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American Business Financial Settles Suit Over Messages From First Union Workers
Thursday August 29, 2:14 pm ET
By Dinah Wisenberg Brin
Dow Jones Newswires
PHILADELPHIA -- American Business Financial Services Inc. (NasdaqNM:ABFI - News) , which alleged last year that two First Union Corp. (NYSE:WB - News) employees illegally schemed to harm the company by shorting its stock and slamming it on Internet message boards, has settled the lawsuit.
Subprime lender American Business, which had a $150 million line of credit from First Union through 2000, alleged the two employees breached fiduciary and confidentiality duties when they shorted the stock and bashed American Business on Yahoo Inc. (NasdaqNM:YHOO - News) message boards two years ago.
In shorting, or selling a stock short, an investor bets that the price will decline.
American Business, based in Bala Cynwyd, Pa., contended the First Union employees spread false and negative information on the Internet in an effort to defame the company and depress its stock price. ABFI also accused First Union, now operating as Wachovia Corp. following a merger last year, of negligent supervision of the employees and of breaching confidentiality and fiduciary duties.
The First Union employees, who described themselves in depositions last fall as a high-yield research analyst and a finance group accountant in North Carolina, denied wrongdoing, but acknowledged shorting the stock and posting negative messages about American Business on the Internet.
One message predicted the company would go bankrupt, another likened the chief executive's family to organized crime figures.
The two men remain employed by Wachovia, a company spokeswoman said this week. She said the company wouldn't discuss specifics of their employment, including job titles.
Terms of the recent settlement are confidential.
"The matter was resolved by the other parties involved and the lawsuit has been dismissed," said Wachovia spokeswoman Christy Phillips, reading a company statement. "Wachovia has policies and procedures that prohibit employees from sharing confidential customer information with anyone."
American Business spokesman Keith Bratz said all parties involved in the initial filing were part of the settlement. First Union research analyst Alan David Boyer, using the Internet screen name Butdart8721, posted messages on American Business Financial's Yahoo message boards, including one likening ABFI Chairman and CEO Anthony J. Santilli's family to a Mafia family, according to records in Philadelphia Common Pleas Court.
Mr. Boyer also used his real name to send a message from his First Union National Bank e-mail address to ABFI's outside accountants at the time, BDO Seidman, accusing ABFI of leading the charge in the subprime industry's use of " fraudulent accounting policies," and of engaging in "borderline criminal" activity.
First Union accountant Samuel R. Shirey, using the screen name Duke8866, also condemned American Business on Yahoo boards.
"There is simply no way a knowledgeable investor would buy this stock. This company is a joke and the balance sheet is a crime. Who audits this garbage company anyway?," read a January 2000 Duke8866 posting included in court documents.
First Union denied in court filings that its employees had spread false information about American Business on the Internet and that the subprime lender had suffered any damages as a result of Messrs. Boyer and Shirey's activities. The company also denied that the pair had used any nonpublic information.
Mr. Boyer denied in court papers that he had illegally schemed to disparage or harm American Business or to manipulate its stock price for personal gain, and denied that his Yahoo postings contained false information.
He said he had no confidentiality agreement with American Business and no access to private information about the company, and that he based his e-mail and Internet postings on public information gathered from company filings and news stories.
Mr. Boyer contended he had a First Amendment right to express his opinions about the company in the e-mail and on the Internet, and said American Business had filed the lawsuit to harass and intimidate him to hinder his free-speech rights.
Mr. Shirey also denied breaching a duty to American Business, telling the court he had no access to confidential information and also gathered his data from public sources. The Philadelphia court released Mr. Shirey from the case earlier this year for lack of jurisdiction.
Eric Weiss, an attorney for Mr. Boyer, said this week that other than the settled civil lawsuit, he was unaware of any cases or actions regarding Messrs. Boyer and Shirey's activities.
Securities and Exchange Commission spokesman Michael Robinson couldn't say whether the agency had any interest in the matter, citing a commission policy of neither confirming nor denying the existence of specific investigations or inquiries.
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