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To: Jeffrey S. Mitchell who wrote (720)	8/31/2000 3:09:50 PM
From: Jeffrey S. Mitchell	Respond to of 12465

Re: 8/31/00 - [EMLX] WSJ: FBI Arrests Man on Charges Related to Press-Release Hoax August 31, 2000 -------------------------------------------------------------------------------- FBI Arrests Man on Charges Related to Press-Release Hoax A WSJ.COM News Roundup The Federal Bureau of investigations on Thursday arrested a man suspected of putting out a bogus press release that sent the stock of Emulex Corp., a high-tech company, plummeting last week. The FBI said the man made nearly $250,000 by trading on Emulex stock. Federal prosecutors said the suspect was being transported to the U.S. Attorney's office in downtown Los Angeles. The U.S. Attorney's office said it will offer more details on the matter at a news conference later Thursday. The phony release, issued last Friday, said that the chief executive of Emulex, a Costa Mesa maker of fiber-optic equipment, had quit and that the company was restating its quarterly earnings from a profit to a loss. Emulex's stock plunged as much as 62% in the minutes after several financial news services ran stories based on the fake release. The stock eventually recovered most of its ground after the company denied the reports. Shortly aftre the arrest Thursday, the company's chief executive, Paul Folino, said the suspect wasn't associated with the company. In an interview on CNBC, Mr. Folino said the man was an active trader in Emulex stock. Mr. Folino said the man left electronic footprints on the Internet that made it easy for the FBI's fraud unit to track him. "It's difficult for people to get away with this kind of crime," Mr. Folino said. "They were on the trail almost instantaneously." Mr. Folino said he was "ecstatic" about how quickly authorities acted and that investors should be reassured that such hoaxes will not go unpunished. Mr. Folino said small investors were hurt most by the hoax. Institutional investors took the time to check the news before acting, he said. Within an hour and a half of the hoax, the company refuted the "news." But not before the stock plunged 60% at one point on the Nasdaq Stock Market, cutting Emulex's market value by $2.45 billion to $1.62 billion. Past hoaxes involving high-tech companies include a fake news release designed to appear as if it came from Lucent Technologies Inc. that was posted on a Yahoo! Inc. message board. The release warned of a profit shortfall for the company's fiscal second quarter. And in a 1999 case, the SEC brought charges against an employee of PairGain Technologies Inc. The employee, who posted a bogus news article about his company on a Web site designed to look like a Bloomberg News site, ultimately pleaded guilty to two counts of securities fraud and was ordered to pay $92,000 in restitution. interactive.wsj.com