Internet hoaxers target Lucent

While other companies have fallen prey to similar scams recently, the Lucent case is a bit different. Here, the target wasn’t a small or relatively unknown company such as the others. It was one of America’s biggest corporations and the most widely held stock, sending a message that no company is immune.

The US Securities and Exchange Commission (SEC), which has been concerned about an explosion in stock manipulation and fraud scams on the Internet, is looking into the matter. The agency moved swiftly in a similar case last April, bringing charges against an employee of PairGain Technologies who had posted a bogus news article about his company.

"The Internet is an increasingly easy, efficient, fast, simple and inexpensive way to spread false information about a company in an effort to drive a stock price up or down," John Reed Stark, chief of Internet enforcement for the SEC, said in an interview Thursday. Stark, issuing the standard agency line, refused to deny or confirm that the SEC was investigating the Lucent case. But he did note that SEC Chairman Arthur Levitt was quoted in news reports as saying the agency was looking into the matter — a rare acknowledgement for the SEC.

Jeff Baum, a spokesman for Lucent, said the company learned of the fake posting Thursday morning after it began receiving calls from concerned investors. He said that Lucent has been in contact with Yahoo and the SEC, but declined to comment further about potential legal action.

Rumours that Lucent would issue a profit warning began circulating in Internet chat rooms Wednesday and had pushed the company’s stock down 4 3/8, or 6.5 per cent, to 62 5/8. The stock fell as low as 60 3/8 Thursday but changed course after the company denied the bogus release. It closed up 2 3/16 to 64 15/16 Thursday on the New York Stock Exchange.

Analysts expect Lucent to report second-quarter earnings of 22 cents a share, according to a First Call/Thomson Financial survey. The bogus release had said Lucent expected earnings per share "to be in the range of 14 to 17 cents compared to 17 cents for the year-ago quarter."

The bogus release was posted by someone using the screen name "hot–like–wasabe." It was designed to look like a legitimate news announcement from Lucent put out over a newswire for company press releases. It came complete with a dateline and standard disclosure statements at the end.

Although Yahoo pulled the original release from its message boards, other copies did appear. Ironically, buried among the disclosure statements in one them was the comment, "…this a joke you idiots." This isn’t the first time that publicly traded companies have fallen victim to online hoaxes about company news.

In February, hackers broke into the Web site of biotechnology company Aastrom Biosciences, of Ann Arbor, Mich., and posted a false notice of a merger between Aastrom and its rival, Geron, of Menlo Park, Calif. The phony release sent shares in both companies soaring before the companies debunked the news.

Last April, an online prankster created a Web page that resembled a Bloomberg news site with a story about a supposed $1.35 billion takeover of Tustin, Calif.-based telecommunications company PairGain Technologies. The news spread throug online bulletin boards, causing PairGain’s stock to jump before it was exposed as a fraud.

Federal authorities quickly traced the online rumor to a PairGain employee in Raleigh, N.C., who pleaded guilty to two counts of securities fraud and was sentenced to five years’ probation last August. "As access becomes more prevalent, more and more people are going to use the Internet for good and bad," Stark said.

Securities regulators are quick to advise investors to be increasingly wary of what they read online, and to make sure they do their research before making investment decisions. "People have got to be skeptical about what they read on message boards, whether it’s a stock tip or a press release," says Marc Beauchamp, executive director of the North American Securities Administrators Association. "It’s so easy to do this kind of thing."

Some online services make it easy for con artists to hide their identities. On Yahoo, for example, users can keep their identities and e-mail addresses private. Yahoo bars users from posting messages that are "unlawful, harmful, threatening, abusive, harassing, tortuous, defamatory, vulgar, obscene, libelous, invasive of another’s privacy, hateful, or racially, ethnically or otherwise objectionable."

Yahoo said it has no plans to change its policy allowing users to remain anonymous, nor to more actively monitor the content of its boards. Yahoo’s policy is to not monitor its message boards, and when libelous, harmful or threatening information is brought to the company’s attention, it will make a decision whether or not to remove the offensive material, a spokeswoman for Yahoo said.