Thu, 31 Aug 2000, 3:57pm EDT
Emulex Hoax Suspect Faces Securities Fraud Charge (Update4)
By Joyzelle Davis
Los Angeles, Aug. 31 (Bloomberg) -- U.S. prosecutors charged a 23-year-old former employee of an Internet press release service with fraud, alleging he made nearly $241,000 after issuing a phony news release that sent Emulex Corp. stock tumbling last Friday.
The suspect, Mark Simeon Jakob of El Segundo, California, a student at El Camino Community College, was accused of wire fraud, acting with intent to defraud, participating in a scheme to defraud and securities fraud.
Emulex shares, which fell as much as 62 percent Friday morning, rose 4.56, or 4.5 percent, to 105.06 today in afternoon trading.
Authorities said Jakob borrowed and sold 3,000 Emulex shares on Aug. 17 and 18 at about $80 a share, hoping to profit by repurchasing the shares at a lower price. By last Thursday, the stock had risen to 113, leaving Jakob with $97,000 in unrealized losses. That evening, authorities say, he used a personal computer at the college library to instruct his former employer, Internet Wire, to issue the bogus press release.
When Emulex shares fell Friday on the false information, he covered his short position earning $54,000 and minutes later purchased 3,500 shares, which he sold Monday after the stock had rebounded, earning $186,000.
Investigators traced Jakob by following a trail of electronic footprints left by the e-mail he sent to Internet wire. The trail led investigators to a personal computer at the college library that Jakob had been seen using.
Emulex shares fell nearly 62 percent Friday morning after the bogus press release was distributed by Internet Wire and picked up by Bloomberg News and other news services.
The stock, which resumed trading about three hours later, fell 7.31, or 6.5 percent, to 105.75 by the end of the day.
``I think they were on the trail very quickly,'' Emulex Chief Executive Paul Folino said in an interview on CNBC television, adding that the suspect has no association with the data-storage equipment maker.
The FBI's computer-crime squad, the U.S. Securities and Exchange Commission, the Chicago Board Options Exchange and the Nasdaq Stock Market have investigated the bogus release.
``They (FBI) followed the money,'' said Mark Rasch, vice president of cyberlaw at the consulting firm Global Integrity Corp.. ``It's hard to hide that large an amount.''
U.S. Attorney Alejandro Mayorkas, FBI Assistant Director James V. DeSarno and SEC Regional Director Valerie Caproni are scheduled to speak at the news conference.
bloomberg.com |
