Whether Raging Bull neccesarily knows their exact identities remains uncertain. People can register for Raging Bull without truthfully stating their name.''
Raging Bull officials did not immediately return calls yesterday.
If they ever are located, could the defendants claim they were simply making constitutionally protected editorial comments?
That's unclear, said Harvard Law School professor Jonathan Zittrain, who studies Internet issues.
``There's a difference between saying `this stock is a dog,' and saying I have information that the CEO is under indictment,'' he said.
Zittrain said it's unusually aggressive for a firm to sue people who make such on-line statements.
``I think typically, depending on who these guys are, from a practical standpoint it's rarely profitable to initiate a private lawsuit against them,'' he said. ``Most people that do this don't have millions of dollars to pay out in judgments.''
He also cautioned against taking too seriously items in on-line chat rooms.
``You'll find people who'll say anything,'' he said.
Arthur Levitt, chairman of the Securities and Exchange Commission, frequently warns investors to question anything they read in Internet chat rooms.
InvestAmerica, of Park City, Utah, is a publicly traded venture capital firm that invests in communications technology and is also working to provide bandwidth and computer network management services. Its shares are traded over the counter and closed yesterday at $2.56, down 25 cents.
In March, the company completed the acquisition of Optica Communications International Inc., a British Virgin Islands company that owns two computer network startups.
In a filing earlier this month with the Securities and Exchange Commission, InvestAmerica said it had ``no material operations and no revenue from operations between April 1997 and the closure of the Optica deal on March 15.'' The company said its only goal in that time was to complete a merger or acquisition.
Now that it has made an acquisition, InvestAmerica said it doesn't expect to generate any new revenue until Optica gets going, a process that could take more than 12 months.
Earlier this week, the head of Talk Visual Corp. sued a man for defaming his company on Raging Bull.
Raytheon Co. last year went to court against 21 anonymous Web message posters, claiming the people behind the screen names were divulging trade secrets. Most of the chatters turned out to be Raytheon employees after the defense contractor subpoenaed Internet companies to get their names. Four of the workers went on to quit the firm, while the rest were sent to corporate ``counseling.''
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