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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: Janice Shell who wrote (288)	6/1/2000 2:34:00 PM
From: Jeffrey S. Mitchell	Respond to of 12465

Re: 6/1/00 - Itex Swallows a Bitter Pill To Settle 'Cybersmear' Suit June 1, 2000 -------------------------------------------------------------------------------- Itex Swallows a Bitter Pill To Settle 'Cybersmear' Suit By AARON ELSTEIN WSJ.COM A beleaguered bartering company has learned the hard way that if you can't beat 'em, you may have to join 'em -- or at least help fund their cause. Itex, the Portland, Ore., company that filed suits against its online critics, recently agreed to a settlement under which it would donate money to a Web site catering to people who have been sued for online postings. Les French, a former Itex vice president who was sued for posting defamatory messages on the Yahoo! Finance message board, confirmed this week that Itex agreed to give $40,000 to his John Does Anonymous Foundation as part of a confidential settlement in April. Mr. French had countersued the company, arguing Itex's suit was frivolous. Mr. French said he is using the money to operate (www.johndoes.org), a Web site where anonymous posters who have been sued -- commonly called John Does in court documents -- can swap stories and strategies. Previously he had run a similar site on Yahoo. As part of his settlement, Mr. French agreed that on any Internet message board discussing Itex, he will post a note that while many of his previous postings were based on publicly available statements from the company, others were his opinion and may have "caused confusion to the public." "This all in all is a very satisfying settlement," Mr. French says. Itex's general counsel, Robert Harris, declined to comment on the settlement's terms, which he said were intended to be confidential. He said the company, which has new management and is relocating to Sacramento, Calif., had decided "it would be a better use of its resources" to settle the suit. The case began in September 1998, when Itex sued 100 "John Does" in Oregon state court for posting messages on Yahoo that the company said were defamatory and interfered with its economic relationships. Itex later identified Mr. French as one of its online critics after presenting Yahoo's legal department with a subpoena. Mr. French said he started posting messages on Yahoo under the alias "whadayaknow" because he was in contact with federal securities regulators who were investigating Itex's accounting practices. He never divulged that fact in his postings, but nonetheless posted many messages critical of Itex's management, directors and decisions to sell stock in the company and offer unregistered shares to overseas investors. The transactions were disclosed in regulatory filings. In December 1998, three months after the "cybersmear" suit was filed, Itex's shares were delisted from the Nasdaq Stock Market. The company cited an ongoing investigation by the Securities and Exchange Commission and delays in filing its annual report for the delisting. In a message the company cited in court documents as "false and misleading," Mr. French wrote, "Why does not the company tell the full truth to its owners about the full and true reasons for termination of its Nasdaq membership?" In September 1999, the SEC sued Itex, former Chief Executive Graham H. Norris, and other officers for fraud, alleging that the company "materially inflated its revenues and earnings" and failed to disclose suspect or sham barter deals. Itex agreed to restate 1997 earnings and Mr. Norris agreed to pay a $50,000 fine. Itex's chief financial officer, Joseph Morris, settled with the government earlier this year without admitting or denying the SEC's allegations, but agreed to be banned from serving as an officer or director at a public company for five years. A case against Itex's founder and original chief executive, Terry L. Neal, is still pending. The SEC alleges he orchestrated a broad scheme to conceal sham deals with various offshore entities that were linked to or controlled by him. Mr. Neal is contesting the charges, said Greg Bruch, an assistant director of enforcement at the SEC. Itex recently installed a new management team and agreed to the settlement with Mr. French in mid-April. Its stock, which is quoted on the Pink Sheets, a price list of tiny stocks compiled by the National Quotation Bureau, traded at nearly 1/2 Wednesday. The shares were trading as high as 4 5/8 before they were delisted. Mr. French says he decided to start an independent "John Does" Web site because of Yahoo's willingness to reveal the identity of online posters in the case without telling the people about it. A spokeswoman for Yahoo says the company's policy since April has been to notify posters when information about them is subpoenaed and not turn over anything for 15 days. "I appreciate they have a new policy," Mr. French says. "But Yahoo continually identified people in this case and many others without letting people know what they were doing, and I don't trust them." Write to Aaron Elstein at aaron.elstein@wsj.com Copyright ¸ 2000 Dow Jones & Company, Inc. All Rights Reserved. interactive.wsj.com