Executives at Internet Wire are red-faced and in a hopping-mad hunt for the hoaxer whose bogus press release about biotechnology company Cel-Sci Corp. was distributed by the company Monday.
Jim McGovern, chief executive of Internet Wire, said the company retracted the release a few hours after discovering the hoax, spent the day purging it from news databases and then contacted the Securities and Exchange Commission about looking into the matter.
But the embarrassment over the incident — the second hoax release it has accidentally put out in almost as many years — has put the company on the defensive over its verification procedures when confirming releases.
McGovern said contrary to other reports about the incident, Internet Wire did make repeated efforts to contact Cel-Sci on Sunday when the fake release and contact information came in.
“We actually have very stringent and rigorous procedures in place, and because this happened once before, we are very attentive to it. We’ve got committed people willing to go to extreme measures” to confirm the releases before they are distributed, he said.
The bogus release carried the headline: “CEL-SCI Corporation And TAKEDA CHEMICAL INDUSTRIES, LTD. Enter Worldwide Collaboration To Develop And Commercialize MULTIKLINE Agreement For A Potential Cancer Cure.”
The fake release said Cel-Sci, which has offices in Virginia, had struck a deal with the Japanese company to develop a new immune therapy drug, and that the alliance could be worth over $500 million in cash.
An investor relations contact at Cel-Sci confirmed that the release was a hoax but would not comment on the matter, deferring instead to the company’s chief executive, Geert Kerstein. His assistant said he was not available to comment and an e-mail query to him was also not returned.
Shares of Cel-Sci, which began Monday’s trading session at 29 cents, had gone up by 8 cents during the day the retraction ran. As of Wednesday, the price has slid back to the 29 cents and Yahoo’s message boards were lit up with messages from posters mulling whether the guilty party would be caught and speculating who might have been behind the hoax.
In August of 2000, Internet Wire mistakenly put out a fake press release that contained fictional news that the chief executive of data networking company Emulex Corp. had resigned, which was then picked up by financial news wires Bloomberg and Dow Jones.
Investors dumped the stock, causing it to plummet from about $110 to $43 per share on August 25, 2000, wiping out $2.2 billion in market value in the process. Days later, the FBI arrested 23-year-old Mark Simeon Jakob of El Segundo, California and charged him with a stock manipulation scheme. Jakob later pleaded guilty to two counts of securities fraud and one count of wire fraud for creating and distributing a fake press release about the Emulex Corporation.
McGovern said Internet Wire was sleuthing with every resource it could muster to find out who might have been behind an apparent attempt to boost the shares of Cel-Sci.
“I think there’s no argument that the Internet has brought tremendous communications abilities and democratized information. But like any tool it can be misused by some people. I think it’s a shame, but there’s evil people out there.”
This time, the shares of Cel-Sci were not impacted to the extent that Emulex’s were, so tracking down the hoaxers may not include as many federal authorities that were involved in the Emulex case, McGovern said, but that it wouldn’t slow down the company’s own efforts to track the culprit down.
“It’s a problem. We’re working hard in delivering a great service at a more effective cost and price point than some of the long time (newswires). To have our livelihood jeopardized by (this) — rest assured, we’re sleuthing.”
