Ben Ezra Weinstein and Company filed a lawsuit yesterday in a New Mexico county district court seeking damages over AOL's alleged posting of erroneous share and volume information concerning the company's stock in the service's financial area. The suit also claims AOL "backpedaled" on knowing about the problem.
The case centers on AOL's posting of share information on several over-the-counter stocks in which the decimal points were misplaced, throwing off price and volume data by several points. Ben Ezra's stock (BNEZ), trades over the counter on pink sheets, as opposed to an issue on the Nasdaq market.
Although AOL said the problem was first discovered on March 4, Ben Ezra executives say the problem first surfaced several weeks ago.
Ben Ezra's stock tumbled as investors incorrectly thought the share price had dramatically dropped, according to Mike Weinstein, Ben Ezra's COO and cofounder. The company then made a frantic call to AOL to report the problem, he said.
AOL technician Jim Hoscheit returned the call and left a message on Weinstein's answering machine noting the problem and the steps the online service would have to take. The suit says Hoscheit, in his March 5 message, reported the following: "A few weeks ago, we got reports from a few members that there was an incorrect price on a stock that was off by a factor of exactly 1/10. Basically, it was a decimal truncation error." That is, a $12 stock would turn into a $1.20 stock, Hoscheit said.
AOL's Jim Hoscheit on length of problem
Once the code arrived on March 4 and was installed by AOL, it then threw the pricing and volume off by a factor of 100 for some over-the-counter companies, the suit alleges.
"They knew about this for several weeks," said Weinstein. "What bothers me is they were clearly aware of this but didn't put up a splash screen right away. If we were a stock traded on the New York Stock Exchange, they would have fixed it right way."
Weinstein also questioned why AOL never set up the splash screen to warn investors, which he says Hoscheit had indicated was in the works.
AOL's Jom Hoscheit on notice to memebers
"It was one company and one case, so we never did a splash screen," Primrose added. "And we never put up a splash screen for the other issue because the problem was quickly corrected."
Primrose said the lawsuit is without merit. "We can't see how the company was injured and believe the problem originated with the quotes provider," adding that Ben Ezra appears to be seeking publicity.
But Weinstein said AOL's response was off base. "The only publicity stunt is AOL attempting to convince the public that this issue only arose on March 4. Their assertions are poppycock and without merit from a company that is desperate about its own record with glitches."
During the time of the snafu, Ben Ezra saw its stock fall from a close of $1.84 a share on March 5 to trade as low as 87 cents the following day. The stock then rebounded to finish that day at $1.30 a share.
Ben Ezra closed at $1.87 yesterday.