Regulators Seek Source of Fake Web Page

Washington--Regulators are searching for the source of a faked news story posted on the Internet that boosted PairGain Technologies shares, and analysts said a swift crackdown is likely in order to prevent more fraud.

Internet search firm Lycos has been contacted by the SEC and New York state authorities and will provide information to them after it receives subpoenas, a Lycos spokesman said. Lycos operates the service where the page appeared.

The page, in a format similar to that used by Bloomberg News, sent PairGain shares soaring as much as 32% Wednesday before the story was denied by Tustin-based PairGain, a phone equipment maker, and Israel’s ECI Telecom. The story claimed ECI had agreed to acquire PairGain for $1.35 billion.

PairGain shares fell 25 cents Thursday to close at $9.13.

The SEC “will dedicate a lot of resources to it because they want to prevent copycats,” said Washington lawyer Harry J. Weiss, a former SEC associate enforcement director.