Emulex suit targets media
|
|
September 1, 2000: 5:48 p.m. ET
Shareholder class action targets messengers: Bloomberg, Internet Wire
|
NEW YORK (CNNfn) - A Boston law firm has filed a class action lawsuit against Internet Wire and Bloomberg L.P. on behalf of Emulex shareholders, accusing the news services of disseminating and reporting a fake press release that sent the company's stock price into a headlong dive last Friday.
The lawsuit, filed by Schatz & Nobel in the U.S. District Court for the Southern District of New York late Thursday, alleges the two news wire services recklessly distributed "materially false and misleading information concerning Emulex," a Costa Mesa, Calif.-based maker of electronic components that connect computer systems to network storage devices.
Click here to learn how to protect yourself from stock scams
A Bloomberg spokeswoman said the company had no immediate comment on the lawsuit. An Internet Wire spokeswoman could not be reached for comment.
The suit stems from a bogus press release that was distributed by Internet Wire, a Web-based news dissemination service, last Friday shortly before the markets opened. The press release said the company's chief executive had resigned and that Emulex had been forced to restate 1998 and 1999 earnings, as well as revise the fourth-quarter results to a loss from a gain.
The release was quickly picked up by Bloomberg, a leading U.S. financial news wire service, as well as other news services such as Dow Jones and CBS Marketwatch, sending Emulex shares into a steep spiral.
After opening the day at $110.69, Emulex's stock plunged as low as $43 before Nasdaq halted trading to investigate the press release. After company officials declared the release a hoax, the stock rebounded and closed at $105.75. The FBI arrested Mark Simeon Jakob, a 23-year old college student and former Internet Wire employee, Thursday and charged him with masterminding the hoax.
Jeffrey Nobel, co-lead counsel for the plaintiffs in the lawsuit, said while his firm was still exploring the possibility of including other media outlets in the lawsuit as well, it felt confident that Internet Wire and Bloomberg carried much of the blame for the trading losses.
"Based on our analysis and based on what Internet Wire and Bloomberg did and did not do, we feel we have a very strong case," Nobel said. "It's pretty clear these two companies are responsible for the loss here."
Asked why Bloomberg had been singled out among the other media outlets that also reported on the fake press release, Nobel noted the New York-based news service published both headline alerts and a full story based on the release even though "the headline of the press release contains information that is not even in the press release itself."
"At the very least, that's reckless," he said.
Nobel would not disclose the exact number of shareholders who had signed on to join the class action lawsuit thus far, but said his firm was still receiving calls from a number of people. He also would not comment on possible damages his clients might seek, other than saying "it's a very large amount."
Typically, when companies experience large losses in their stock price or are forced into bankruptcy, class action suits on behalf of shareholders are filed against the companies themselves. But in this case, Nobel said there was no evidence that the company had any involvement in the false release.
Emulex shares gained $3.63 to $108 in mid-day trading Friday.
|
|
|
|
Emulex Corp.
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
|
|