ONLINE RUMORS
This just in: On the Internet, no one knows you're a fraud. In August, after a former employee of Internet Wire issued a fake press release stating that Emulex Corp.'s CEO had resigned, the company's stock plummeted. The next month, the SEC brought charges against a Cedar Grove, New Jersey, teenager for orchestrating a "pump-and-dump" scheme over the Internet, sending hundreds of anonymous emails to message boards touting selected stocks.
Now, a small industry has sprung up to help businesses combat the spread of false information on the Net that could damage a company or manipulate its stock. NetCurrents, based in Burlingame, California, uses proprietary software to scan thousands of user-selected online discussion groups and rumor boards, plus 2,600 Web publications. Search results are delivered during trading hours to two dozen analysts, who rate the mentions and create reports for NetCurrents clients. An analyst calls to inform the client immediately when something potentially damaging or inaccurate appears. The client can decide whether to release correct information, add a touch of positive spin, or take the more drastic step of notifying law enforcement.
WebClipping.com, a New York marketing and PR service, uses a similar system to scan online newspapers, zines, email newsletters, and Usenet discussions to generate reports for its 1,000 clients. The tool was originally designed to help companies monitor their reputations online, but post-Emulex, WebClipping ramped up its wire search frequency from daily to hourly. "We're like a smoke alarm," says CEO Noah Silverman. "We can't stop the fire, but we can let you know there is a fire."
Services like these might be able to lessen the impact of an Emulex-style false press release by alerting a targeted company minutes - not hours - after an attack, but rumor watchers can offer only a modicum of damage control. Although it's illegal to spread false information about a company for personal gain, most of what's posted on Internet bulletin boards - true or false - is protected by the First Amendment. "People are free to talk about rumors," says Lisa Gok, an assistant regional director at the SEC office in Los Angeles. "It's just the luck of the draw if somebody picks your company to talk about."
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