Re: 7/21/00 - [TVCP] In This Cybersmear Settlement, Loose Lips May Cost $1 Million
July 21, 2000
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In This Cybersmear Settlement,
Loose Lips May Cost $1 Million
By AARON ELSTEIN
WSJ.COM
Don't ask Gary Dobry or David Shepard what they think of Talk Visual Corp. or its chairman, Michael J. Zwebner. They aren't allowed to tell you.
As part of a settlement reached last week, the two men, who had been sued by Mr. Zwebner for posting "false and defamatory" statements on Internet message boards, agreed to never again speak publicly about Talk Visual (www.talkvisual.com) or Mr. Zwebner or face a fine of $1 million.
Mr. Dobry, 35 years old, runs a boxing gym in Palatine, Ill. He says he decided to settle because he didn't want to face a prolonged legal fight in New Hampshire, where the case was filed.
Mr. Shepard of Lake in the Hills, Ill., couldn't be reached.
Mr. Dobry says Mr. Shepard runs the gym's Web site, and Mr. Shepard's credit card was used to open the account under which Mr. Dobry posted the allegedly defamatory messages. The pair's lawyer, Gregory Martucci, says his clients "have agreed to keep their mouths shut."
The settlement offers a glimpse of how corporate suits filed against online critics sometimes get resolved. At least 80 cases have been filed by companies claiming that they or their managers were defamed on Internet message boards. Legal experts say few ever get to trial, in large part because most individual defendants settle out of court because they can't afford to take on a company in court.
Megan Gray, a Los Angeles lawyer who defends clients named in cases involving libel on the Internet, says the confidential nature of these settlements makes it impossible to determine how many suits have been resolved this way. But she says such agreements are what companies are aiming for when they sue their online critics, even though virtually all ask for monetary damages when filing suit. "The whole point of these suits to is silence people," she says.
Companies, however, generally say they file suit against anonymous message-board posters to defend their reputations. To ignore malicious postings, they say, is to at least tacitly acknowledge they are true.
Mr. Zwebner is known as a hard-liner with his online critics. He has filed three such suits against them so far, which is believed to be more than any other executive. In addition to the case that recently settled, another suit is pending in state court in Massachusetts. An earlier case, also filed in New Hampshire, also was settled out of court.
Mr. Zwebner announced his settlement with Mssrs. Dobry and Shepard by issuing a press release July 13 with the headline: "Talk Visual Chairman Wins $1 Million Judgment Against Libelous Internet Poster." He said in the release that closure of the case "confirms to the public at large the real true facts, the truth, as I have always claimed it to be." Mr. Zwebner didn't return a call Thursday.
But the press release was misleading because, in fact, Talk Visual hasn't won any money yet. Mssrs. Dobry and Shepard won't pay $1 million unless a court determines they violated the terms of their settlement.
The settlement requires the two "will not discuss Zwebner or Talk Visual ... with anyone, irrespective of whether such discussion is disparaging or not disparaging." If either is asked about Mr. Zwebner or Talk Visual, they are required to respond: "Pursuant to an agreement, I cannot discuss this topic." If asked about the agreement, they may not elaborate. "The matter has been settled and closed," is the required response.
The settlement also required the two defendants to issue a public apology, which was included in Mr. Zwebner's press release. The settlement doesn't involve a third person named in the suit, Ramon Silvestre of Hayward, Calif. Mr. Silvestre couldn't be reached.
Mr. Zwebner's case stems from postings Mssrs. Dobry and Shepard made on the stock-chat site Silicon Investor (www.siliconinvestor.com) concerning DCI Telecommunications, Stratford, Conn., and on Raging Bull (www.ragingbull.com) regarding Legacy Software, which is now known as Talk Visual.
Mr. Zwebner was a shareholder in DCI after selling his British phone-card marketing firm to the company in February 1997, according to the suit.
In October 1998, when DCI was looking for a buyer or additional investors, Mr. Zwebner alleged that Mssrs. Dobry and Shepard "disseminated lies" on Silicon Investor by posting anonymously authored messages accusing Mr. Zwebner and his brother of selling short stock in DCI and saying the Securities and Exchange Commission and Federal Bureau of Investigation were investigating. (Short sellers profit from falling stock prices by selling borrowed stock. They then hope to repay the loan by buying stock later at a lower price.)
In court papers, Mr. Zwebner denied ever short selling the stock and said there was "absolutely no investigation" by the SEC or FBI concerning his actions with DCI.
The online attacks resumed in April on Raging Bull, according to the suit. By this time, Mr. Zwebner was chairman of Legacy Software, which has since changed its name to Talk Visual. Based in Miami, Talk Visual says it develops video-teleconferencing equipment.
Mr. Zwebner says Mr. Dobry, who posted under the aliases "Captin Crunch" and "FBN Annihilatr," accused him of "intimidating investors with scare tactics" and falsely called him a "notorious penny stock promoter doing shady deals from European boiler rooms."
Mr. Zwebner, a British citizen, said in his suit that the cumulative effect of the postings has been "anguish and emotional distress" as well as a "loss of faith" by investors in Talk Visual, thereby causing a "substantial drop" in its stock price. Since April 18, the date Mr. Dobry resumed his online campaign against Mr. Zwebner, according to court documents, Talk Visual's stock has slipped from 1 7/32 to about 9/16 Thursday on the OTC Bulletin Board.
There may be other reasons behind the sluggish performance of Talk Visual's stock. According to its most recent financial statements, the company posted a loss of $780,000 for the quarter ending March 31 on revenue of $342,000.
Although the company describes itself in press releases as a "pioneer in the video teleconferencing industry," only $26,000 of its revenue came from selling telecommunication services and software. The other $316,000 was derived from renting out property in Toronto and Sacramento, Calif.
Write to Aaron Elstein at aaron.elstein@wsj.com
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