Re: 10/27/00 - [ZSUN] SD Union Tribune: ZiaSun settles 'cyber-smear' case
ZiaSun settles 'cyber-smear' case
By Thomas Kupper
STAFF WRITER
October 27, 2000
A little-known Solana Beach company that filed one of the first "cyber-smear" lawsuits against online critics has settled with several of the defendants in return for a promise that they won't post anything else about the company.
ZiaSun Technologies, which describes itself as an Internet holding company with business interests in North America and Asia, had sought hundreds of thousands of dollars in damages from eight so-called bashers who urged ZiaSun shareholders to sell their stock.
But the company, whose stock has plummeted as it restated its financial results amid a generally softening stock market, said it was worth it to drop the claims for damages if it could get several of the online critics off the company's back.
The defendants, who contended that everything they said about the company was true, said they considered the outcome a victory.
"This is, in no uncertain terms, a victory for free speech," said one defendant, Stephen N. Worthington. "A public company should not be using its power to sue those with opinions different from the company's, since that would chill the exercise of free speech protected by the First Amendment and thwart the goals of the securities laws."
The case and others like it have been closely watched, as courts try to sort out the limits of free speech in Internet chat rooms, where advocates and skeptics of companies large and small assert their views in millions of postings a day.
No money will change hands under the settlement, though a separate agreement calls for ZiaSun consultant Bryant Cragun to pay $60,000 to defendant George Joakimidis to settle a complicated dispute over Joakimidis' stock holdings.
Cragun said he had nothing to do with that particular dispute but considered it "well worth it" to pay the $60,000 to settle the broader case.
ZiaSun sued the eight critics in July 1999 after a lengthy war of words in which the "ZiaSun 8" posted thousands of taunting, scornful messages in the Silicon Investor chat room and elsewhere. Some messages ridiculed the company's financial statements. Others made allegations of criminal conduct and criminal associations by ZiaSun officers. Still others suggested that the company engaged in fraud.
ZiaSun maintained that those posting messages on the Internet were in league with short sellers, who bet that a stock will fall, in a campaign to drive down the stock price.
Under the settlement agreement, the defendants agreed not to publish any more statements on the Internet about ZiaSun and a number of companies and individuals related to ZiaSun. ZiaSun said it was continuing to pursue cases against two other defendants.
"This settlement is a great victory for ZiaSun," company President Al Hardman said in a written release. "The defendants have agreed to far greater restraints than we ever hoped to obtain in court."
However, the cyber-smear dispute is just one of many problems facing the company, which once said in a news release that its 1998 earnings reached $1.15 million on $3.5 million in revenue but has since had to revise those figures downward twice.
The most recent numbers for 1998, from a Securities and Exchange Commission filing, show net income of $769,320 on revenue of $760,529. The company's earnings include profits from securities transactions involving other public companies.
Net income grew last year to $6 million on $27.2 million in sales, much of it from a business that operates traveling seminars on Internet stock trading at $2,995 per person.
But the company also attracted scrutiny in a recent Wall Street Journal article that found that overseas investors who bought the stock had trouble selling it. The company has acknowledged such complaints and said it is working to resolve them.
Meanwhile, the company's stock has fallen sharply after trading above $10 around the time the company filed the cyber-smear lawsuit. It closed yesterday at $1.65 a share, up 15 cents.
Copyright 2000 Union-Tribune Publishing Co.
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