Re: Firm [AZNT] Says Stock-Chat Sites Conspired to Destroy It
11 February 2000
Firm Says Stock-Chat Sites Conspired to Destroy It
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
A tiny Las Vegas company is suing its Internet critics for defamation, but this isn't your typical cyberlibel case.
The company has taken the unusual step of targeting two prominent stock-chat Web sites -- Silicon Investor and Raging Bull -- alleging that they conspired with message-board participants to destroy the
firm.
Amazon Natural Treasures, which makes a variety of health-care products with ingredients it harvests from rain forests in Brazil, filed the lawsuit Tuesday in U.S. District Court in Las Vegas against five message-board users, another 113 unnamed posters, 20 unnamed companies it identified as "black corporations" and the two stock-chat sites where posts about the company were made. The company is suing each defendant for $250 million.
Companies have been bringing lawsuits against their online critics with greater frequency recently, but suits against message-board operators are rare. Indeed, Silicon Investor, one of the most popular stock-discussion forums, says this is the first time it's been sued over messages posted by its users.
The suit alleges that all of the defendants, including the message-board operators, are part of an elaborate conspiracy to drive the company out of business. Amazon Natural believes the defendants are working for unnamed short sellers and brokerages, the so-called black corporations, who stand to profit by seeing the company's share price fall.
Michael Sylver, Amazon Natural's chief executive, says his company has used "covert operations" to determine that both Raging Bull and Silicon Investor have been active participants in what he calls a cybersmear campaign against his company. Mr. Sylver says the site operators reviewed libelous messages about Amazon Natural and approved them before they were published online. He declines to elaborate.
Both Raging Bull and Silicon Investor say they don't review posts in any way before they're made.
Making the charges against Silicon Investor and Raging Bull stick will be tough, says Blake Bell, an attorney with Simpson, Thacher & Bartlett in New York who specializes in so-called cyberlibel cases. The Communications Decency Act of 1996 has been repeatedly used to insulate message-board operators and other Internet-service providers from lawsuits arising from the behavior of their users, he says.
"The claims against Silicon Investor and Raging Bull don't have a snowball's chance of prevailing, and I really don't know what [Amazon Natural's] thinking in bringing this case," Mr. Bell says.
Mr. Bell notes that the "Good Samaritan" clause of the act specifically states that message-board operators can't be considered publishers of information posted on their sites, and aren't liable for their content.
"People call me a lot and threaten to sue us, but I inform them that according to the Communications Decency Act, they can't," says Ethan Caldwell, general counsel for Go2Net, Silicon Investor's parent. "I've really never seen anything like this," he says of the allegations.
Amazon Natural has been waging a well-publicized fight against short sellers that began soon after it went public in 1996. Short sellers borrow securities and profit when they are able to repurchase them later at a lower price to repay the loan.
Mr. Sylver says fighting off the short sellers -- and the message-board posters he believes are working with them to attack the company and depress its stock -- has taken up almost all of the company's time over the past two years. Amazon Natural announced last summer that it was preparing to file the lawsuit, and since then there has been rampant speculation on the boards about when, if ever, the suit would be filed.
The individual posters named in the suit are Janice Shell, D. Tod Pauly, Jeffrey Mitchell, Cynthia Demonte and Dean Dumont.
Ms. Shell, an art historian in Milan, Italy, and controversial message-board poster, dismisses the case as "idiotic."
"In all seriousness, the measure of their obsession with me is really insane. They've made up a whole construct of my life," she says. In a July 1999 interview, Amazon Natural's Mr. Sylver said Ms. Shell was the "kingpin" of the cybersmear campaign against the company. He still maintains that Ms. Shell is being paid by short-sellers to hammer away at the company, although he declines to say who he believes is paying Ms. Shell, or to offer any proof.
"All that will come out in court," Mr. Sylver says.
Mr. Pauly, who owns a small manufacturing business in Wisconsin, calls the allegations "absurd."
Mr. Mitchell, a Connecticut software programmer, says the allegations are without merit. "It doesn't cost much to file a lawsuit, and I think they feel like they have nothing to lose here," he says.
Cynthia Demonte and her New York public-relations firm, Demonte & Associates, also were named as defendants. Ms. Demonte once handled public relations for Amazon Natural, and the lawsuit alleges that she was secretly urging investors to sell their Amazon Natural stock and invest in the stock of one of her other clients.
"This is all completely ridiculous, and we will vigorously fight this," she says.
Ms. Demonte says a collection agency is suing Amazon Natural on her behalf to recover about $7,000 she says she is still owed for the work she did for the company. Mr. Sylver denies owing Ms. Demonte any money.
Mr. Dumont, who is also named in the suit, didn't return telephone calls seeking comment.
"As for the broad conspiracy charges against the posters, this complaint seems to be particularly vague. This is the only complaint like this I've ever seen that doesn't point to specific messages and say why those messages are false," says Mr. Bell of Simpson, Thacher & Bartlett.
The case seeks to enter into evidence all of the messages on Silicon Investor and Raging Bull relating to the company. Almost 25,000 messages have been posted about the company on Silicon Investor, and more than 22,000 have been posted on Raging Bull.
Mr. Bell says he would expect that one or more of the defendants would bring a motion to dismiss the case based on a lack of specific allegations against them.
Amazon Natural says it would be willing to let Raging Bull and Silicon Investor out of the case if the sites agreed to close message boards dedicated to discussion the company, and promised to prohibit members from ever discussing Amazon Natural again.
Raging Bull declines to discuss details of the case but says it won't limit what topics its users can discuss. Silicon Investor declined to comment further on the case.
Amazon Natural's online critics have taken the company to task over a number of announcements regarding new products and earnings that, so far, have yet to materialize. Beginning in 1997, the company issued press releases trumpeting its innovations, including a "cream protection against AIDS," a chewing gum that can be used in place of brushing teeth and a scalp cleanser that cures baldness.
Mr. Sylver says the company can't afford to produce and distribute those products and others because of the cybersmear campaign.
The company's flagship product is a sweetener that competes with products such as Equal and Sweet 'n Low. In press releases, the company predicted that sales from that product alone would reach $50 million in 1998 and would contribute to overall sales of $75 million in 1998, $125 million in 1999 and $250 million in 2000.
But sales have fallen far short of those predictions. According to U.S. Securities and Exchange Commission filings, 1998 sales were $392,000 and the company had a net loss of $4.8 million. For the nine months ended Sept. 30, 1999, the company had sales of $103,000 and a net loss of $442,000. No other financial information is available.
Amazon Natural's shares were quoted Friday around 80 cents on the Pink Sheets, a service owned by the National Quotation Bureau that lists small, infrequently traded stocks with light reporting requirements. Its shares had traded above $2 in 1997.
Write to Jason Anders at jason.anders@wsj.com.
From "Heard on the Net" |
