Janice is an old friend of mine from way back on SI. It is her goal to uncover fraud<G>
"July 2, 1999
Embattled Amazon Natural
Threatens Critics With Suit
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
A tiny Las Vegas company that is at the center of a heated debate on
stock-chat message boards says it will go after its critics in court. The move is
the latest in a saga that includes allegations of both death threats and a massive
conspiracy involving short sellers.
In a filing with the U.S. Securities and
Exchange Commission on Wednesday,
Amazon Natural Treasures, which uses the
Web to market a variety of health-care
products based on materials it harvests from a
rain forest in Brazil, said it is "preparing to
file suit against Janice Shell and numerous others for utilizing Internet chat
rooms to defame, slander and libel Amazon Natural Treasures Inc., their
principals and stockholders."
Ms. Shell, an art historian in Milan, Italy, has been a vocal critic of Amazon
Natural on the Silicon Investor and Raging Bull message-board sites. She and
others have taken the company to task for a wide range of promises and bold
revenue predictions that have yet to come true.
The company, which sells more than 100 products that treat ailments ranging
from stomach aches to liver disease, admits that it has fallen far short on many
of the expectations it outlined in its press releases. But Michael Sylver,
Amazon Natural's president, says Ms. Shell and others are to blame. "These
people are part of an organized conspiracy to short our stock and ruin our
company. We haven't been able to do anything else but fight them," he says.
The company says it has been dogged by short sellers since its stock began
trading publicly, in 1996.
Amazon Natural shares were quoted at 62.5
cents a share at midday Thursday on the OTC
Bulletin Board. The stock traded above $2 a
share during 1997, but slumped in early 1998 as
the online criticism heated up. The OTC Bulletin
Board is a loosely regulated quotation service of
the National Association of Securities Dealers,
which also runs the Nasdaq Stock Market.
Short sellers are investors who sell borrowed stock hoping to buy it back later
at a lower price and pocket the difference. Such people could profit from
"bashing," or criticizing, a stock in an online message board if their comments
pushed the stock's price lower.
But Ms. Shell says she has never held a position in Amazon Natural Treasures,
and has no intention of doing so in the future. As for the threatened lawsuit,
she says she isn't worried. "This is just plain silly. These guys are a joke," she
says.
Ms. Shell already faces a lawsuit from Hitsgalore.com, a Rancho Cucamonga,
Calif., Web-site operator over her online criticism of that company. She says
that case, filed in the U.S. District Court for the Middle District of Florida, is
without merit. She is well known on Silicon Investor and other stock-chat
Web sites, where she is among a small group of users who regularly criticize
companies they believe are in trouble.
Ms. Shell and other message-board users also
were sued in U.S. District Court in San
Francisco by Business Wire, a San Francisco
wire service that distributes press releases for a
fee. As an April Fool's prank aimed at satirizing
the hype of some corporate announcements, the group issued a press release
via Business Wire about a phony company making an outrageous claim.
Business Wire alleges its trademark and reputation were damaged by the
prank.
Mr. Sylver says his company's lawsuit will also name 111 other
message-board participants from Silicon Investor and Raging Bull that he says
are involved in the conspiracy to trash the company. He says he obtained
through "covert operations" the identities of many of those users, who post
under aliases. He declines to elaborate.
He also declines to say how he knows that Ms. Shell, and others, have actually
established short positions in the stock. "All of that will come out in court," he
says. "She is the kingpin behind it all."
Ms. Shell calls that assertion baseless.
Taking Shots
The battle between Amazon Natural Treasures and its online critics goes far
beyond a simple message-board debate. Mr. Sylver says online short-sellers
have made numerous death threats against him in telephone calls and letters,
and even shot at the company's building in the middle of the night in October
1998.
He says he doesn't have any evidence that Ms. Shell was personally responsible
for the threats or the shooting, but points to one of her message-board
postings, dated Oct. 21, 1998, the day before the shooting, as evidence that she
knew it was going to happen. In it, Ms. Shell is writing to another user who
has been critical of Amazon Natural Treasures, and says, "Y'know, tonto, I
have the strangest feeling ... that we may be getting some 'news' very soon.
Perhaps within 24 hours?"
Ms. Shell denies having any involvement in the shooting or death threats. She
laughed at the assertion, saying, "I do own a gun, but I don't think it has that
kind of range." As for the message-board post, she says it was a joke poking
fun at pro-Amazon participants on the boards who were "forever announcing
imminent 'news' that never materialized."
After the shooting, Mr. Sylver filed a report
with the Las Vegas Metropolitan Police
Department. The police say there was evidence
that the building had been shot at. But a
spokeswoman for the department says the case
has been closed. "There were no witnesses and
no suspects so there really wasn't anything we could do," she says.
Amazon Natural's online critics have taken issue with many of the company's
press releases outlining products that never made it to market and revenue
goals that never came true.
In January 1997, shortly after its stock began trading publicly, the company
announced that it had developed "a cream protection against AIDS." The
release said the company "is making all necessary arrangements for FDA
approval."
Mr. Sylver says the company hasn't sought Food and Drug Administration
approval for the cream -- which he says is "also a spermicide and it will stop
any other sexual diseases" -- because it has been busy defending itself against
the short-selling campaign. Winning FDA approval is complex and costly, and
requires studies of a drug's safety and effectiveness. Mr. Sylver says the
product has been tested on humans in Brazil.
In another release, in April 1997, Amazon Natural announced it was "ready to
satisfy the overwhelming nationwide request from consumers" for another
invention: a chewing gum that will starts "to whiten your teeth within three
minutes of chewing," prevents cavities and can be used instead of brushing.
The release said the company would begin manufacturing the gum in six
months.
Mr. Sylver says the company can't afford to buy the machinery necessary to
produce the gum, and again blames short-sellers.
In December 1997, the company announced it had developed a new sweetener
to compete with products such as Equal and Sweet 'n Low. Amazon Natural
predicted it would be in full scale production in the first quarter of 1998, and
that sales for the first year would be more than $50 million. In a later press
release, in September 1998, it said the sweetener would be sold through 250
outlets of Sweet Factory, a candy retailer.
But Mr. Sylver says the Sweet Factory deal never came to fruition, and says
Amazon Natural only began selling the product five months ago. He says
Amazon Natural was going to get the product into Sweet Factory stores
through a distributor that was angling to buy the chain. But he says that deal
fell through, and says it was an "oversight" that Amazon Natural never put out
another release informing investors that the deal wasn't going to happen.
For its part, a spokesman for Sweet Factory, which is based in Chicago, says
such a deal would have been unlikely because the product doesn't fit in with its
other offerings, which include mostly candy and gift items.
Moreover, Amazon Natural is the target of a trademark infringement suit
filed by the Union of Orthodox Jewish Congregations of America regarding
the sweetener. The Orthodox Union asserts Amazon Natural ran an ad in a
magazine called Kashrus that carried a logo indicating its sweetener product
was kosher and suitable for Passover. The Orthodox Union says it owns a
trademark on the logo, and is responsible for certifying products as kosher.
Mr. Sylver says he doesn't know anything about the lawsuit and says he has
never heard of the Orthodox Union. "I have no idea what this is. We didn't
advertise any products as kosher, and we didn't advertise in any Jewish
magazines," he says.
But Howard Katzenstein of the Orthodox Union says he spoke with Mr. Sylver
before the lawsuit was filed. "He was not cooperative," Mr. Katzenstein says.
The clerk's office of the U.S. District Court in Brooklyn, N.Y., confirms the
case was filed on May 25, 1999.
Message-board users have also taken issue with other predictions by Amazon
Natural. In press releases, the company predicted annual sales of $75 million
in 1998, $125 million in 1999 and $250 million in 2000. Mr. Sylver says the
actual sales figure for 1998 is "around $800,000." He says the bulk of the
company's sales come from orders placed directly to the company.
"We will eventually meet those [revenue] goals and even surpass them," Mr.
Sylver says. He says that assuming the lawsuit is able to stop the online
bashers, the company should have sales of $75 million and earnings of $50
million next year.
"Once this is all over and done, we're going to get back in there and do
everything we said we were going to do," he says.
Write to Jason Anders at: jason.anders@news.wsj.com
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