Someone who goes by "Steve Pluvia" likes to lurk in and out of online investor bulletin boards, swapping his stock research and analyses with other market speculators.
That practice is not unusual, as Pluvia is only one of many Netizens who use pseudonyms on the Net. But a series of critical comments he made last month sparked a company to offer a $5,000 reward for the revelation of his true identity. Although Pluvia has since revealed himself, the case has raised important issues ranging from securities regulations to the First Amendment.
On August 20, Westergaard Online charged that Pluvia had been spreading "disinformation designed to drive down the price of Premier Laser Systems' (PLSIA) common shares." Westergaard put up the bounty as part of a paid service it offers to Premier, a developer of medical and dental laser equipment.
Pluvia vs. Westergaard has turned into a tangled dispute that unfolded almost entirely in cyberspace, where those who frequent investor chat rooms acted as both spectators and referees. The conflict raises concerns about the reliability of financial information on the Net, a medium that makes it easy for investors and publishers to hide their identities, affiliations, and motives. The altercation also brings up the issue of libel, as both parties claim they were damaged by each other's online comments.
The controversy has acquired even more urgency as the Net is increasingly relied upon for instant stock prices, financial news analysis, and real-time trading. A slew of sites are designed for market players to exchange advice and debate Wall Street's expectations.
Among their various contentions, both Westergaard and Pluvia accuse each other of driving a secret agenda to shape the online community's perception of Premier's stock potential.
Premier paid Westergaard up to $30,000 to build a customized Web site that features up-to-date stock prices, commentary, and headlines that are written by Westergaard and other sources. The service, dubbed Westergaard Broadcasting Network, publicly launched yesterday.
Under the deal, Westergaard also surfs the Net, sniffing out "bad" information that could hurt Premier's stock performance. After identifying "fraudulent" data, Westergaard's lawyers will contact its source and attempt to eliminate the information.
"It is very disturbing that Premier Laser Systems, a public company, can hire a stock promoter like Westergaard to intimidate persons who present negative information about Premier's stock," Pluvia said. "Westergaard was hired to keep the company's stock from being publicly debated."
Pluvia added that his posts to the Motley Fool, Silicon Investor, and America Online's Shark Attack section were cautiously crafted and that Westergaard's accusations are ruining his credibility. He told CNET's NEWS.COM that he plans file a libel suit against Westergaard.
In turn, Westergaard said it only tried to hunt down Pluvia so it could expose his "mixed agenda" to online investors. As part of an independent venture, Pluvia acknowledged that he rented out the equipment of Premier's main competitor, Ion Laser Technology (ILT), to at least three dentists. Although Pluvia said he owned stock in that company for two days in July, he doesn't own any now.
A week ago, Pluvia disclosed his real identity to Westergaard, but he still asked that his real name not be used for this story. Westergaard has since withdrawn some of its accusations. However, some of Pluvia's assertions about Premier's sales and product performance already were proven to be true in a press release the company issued this week.
"I'm not saying that specific items he said about the company were false, but he did present an unbalanced picture. He misrepresented his involvement," said the financial site's founder, John Westergaard. "There is a huge problem of false and misleading information being circulated on the Internet. This is stock manipulation. People can be damaged and lose a lot of money."
Westergaard and Pluvia aren't the first to fight over the accuracy or legality of investment information and user comments on the Net. The Securities and Exchange Commission has filed charges against online newsletter publishers that allegedly profited from stock they inflated with upbeat reports.
"Just as agencies may be concerned about the hyping of stock, there is the same concern over business disparagement," said Eric Schlachter, an attorney with Cooley Godward who also teaches a cyberspace law course at Santa Clara University's School of Law.
"It isn't just the SEC; sometimes the Federal Trade Commission gets involved," he added. "So anyone posting financial misinformation could get in a lot of trouble."
The National Association of Securities Dealers Regulation says while it will "aggressively pursue securities fraud or stock manipulation perpetrated on the Internet, it would be an impossible logistical task to monitor every investment-related posting at thousands of chat rooms, bulletin boards, newsgroups, and home pages."
Instead, NASD Regulation has launched an investor education program to combat the problem. "Never make an investment decision based solely upon what you read online," the program states. "Even if motives are honest, there are no guarantees that the information is accurate or that the advice is sound. The real-time nature of the Internet, combined with its growing base of users, makes it a prime target for stock touting and bashing."
Legal battles have also been waged between companies and three major online service providers over allegedly libelous posts. From a legal standpoint, there are a few avenues corporations and stockholders can take to curtail the spread of slanted or inaccurate online investment information. Companies can sue on the grounds of trade libel, business disparagement, or unfair competition, for example.
In Stratton Oakmont vs. Prodigy, the online service was sued for $200 million after an unidentified person used a former Prodigy employee's member account to post claims of fraud against Stratton Oakmont, a securities investment banking firm in New York. The firm named Prodigy a "publisher" in the libel suit, as the comments were posted in the Money Talk section of the online service.
The case was settled out of court in 1995 with no money exchanging hands, but the judge's report stated that Prodigy could be held liable for its customers' activity. However, the Supreme Court's Communications Decency Act ruling this summer indicates that service providers aren't liable, according to Schlachter.
In another example, CompuServe was sued in 1991 over the contents of a daily newsletter it hosted called Rumorville, focusing on media companies and journalists. The plaintiff in the case, Cubby Incorporated, competed with the newsletter and alleged that Rumorville published false and defamatory statements about its operation. CompuServe was not held responsible for Rumorville's editorials.
The most recent online libel case involves online gossip columnist Matt Drudge, who was sued last Wednesday over admittedly inaccurate statements in his Drudge Report that White House adviser Sidney Blumenthal had abused his spouse. Blumenthal is seeking $30 million from Drudge and America Online, which hosts the Drudge Report on its service.
"People who defame other parties online are going to be responsible--this is nothing new," Schlachter said. "But if a person feels aggrieved by an anonymous posting online, they can only sue if they can find the person who posted the message. When the person can't be found or has no money, people often look for the deep pockets instead."
Schlachter said it is doubtful that Congress will pass new laws to prohibit the anonymous posting of online financial information. "Anonymous speech is protected under the First Amendment," he said. Still, legislation has been introduced this year to prohibit sending unsolicited junk email without including a name and physical address.
As for Steve Pluvia, neither Westergaard nor Premier Laser Systems has brought cases against him for the so-called rumors he posted online. On the contrary, it is Pluvia who plans to seek legal vindication for invasion of privacy and libel.
"[My online name] is a very important identity to me," he said. "These accusations are damaging my reputation."
Westergaard remains unapologetic. "We wanted to see if could pierce his veil of anonymity. If he wants to sue me, be my guest. This is all part of defining this lawless world of the Internet."