Online Power Gives David a Little Leverage on Goliath

Fast becoming the weapon of choice among the ranks of the disgruntled, Internet attacks against public companies have surged in recent months, prompting an unusual wave of retribution--and in some cases retreat--by targeted firms.

No longer consigned to carrying picket signs or launching letter campaigns, today’s unhappy employees, customers and investors erect Web sites, fire off e-mail and sprinkle anonymous postings like electronic grenades. One way or another, many are getting the attention of their corporate quarry.

Bekins Van Lines Co. recently buckled to online pressure. After repeatedly rejecting the $1,700 claim of two unhappy customers, the moving company reversed itself when it learned the couple had set up a Web site detailing their gripes.

Intel Corp. is in the midst of a lawsuit against a former employee who flooded more than 30,000 of the microprocessor giant’s employees with angry e-mail. And credit report powerhouse Experian Information Solutions Inc. has given up hope of pulling the plug on a Web site that depicts the company CEO with “666” stamped across his forehead, and provides maps to attorneys’ homes.

But many public companies are most concerned about a type of online attack that has become so popular in recent months that stock market regulators have given it a name: “cybersmearing.” The tactic involves the anonymous posting of messages--ranging from personal attacks on executives to leaks of inside information--on Internet financial message boards.

Complaints about such digital broadsides were almost nonexistent six months ago but now come in almost every day, according to officials at the Securities and Exchange Commission. And dozens of companies are trying to flush out the anonymous posters by filing lawsuits and subpoenaing records from Yahoo and other companies that manage the online forums.

“It’s become an epidemic among our clients,” said Christopher Wolf, an attorney at Proskauer Rose, a Washington-based firm that represents giant companies such as NBC, United Parcel Service and MCI/WorldCom.

So far, the biggest penalty levied against an online critic came last month, when a Huntington Beach man was ordered to pay $8.3 million to a company and executive he was accused of defaming in dozens of online postings.

Using the cryptic pseudonym “PMMK1,” Jonathan Grossman heaped scorn on David Norris, apparently a onetime business partner who later became chief financial officer at American Eco Corp., a Houston-based manufacturing company.

The postings accused Norris of breaking securities laws and leaving a trail of troubled companies. They also spread rumors that he “left his wife and three kids . . . not once but twice for another woman.”

Neither Grossman nor Norris could be reached for comment. In fact, Grossman never even defended himself in court, which legal experts say might be the only reason he lost his case. But American Eco executives said the postings “damaged [the company’s] reputations with the investment community and caused investors to short its publicly traded shares by creating doubts about statements made by management.”

Posted Warnings but Little Policing

Such attacks are hardly unusual on freewheeling message boards operated by companies such as America Online and Excite. Yahoo, a Santa Clara company that runs the most popular portal site on the Net, operates financial forums on 8,426 companies, including all the companies listed on every major stock exchange.

Like most operators, Yahoo posts rules that prohibit “unlawful, harmful . . . defamatory, libelous . . . or otherwise objectionable” postings. But in reality, the company does little to police the boards and is under no legal obligation to do so.

Stock market regulators marvel that anyone pays attention to anonymous postings. But online investors, who are an increasingly powerful force in the stock market, flock to such forums, and many public companies say they are surprised at how much damage an anonymous posting can cause.

“A lot of customers, clients and competitors read the message boards,” said John Stark, chief of the Office of Internet Enforcement at the SEC. “Companies say they are suddenly getting calls from major accounts asking questions about the postings, as well as calls from the media.”

That was partly why Chatsworth-based Cohr Corp. took the unusual step of issuing a press release two months ago saying that a series of critical postings on Yahoo were unfounded and the work of a disgruntled former executive.

Like many companies, Cohr discovered the identity of the person doing the posting by filing a “John Doe” lawsuit, which enabled the company to subpoena records from Yahoo. Like most of its competitors, Yahoo ordinarily refuses to yield the identities of its users unless compelled to do so by court order.

But courts have been reluctant to muzzle even the most vicious Internet gadfly.

Just Getting Their Attention

Bill Sheehan, a Seattle computer engineer, used the Internet to wage all-out war against a number of credit reporting and collection agencies over the last several years. He was particularly venomous toward Experian, an Orange County company he says was largely responsible for gross inaccuracies on his credit record.

He listed the names of dozens of company executives, along with their Social Security numbers and phone numbers. He even posted maps that marked the homes of attorneys he was battling in court.

“It was essentially schoolyard name-calling,” said Sheehan, 36. “But my goal was to get these people’s attention.”

The maps caused some of their targets to fear for their safety, and Experian filed a counterclaim against Sheehan, hoping to force him to shut down the site. But a federal judge in Washington rejected that effort, saying that, although Sheehan’s “pyrotechnics have surely been offensive,” it was nonetheless protected speech.

Mindful of courts’ reluctance to undermine the 1st Amendment, Intel Corp. for years grudgingly tolerated a Web site operated by Ken Hamidi, an ex-employee who has been in a lengthy dispute with the company about disability pay. But Hamidi finally provoked Intel to take action last year when he inundated more than 30,000 workers with e-mail rumors about pending layoffs and other problems.

Intel sued Hamidi, claiming the e-mail was a form of trespass on the company’s computers. Hamidi argues it was free speech. A Sacramento Superior Court judge issued a preliminary injunction ordering Hamidi to halt the e-mails, and a hearing is set for April 19.

In the meantime, even everyday consumers are finding that the Internet gives them previously unimaginable leverage with major companies. Consider the recent case of George Musser and Talia Schaffer, a magazine editor and teacher who recently hired Bekins to move them from San Francisco to Hoboken, N.J.

Along the way, the couple says, Bekins lost the platform to their bed, a stool, some legs off a desk and books. The couple figured Bekins owed them about $1,700. But the Illinois company denied the claim because the couple didn’t have receipts and had signed release papers on moving day.

Musser and Schaffer’s lawyer had no better luck negotiating a settlement until he pointed Bekins officials to a Web site the couple set up at https://www.bekinsbeware.org.

Ten minutes later, Waldman said, the company called back and said they’d pay the full amount.