Related topics

Hoaxer Strikes Online News Service

June 12, 2002

%mlink(STRY:; PHOTO:; AUDIO:%)

NEW YORK (AP) _ An unidentified hoaxer got the Internet Wire online press-release service to publish a bogus news release about a tiny drug company this week, in what may have been an attempt to manipulate the stock.

The phony release Monday caused a short-lived jump in shares of Cel-Sci Corp.

Internet Wire and Cel-Sci both said they didn’t know who was behind the false release, which has since been retracted.

The companies have referred the matter to the Securities and Exchange Commission, which has declined to comment.

The incident is reminiscent of a widely publicized case in 2000 in which a hoaxer drove Emulex Corp. shares lower by getting Internet Wire to distribute a false negative release about the maker of data-storage products.

After that incident, Internet Wire vowed to tighten its security to assure that all its releases were genuine.

Internet Wire on Tuesday blamed the release of the bogus press release on an employee’s failure to follow its procedures.

The company defended its procedures, and said it was ``frustrating″ that it had been victimized again despite the procedures, which include authenticating phone calls.

``It’s damn difficult to stop this stuff,″ said Jim McGovern, Internet Wire’s chief executive. ``We’re going to reexamine what else we can do.″

The Cel-Sci release, which Internet Wire published early Monday morning, purported to announce a partnership between Cel-Sci and Japan’s Takeda Chemical Industries Ltd. to develop Multikine, Cel-Sci’s immune-therapy drug.

As described in the release, the deal would have provided Cel-Sci with up to $520 million in cash, equity and convertible notes. That would have been a windfall for a company that had only $670,000 in revenue in its most recent fiscal year, and which has cash and investment securities of only $2.4 million on its balance sheet.

The release boosted Cel-Sci’s stock Monday to 31 cents a share from 29 cents; the stock went as high as 37 cents during the day. Trading volume was 1.3 million shares, more than five times the average volume for Cel-Sci, a biopharmaceuticals concern based in Vienna, Va.

Geert Kersten, Cel-Sci’s chief executive, said the company doesn’t have a relationship with Takeda, much less the lucrative one cited in the release.

Cel-Sci informed Internet Wire that the release was a fake, and Internet Wire issued a retraction after the market closed Monday.

Kersten said he doesn’t know who was behind the hoax, and isn’t even sure that the purpose was to goose Cel-Sci’s stock.

Shares of Cel-Sci closed Wednesday at 30 cents, down 1 cent, on the American Stock Exchange.

Update hourly