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Top Stories: Tearing Down the Internet's Anonymous Posters
By Gregg Wirth
Staff Reporter
9/22/98 4:09 PM ET
"SELL SELL SELL SELL. . . This doggie is going into the toilet. Salvage what's
left of your investment."
-- Mr_Pink_esq,
on a Yahoo! message board for FirstPlus, Sept. 14.
Since stock message boards came into being, Internet posters have slung
anonymous missives like blackjacks to bludgeon the shares of target companies.
Now, the companies are fighting back, starting a trend that could change the
very nature of the message boards.
In several cases, companies have sued to unmask the anonymous posters, whose
identities Yahoo! (YHOO:Nasdaq) and other companies that run the message
boards
routinely hand over when faced with court orders.
Once the posters' real names are discovered, the maligned companies have
sought
legal and financial sanctions against them. For example, as far back as 1996 a
lawsuit brought by Fonix (FONX:Nasdaq) against an online poster was settled in
an unusual way: The poster not only had to apologize online, but also was
required to buy shares of the company.
The issue pits Americans' right to free speech against companies' right to
protect themselves against false and misleading statements. It also pits the
Internet's Wild West culture against the staid corporate world.
Just last week, FirstPlus (FP:NYSE), a Dallas subprime lender, issued a press
release saying it had identified a short-seller who "disseminated false and
misleading information about the company over the Internet." FirstPlus, which
hasn't identified the individual or said how it obtained the information, is
forwarding the results of its investigation to the Securities and Exchange
Commission and reviewing its legal options.
If companies continue to succeed in ferreting out the names of anonymous
posters, the entire culture of the message boards could change. Now, posters
revel in their ability to attack -- and praise -- stocks behind a shield of
anonymity. The practice has spawned hundreds of message boards on stocks
ranging from Microsoft (MSFT:Nasdaq) to Rocky Mountain International. But it
also has made it possible for unscrupulous operators to post false information
in a bid to move stocks for the sake of profit.
Mary Calhoun, president of Waltham, Mass.-based Calhoun Consulting, has
tracked
six or so similar lawsuits in the past year and is a dogged follower of the
message boards. So far, the threats and lawsuits have not had a chilling
effect
on message-board conversation, she says.
"I think now many more people know there might not be protection online" of
anonymous posters' identities, she said.
"But it's not easy to get subpoena power -- you have to have a strong case,"
Calhoun explained. "There are prohibitions against filing a frivolous
lawsuit."
Calhoun's firm acts as a consultant to securities attorneys and specializes in
market-manipulation cases.
"Companies file these lawsuits, then use subpoenas to get the user info," said
John Place, Yahoo's general counsel, adding that his company has complied with
subpoenas in the past and provided names as requested. Place declined to
detail
any specific incidents.
FirstPlus is not the first company to go after an anonymous Internet
haranguer.
Itex (ITEX:Nasdaq), a Portland, Ore., company, filed a lawsuit in a county
circuit court Sept. 4 against 100 "John Does." The suit alleges that a number
of postings on the Yahoo message board critical of the company's management
were defamatory. Itex is seeking to learn the identities of such posters as
orangemuscat and colojopa, both of whom were named as defendants in the
lawsuit.
In its lawsuit, Itex, which operates a retail barter exchange for brokers in
the Portland area, says the anonymous posters used their messages "for the
purpose of undermining the confidence of the public in the stock (of Itex) and
to induce others with whom Itex does business to lose faith in the operations
and financial soundness of Itex."
Some of the messages mentioned in the suit claim that Itex inflates the value
of its assets, that members of top management had been fired and that the
company is engaged in prostitution. One claimed Graham Norris, Itex's
president
and chief executive, is a "pimp." Itex says these messages are false and
defamatory.
The lawsuit is about accountability, not the First Amendment, said Stephen
Pearson, a spokesman for Itex. The only people who should worry are the ones
making false postings, Pearson said. He concedes Itex' suit may have a
chilling
effect, but adds that such a result might be necessary because people were
posting comments on the Internet they would not have dared publish in more
traditional mediums. "We are not interested in suppressing anyone's First
Amendment rights," he said.
Others agree that while First Amendment rights are paramount, companies should
be allowed to fight back against this type of slander. "We'd all be better off
if the stock manipulators are brought to justice," said Jill McKinney,
webmaster at another message board site, Silicon Investor. She is uncertain
whether more lawsuits are being filed recently or if those filed are simply
getting more attention. Silicon Investor has answered about five or six
requests for posters' names in the past three years, she says.
The most recent situation with FirstPlus brought some heated debate on the
Yahoo! message board, including a laughing, I-dare-them-to-sue-me series of
posts from Mr_Pink_esq himself, the person FirstPlus is believed to be
targeting. In a mock transcript of the case of "FirstPlus vs. Mr. Pink," a
poster called justgivememoney jokingly relates the difficulty FirstPlus would
have convincing a judge that sophisticated money managers actually sold their
shares based on anonymous Internet postings.
The stock price of FirstPlus fell by about two-thirds in less than two months,
from around 47 in mid-July to a low of 15 Sept. 11. It has since rebounded and
was near 22 1/3 at midday Tuesday. (FirstPlus also recently announced it was
beginning talks with potential acquirers about a purchase of the company.
Trading in both its stock and options have been active lately.)
The subprime lending arena has been hit especially hard in the recent market
downturn. For example, two other subprime rivals, United Cos. Financial
(UC:NYSE) and Southern Pacific Funding (SFC:NYSE), are down 34% and 81%,
respectively, over a span in which the benchmark S&P 500 fell 10%.
So whether the Internet messages actually hurt FirstPlus' stock price is open
to debate. But the investigation, and similar ones by other companies, could
make bigger waves. |
