The Nile is long, trecherous and difficult to navigate;
Internet Wire's lucky they aren't a public outfit, I think this guy would react a bit differently (probably doesn't own emlx).
m2
August 29, 2000
Internet Wire Vows to Increase
Oversight, Retain Key Policies
By AARON ELSTEIN
WSJ.COM
Internet Wire, a distant contender in a market dominated by two giants, has a plan for narrowing the gap: make it easier for clients to distribute their press releases.
The strategy needs some tweaking, company officials said Monday, the first business day after Internet Wire distributed a false press release about Emulex Corp. The hoax pounded shares of the Costa Mesa, Calif., company and made Wall Street wary of believing everything it reads.
But six-year-old company is standing by policies designed to make it easy -- too easy, some say -- to disseminate information.
On Monday, Michael Terpin, founder and chief executive of closely held Internet Wire, spent the morning conferring with venture investors, including Sequoia Partners, Hummer Winblad Venture Partners and others, which have infused the company with $17.5 million. Their remedy: Hire a "compliance officer" to oversee overnight operations and in the morning, give all releases collected overnight a second read to check for errors.
"We are simply adding an additional level of verification," says Mr. Terpin.
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The Los Angeles-based service mistakenly published the false report after someone pretending to be an Emulex representative tricked Internet Wire's night crew by saying the release had been approved the previous day, says Mr. Terpin. The release erroneously said Emulex's chief executive was resigning and that the Securities and Exchange Commission was investigating.
Emulex officials denied the report, but not before its stock plunged more than 60%, wiping out $2.4 billion in market value, before recovering most of its ground by day's end. The company's shares closed down $6.25 to $99.50 in Nasdaq Stock Market trading Monday.
Mr. Terpin says his firm's policy is to call all parties who submit releases to verify the source and content before publishing. He acknowledges that in the Emulex case, something went wrong, but says the breach was caused by an "unusually sophisticated hoaxster" rather than Internet Wire's policies.
Internet Wire counts 2,500 customers, including such media outlets as Bloomberg News, Dow Jones & Co., CBS Marketwatch and Screaming Media, as well as 300 public-relations firms.
Until now, the company's security efforts were focused on preventing hackers from violating its computers. "We've spent a lot of time guarding against people breaking into our computer system to send false releases," Mr. Terpin says. "We're now going to set up safeguards on another front."
But Internet Wire has policies that leave it more vulnerable to fraud than Business Wire or PR Newswire, the giants in the field of disseminating corporate press releases, says Jeffrey Bedser, managing director of Internet Crimes Group, a Princeton, N.J., firm that specializes in investigating online fraud.
Internet Wire gives clients the chance to open an account and submit an online press release at the same time with a single click. Officials at Business Wire and PR Newswire, both claiming about 40,000 accounts each, say they only accept online press releases from existing, verified customers.
Emulex has no account with Internet Wire. Mr. Terpin, citing government investigations, won't elaborate on how the impostor was able to circumvent Internet Wire's system, but said it wasn't related to the policy of accepting online submissions from new accounts. There are no current plans to change the policy, he added. "We want to automate the process to make it more convenient for our customers."
Mr. Bedser also noted potential vulnerabilities in the way Internet Wire collects payment for its services. Clients can pay the $325 distribution fee by submitting their credit-card number, which permits rapid verification of client information. But clients can chose not to reveal that information and instead receive a bill via regular mail.
Again, Mr. Terpin said this payment policy wasn't a factor in the Emulex situation and said there are no plans to change this procedure.
Several government agencies are investigating Friday's hoax, including the SEC and Federal Bureau of Investigation. Mr. Terpin said his firm has contributed phone and computer records.
Friday's incident wasn't the first time a hoaxster managed to cause havoc for a press-release service. Last year, Business Wire sued three people after they disseminated information over the service about a phony company called Webnode. The parties settled out of court. And earlier last year, shares of PairGain Technologies Inc. surged after an employee used an online message board to create a false press release saying the company had agreed to be acquired. (PairGain did eventually sell itself to Advanced Communications Technologies).
Earlier this year, Lucent Technologies was hit when a fake news release was posted on a Yahoo! message board.
On Monday, several news organizations said they are reviewing whether to continue accepting Internet Wire's press releases. "It's fair to say that everyone will be a bit cautious when reviewing releases from that source," said Vickee Adams, a spokeswoman at Dow Jones, which publishes WSJ.com and The Wall Street Journal.
Mr. Terpin acknowledged that Internet Wire has lost one client, whom he declined to identify, in the wake of the Emulex episode. But he expressed confidence that his company can survive its latest challenge.
"Our clients have been very understanding," says Internet Wire's public relations manager, Amy Orebaugh. She said both Emulex and Internet Wire were victims of fraud, "Although I guess you could say that Emulex was in a more difficult situation." |
