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So this wasn’t you Janice?

Online Jokesters Get Sued
April 28, 1999|By Carolyn Said, Chronicle Technology Editor

Business Wire, a New York service that distributes corporate press releases, is suing three pranksters who posted a phony announcement of a new online investment opportunity that attracted almost 2,000 inquiries.

The ersatz press release said a company named WebNode had won a government contract to raise $4 billion to build a faster Internet by selling "nodes," or pieces of the new Internet, to the general public.

Business Wire distributed the release to Bay Area news organizations and investors on April 1 and also posted it on its Web site. It quickly retracted the release after receiving calls from people who couldn't get through to WebNode by phone.


However, almost 2,000 potential investors went to the Web site listed in the press release -- www.webnode.com -- and attempted to buy nodes.

Business Wire said the only organization that published the release was online service Wired News, which later retracted it.

Jeffrey Mitchell, one of the defendants, said the WebNode stunt was an April Fool's Day hoax designed to mock investors' love affair with Internet stocks and to illustrate the danger of online fraud.

"It's the ultimate: Sell the actual Internet. After all, people buy pieces of the Brooklyn Bridge," he said. "We just wanted to see if people would respond and to point out how easy it is to get taken."

The pranksters paid Business Wire $260 to distribute the release.

The lawsuit, filed in San Francisco federal court Monday against Mitchell, William Ulrich and Janice Shell, alleges violations of federal and state trademark laws, fraud, breach of contract, defamation and conspiracy. It seeks unspecified damages and injunctive relief.

The WebNode stunt came amid growing concern about online fraud. In the most widely publicized cyber hoax, an employee of PairGain Technologies Ltd., a Southern California communications gear-maker, allegedly faked an online Bloomberg article saying the company was about to be acquired. The PairGain employee was arrested this month and charged with stock fraud. Both the Securities and Exchange Commission and Bloomberg sued the alleged author of the bogus report, who apparently was hoping to drive up the price of his PairGain stock.

Unlike the PairGain case, the WebNode pranksters weren't trying to cash in. Although their Web site included an order form where investors could list their names, addresses and number of nodes they wanted to buy -- at $100 a pop -- it didn't include any mechanism for collecting money.

Mitchell, 38, is president of a Westport, Conn., firm called Insurance Software Solutions.

Mitchell and others he met on an investment site formed a loose group called FBN (Fly by Night) Associates. He said FBN investigates online investment scams and conducts an annual April Fool's prank -- last year's was about a fictitious Y2K company.

Mitchell said he is "perplexed" by the suit. "Why would (Business Wire) go after an April Fool's joke when there have been actual people who lost money through other stocks proven to be fraud?" he said.

Cathy Baron Tamraz, Business Wire executive vice president, said the lawsuit aims to stop others from perpetrating similar pranks. "We feel they've besmirched our good name and gone beyond the boundaries of a joke," she said.

Tamraz said Business Wire has "checks and balances" to verify releases, but she declined to say how the WebNode release slipped out. "Obviously, this will make us take a closer look at our policies," she said.

Industry analyst Jim Balderston of Zona Research in Redwood City said he thinks the lawsuit could backfire on Business Wire. "They could put themselves in a position where they imply that they're vouching for the validity of everything that they transmit," he said. "Due to no fault or shortcoming of Business Wire and PR Newswire, I've read a lot of lies transmitted over them."

But Balderston also saw a tongue-in- cheek upside. "If Business Wire wins this case, they may be able to sue anyone who ever lies in a press release," he said. "You could generate a lot of money that way."