I hope you are paid well to bash stocks.
Judge Fines 4 Online Posters
For Not Answering Questions
By AARON ELSTEIN
WSJ.COM
Four Internet message-board posters embroiled in a bitter defamation suit decided to
shut up in court, so now they have to pay up.
A California state judge fined the four, who are among the most popular members of
Silicon Investor (www.siliconinvestor.com), $18,967.50 for refusing to answer questions
about their postings that a California businessman is a "criminal."
It appears to be the first time a judge has fined someone involved in a "cybersmear"
case, lawyers say.
Judge Janis Sammartino didn't decide on the merits of Bryant Cragun's lawsuit against
the posters. But because they produced "the same 'boilerplate' objection" in written
answers to all questions from Mr. Cragun's lawyers, the judge ruled that "monetary
sanctions are justified."
Floyd Schneider, a mortgage banker in Rochelle Park, N.J., says he and co-defendants
Stephen Worthington, a San Francisco money manager, Michael Morelock of
Greenwood, Ark., and George Joakimidis of Athens, Greece, will divide the fine
amongst themselves and continue the fight.
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"We'll win this case in the end," says Mr. Schneider, who goes by the popular online
screen name "The Truthseeker."
Daniel Pascucci, a lawyer for Mr. Cragun, says he is pleased with the ruling, which was
issued Friday and posted on the Web site for the California Superior Court in San
Diego. "We said, 'OK, you're all saying a lot of things, now go prove them,'" Mr.
Pascucci says. "They haven't done it."
Mr. Worthington didn't immediately respond to e-mail messages Wednesday, Mr.
Morelock declined to comment and Mr. Joakimidis couldn't be reached. Their attorney,
James Shalvoy, declined to comment.
Charles Solomont, a Boston lawyer who has pursued several cybersmear cases, says
he isn't surprised that the defendants have refused to cooperate. "It's typical that people
in these cases don't think they'll get caught because they publish messages
anonymously. And when their identities are uncovered they don't think they are any
consequences for their actions," he says.
'The Truthseeker' Faces Another Legal Tussle (May 17)
ZiaSun Cyber-Libel Lawsuit Is Dismissed on a Technicality (March 1)
Silicon Investor Deletes Posts In ZiaSun Cyber-Libel Case (Feb. 7)
Net Firm Wins First Round In Battle With Online Critic (Jan. 26)
ZiaSun Sues Its Online Critics As Posts Get Nasty And Personal (Agu. 13, 1999
The case is a product of the Internet age. The defendants are some of the Internet's
most outspoken critics of what they deem to be overvalued stocks, and their
frequently-caustic remarks are closely followed by thousands of friends and foes. More
than 100 cases have been filed around the country by companies who feel they are
being unfairly attacked by these kinds of critics, but few have advanced in court so far
or have been so contentious for so long as this one.
The fight began in the spring of 1999, when the four defendants started regularly
posting messages on Silicon Investor about ZiaSun Technologies, a tiny Solana Beach,
Calif., Internet-holding company where Mr. Cragun once served as president. ZiaSun
emerged in late 1998 amid the mania for Internet stocks and online trading. Its largest
holding is a Utah company called Online Investors Advantage, which offers seminars on
sophisticated trading strategies to novice investors. Previously, the company had
operated under another name and had been trying unsuccessfully to market a device
that enables people to bottle their own soft drinks in grocery stores.
The online critics relentlessly criticized ZiaSun, alleging that Mr. Cragun had misled
investors by marketing shares in ZiaSun's predecessor as an initial public offering
when they were already trading. Mr. Joakimidis, the online critic from Greece, contends
that he lost money on $377,300 worth of shares in ZiaSun and other tiny companies that
he bought based on information provided by a brokerage firm allegedly controlled by
Mr. Cragun. In a countersuit, he contends that the firm's officials "failed to disclose the
true financial condition" of the companies. Mr. Cragun's lawyers deny the charges, and
the case is pending.
Unlike many Internet start-ups, ZiaSun is profitable. According to its latest financial
statements, the company posted a profit of $4.2 million, or 16 cents a share, for the six
months ending June 30, compared to a profit of $1 million, or 4 cents a share, a year
earlier. But investors haven't been impressed. ZiaSun's stock, which is quoted on the
OTC Bulletin Board, traded for $3.06 Wednesday, down from $10.44 in mid-April, when
the company and Stockreporter, a German stock promoter, both issued press releases
saying ZiaSun stock was "tremendously undervalued" and worth $28.50 a share.
In a separate development, the Securities and Exchange Commission on Wednesday
filed a civil case against Stockreporter's parent, World of Internet.com, and its owners,
saying they failed to disclose the source or nature of their compensation. The SEC
alleges that Stockreporter was paid 5,682 ZiaSun shares at $11 each to write the
favorable report, but doesn't say who paid the shares. A ZiaSun spokeswoman says
the company didn't pay Stockreporter or World of Internet.com for the report.
Fed up with repeated attacks from Mr. Schneider and others, ZiaSun had responded by
suing them for defamation in U.S. District Court in Seattle in June of 1999. That case
was dismissed in January because the judge ruled it had been filed in the wrong court.
It since has been transferred to federal court in San Francisco, where it is pending.
Meanwhile, Mr. Cragun proceeded with his own case against four of the
message-board posters in California state court, where he has sought to silence Mr.
Schneider.
In January, he won a restraining order preventing Mr. Schneider from posting
messages suggesting he has engaged in criminal activity. He also won a separate
court order requiring Mr. Schneider to retract a report he published on the Internet
recommending people sell their ZiaSun shares. Mr. Cragun contended that the report
"may be false or imply false facts." Mr. Schneider maintains that his report was
accurate.
Last month, ZiaSun filed a motion in federal court in San Francisco arguing that Mr.
Schneider violated a federal court injunction, issued when its case was being heard in
Seattle, that prohibited him from publishing "false statements" about ZiaSun. ZiaSun
alleges in its motion that Mr. Schneider posted messages saying that the company
engaged in "improper promotion techniques," among other things. "He was at first
compliant with the court order, but has become less so," says Christopher Howard, a
lawyer for ZiaSun.
A hearing on the matter is scheduled for Oct. 4 and Mr. Schneider says he plans to fight
it. "If ZiaSun folks aren't aware of their improper promoting, they should ask the SEC,"
he says.
But in the meantime, Mr. Schneider, who has published something about ZiaSun on
Silicon Investor or another message board, Raging Bull, almost every day since April
1999, says he will be stepping back a bit.
On Aug. 30, he went onto Silicon Investor to declare his "permanent retirement" from
posting any messages about Mr. Cragun or the companies he is involved with and is
focusing on his legal defense. "Further posting by The Truthseeker is no longer
necessary," he wrote, although he has continued to publish messages about other
subjects. He says he expects to resume publishing after his legal battles are over.
Mr. Worthington, believed to publish under the alias "Auric Goldfinger," has defended
himself the most aggressively of all the defendants according to people involved in the
suit. In that vein Auric Goldfinger published a lengthy statement Monday on Silicon
Investor promising that the fight with Mr. Cragun would continue. |
