1st Net Technologies Complains Of Detractors on Silicon Investor
By JOHANNA BENNETT
Dow Jones Newswires
June 29, 1999
NEW YORK -- When 1st Net Technologies Inc. Chief Executive Greg
Writer launched a message board on Silicon Investor, it seemed as good a
way as any to chat with investors.
And chat he did. In fact, between December and May, Mr. Writer and
other officials at 1st Net Technologies posted press releases, answered
investors' questions and generally defended the company to a group of
vocal critics.
Now, those same company officials seem to think it was all a big mistake.
"It has turned into nothing more than a farce," said 1st Net Technologies
President Cliff Smith. "It is a battleground for people bent on discrediting
the company."
After three months battling online detractors
who bashed the company for everything from
its press releases to Mr. Writer's disciplinary
record with the National Association of
Securities Dealers, officials at 1st Net
Technologies said the message board on Silicon Investor has become a
haven for unscrupulous short sellers. So now, the company has demanded
that Silicon Investor erase the message board from its Web site.
The result has been something of a stalemate. Silicon Investor insists that
its members don't appear to have violated the Web site's rules of conduct.
1st Net Technologies, which specializes in the development of online
investor-relations programs, has threatened legal action. And foes and fans
of the San Diego holding company -- it owns several online investment
news letters -- continue to post on the board.
The brouhaha started in late March, almost three months after Mr. Writer
launched the message board on Silicon Investor.
The thread, which had been largely ignored by the public, exploded with
activity in late March after 1st Net Technologies' shares hit a 52-week high
of $10.50. The stock gained more than 4 a share in two days of heavy
trading on the OTC bulletin board.
Not everyone was happy.
Message-board participants had discovered that 1st Net Technologies'
vice president of public relations, Jeff Chatfield, was posting bullish
messages about the company without disclosing his identity or corporate
affiliation. Angry messages flooded the bulletin board, eventually
compelling Mr. Writer to post an apology a few days later.
Mr. Writer admitted in a message-board posting that he encouraged
employees, officials and shareholders to use the board. But he denied the
stock surge stemmed from any message-board activity.
Mr. Chatfield didn't respond to requests for an interview. Mr. Writer
initially referred all questions to attorneys at The Krueger Group, the San
Diego law firm that represents 1st Net Technologies, and later couldn't be
reached for comment.
"It was not my intention to use this board to hype our stock," Mr. Writer
wrote in a message dated March 20.
A Gaggle of Detractors
Mr. Chatfield was banned from posting further messages, according to
Jason Howard, an attorney for 1st Net Technologies. Messrs. Writer and
Smith continued posting on the site.
By then, however, a gaggle of detractors found their way to Mr. Writer's
message board, including a band of loosely affiliated cybersleuths, known
on Silicon Investor as FBN Associates. Over the next few weeks, they
grilled Messrs. Smith and Writer, accused the company of issuing
misleading press releases and posted information about Mr. Writer's
NASD disciplinary record.
Between 1987 and 1993, Mr. Writer was disciplined by NASD, as well
as securities regulators in Idaho and Kansas. Among the list of reprimands
was a 1990 NASD ruling barring him from the securities industry and
fining him $200,000 for allegedly selling unregistered securities and making
false statements to NASD, according to agency records.
At the time, Mr. Writer was a principal in a Colorado-based
broker-dealer, Oxford Group, which acted as a market maker in a merger
deal. In a written statement issued by an attorney for 1st Net
Technologies, Mr. Writer denied any wrongdoing. The NASD fine and
barring followed a Securities and Exchange Commission investigation into
the merger, which was sparked when Mr. Writer went to regulators with
concerns of possible fraud, according to the attorney's statement.
Mr. Smith downplayed the significance of Mr. Writer's past dealings with
securities regulators, arguing that detractors have unfairly used the
information to bludgeon the company and Mr. Writer on the message
boards.
"It is just slash and burn, and it's the same people over and over again," he
added.
Those arguments haven't been enough to compel Silicon Investor to
remove Mr. Writer's message board. The message board's participants
haven't violated the Web site's code of conduct, said Ethan Cauldwell,
general counsel for Go2Net Inc., which owns Silicon Investor. While
Silicon Investor forbids vulgarity, personal attacks or harassing behavior,
members are allowed to voice honest criticism about companies, he said.
"This is a case of someone crying wolf," Mr. Cauldwell said, referring to
1st Net Technologies' reaction. "They set themselves up. They did not
gauge the critical comments they could get."
Mr. Writer and other officials at 1st Net Technologies aren't the first
corporate executives to post messages about their companies on the
Internet. A growing number of companies, especially small corporations,
use chat rooms and message boards as a way to communicate with
investors, dispense news and dispel untrue rumors.
Not everyone agrees that such tactics are wise. Many companies forbid
employees and officials from chatting about the corporation online, worried
that the slightest misstatement could expose them to legal entanglements
such as shareholder lawsuits.
No Place for the Thin-Skinned
Meanwhile, Web communities like Silicon Investor and Yahoo! Inc.'s
Yahoo! Finance are no place for the thin-skinned. The message boards
and chat rooms are touted as places where investors can find open
discourse and voice honest criticism and those discussions are often
caustic.
"We are not here to have every thread filled with gushing comments. If a
company's manager wants to participate [on a message board], they have
to withstand the heat," Mr. Cauldwell said.
But that's not to say that chat rooms don't have a dark side. Securities
regulators and stock market officials have become increasingly concerned
over the use of chat rooms by fraud artists and short sellers looking to
manipulate stock prices.
The SEC's much touted "cyberforce" routinely searches the Internet for
signs of stock fraud. Meanwhile, many companies have assigned
employees to surf the Web for remarks about the company, often filing
lawsuits charging message-board participants with stock manipulation.
These tactics have come under fire by online advocacy groups that argue
companies are using lawsuits to silence online criticism. |
