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Bloomberg sues fraudsters
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April 12, 1999: 9:32 p.m. ET
Business news provider sues 5 'John Does' over 'Net scam to boost stock
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NEW YORK (CNNfn) - Bloomberg L.P. filed a lawsuit Monday against the unidentified people behind a scam to pump up the stock of PairGain Technologies by causing investors to believe a faked news story on the Internet.
In its filing in the federal district court in Manhattan, Bloomberg said it would seek an unspecified amount of damages. The lawsuit is seen as a way to help flesh out the identities of those responsible.
The defendants in the lawsuit, none of whom are known, were listed as "John Doe" numbers one through five. "John Doe #1" is the name of the author of the site, and the others are cited for touting the story as appearing on the actual Bloomberg business news site.
Among those set to receive subpoenas are Internet portals Yahoo! (YHOO) and Lycos (LCOS), whose message boards were among the key venues for those touting PairGain. The portals are not named as defendants.
VB Web Partners, which operates the Web site Techstocks.com, is also to be subpoenaed.
Last Wednesday, investors flocked to buy shares of PairGain Technologies (PAIR) after they discovered a link to a supposed article on those and other message boards.
The link led Web surfers to an article, formatted to look like a Bloomberg news page, that said Israel-based ECI Telecom would buy PairGain in a deal worth $1.35 billion cash and stock.
The article actually appeared on a site called Angelfire.com. Bloomberg quickly posted a denial of the report.
In the meantime, however, shares of PairGain rocketed 31 percent before the hoax was exposed.
"Bloomberg will pursue its legal remedies against anyone who attempts to use its name and tarnish its reputation for their own gain," said Richard Klein, a partner at the law firm Willkie Farr and Gallagher, which represents Bloomberg.
Klein declined comment on possible investigations by federal agencies.
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