By Dan Janal Your Fearless PR Leader PR Leads www.prleads.com

The recent fraudulent activity regarding a fake press release that sent shares of Emulex skidding is a warning sign of how the Internet can be abused. This type of irresponsible behavior by the con artist and the Internet Wire service should not be tolerated.

I warned about this type of abuse and fraud in my book, “Risky Business: Protect Your Business from Being Stalked, Conned or Blackmailed on the Internet,” and have led seminars on reputation management issues for IABC (International Association of Business Communicators), University of California at Berkeley Extension and Ragan Communications.

So what must be done?

  • All wire services must verify the source and accuracy of the press materials. Business Wire and PR Newswire have done this for years. New Internet-based wire services have announced they will adopt similar policies. The two major press release distribution services (BusinessWire and PR Newswire) never would have let this occur. Several years ago, I wrote a press release about the Pope using my client’s software. An account exec with Business Wire called and asked me to prove it. My client faxed her a copy of the purchase order from the Vatican!
  • Although the SEC has done a very commendable job in rooting out Internet fraud, it wouldn’t hurt for them to send a few representatives to teach the account execs at the newswires what they should watch for, like the warning signs of fraud or market speculation. Perhaps they could issue a manual on this topic. The responsible press release vendors could require all employees to read the document as a condition of employment.
  • Since the problem has been exposed and the news release companies are on alert against scammers, it is fair to assume that the Emulex story won’t be repeated using that venue. However, there are thousands of messages posted to bulletin boards every day that pick and pan stocks. These messages are particularly insidious for two reasons: the poster rarely reveals his true identity and the hosting service (such as Yahoo) doesn’t stand behind the accuracy of the content. In fact, Yahoo, stung with a lawsuit on this topic, now states their message boards are to be used for entertainment purposes only! In other words: Reader beware! The Supreme Court should determine if ISPs, Online Content Providers, Websites and other online publishing entities are entitled to the same safeguards as traditional publishers. In my view, if the online publishers have the same protections as traditional publishers, they should bear the same responsibilities.
  • Because those messages that try to manipulate stocks do appear online, all Investor Relations and Public Relations officials must monitor the news as well as chat rooms. They must respond to wild charges and set the record straight.
  • PR/IR people should contact the SEC as soon as they spot erroneous messages so they can begin their investigation while the trail is hot. It is also better to call the SEC than to have them call you!
  • Reporters shouldn’t walk away unscathed from this issue either. They are responsible for spreading rumors. The first rule of reporting is to “check your facts.” How many reporters and analysts called the company to see if there was any truth to this? The Wall Street Journal quotes Bloomberg News, CNBC and Dow Jones News Service as running the press release – obviously without checking with the company. Minutes later James Cramer of The Street.com posted a message saying the stock was heading down – and urged people to buy puts. Those actions were as irresponsible as the false press release. Perhaps we should all follow the advice of a vice president of a major bank who attended my seminar. After she heard about the rumor-mongering nature of the net, she devised a great solution. She posted a notice on the monitors of all her staffers saying in effect, “If a reporter calls you to verify a bulletin board message, ask the reporter if they have contacted the writer of the rumor. Ask them to find out the writer’s motivation and where he got his information. Hold them to the same high standards they hold us to.” I thought that was brilliant.
  • No doubt, the SEC or FBI will find the sender of the phony story. In fact, they arrested a person in less than a week! What happens next? There should be stern punishment. As the Wall Street Journal notes, the sender of another fraudulent press release several months ago was forced to pay a fee for restitution and be confined to his home for five months. That’s not a strong deterrent to future con artists – as the Emulex case shows.

The Internet can be the greatest resource for investors and companies – or it can be a dangerous weapon. How you act will determine your results.

This article can be reprinted if the following information is printed:

By Daniel Janal, dan@prleads.com, http://www.prleads.com

PR Leads founder Daniel Janal is the author of numerous books, including “Dan Janal’s Guide to Marketing on the Internet.”