nikorettka fc2 news blog Citizen Journalis' Could Face Prison for Fake Jobs Stor

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Citizen Journalis' Could Face Prison for Fake Jobs Stor

Iminjail_2 The gutsy (and stupid) "citizen journalist" who posted an erroneous story that said CEO Steve Jobs had a heart attack has the hallmarks of a short seller, and it's likely that he (or she) could face criminal charges and possibly prison time, according to one attorney.

"It's unlikely that anybody does this for kicks," says Scott Vernick, a partner at Fox Rothschild in Philadelphia. "People generally do this kind of thing because they have a position in the stock and they want to see it go one way or the other."

This isn't the first time Apple shares have been subject to violent swings due to product misinformation or speculation about Steve Jobs' health. Last year, bogus reports that the release of the iPhone and Leopard operating system would be delayed shaved $4 billion off Apple's market capitalization.

And earlier this year, shares of Apple took a beating on concerns that Jobs was battling cancer again after he appeared gaunt at a company event. Jobs declined to disclose the cause of his weight loss but denied it was cancer. When asked about the origins of the cancer rumors, Jobs told CNBC they were started by "hedge funds with a big short position on Apple."

In this case, the erroneous story, which appeared on CNN's iReport -- a citizen journalism site pitched as "unedited" and "unfiltered" -- prompted a sell-off of Apple shares, which dropped to $95.41 from $105.27, between 9:40 a.m. and 9:52 a.m. EST, before Apple denied the report and the stock recovered.

CNN says the story was removed after it was flagged by the community, and the user's account has been disabled, so at least that part of the system worked.

But since information seeded on the internet (to say nothing of one of the internet's premiere news brands) can seep into the markets virtually instantaneously, 12 minutes is an eternity during which time anybody with certain knowledge of the truth or falsity of the report could, you will pardon the expression, make a killing.

To boot, the subject of Jobs' health is exactly the sort of front-burner item that would tend to catch fire. Plus, Apple stock has been especially tormented lately, even given the downward spiral of the broad market, and has been trading at 52-week lows.

So giving a manipulator the benefit of less than perfect timing, it would have been possible to net a gain of about 10 percent. In about 10 minutes.

We don't know if the perpetrator had this particular plan in mind or was just having his jollies. But that is exactly how a person of larcenous intent would do it.

And assuming the Securities and Exchange Commission can prove the fake news writer published the post with the purpose of manipulating the stock, there would likely be criminal charges, says Vernick.

"These sorts of financial crimes or attempts to defraud investors carry criminal penalties and the possibility of imprisonment," says Vernick.

Similarly, in a 2000 case, 23-year-old community college student Mark Jakob published a fake press release suggesting Emulex would have to restate its earnings. The stock tanked and Jakob netted roughly $240,000 by shorting it. He got busted, though, and had to give up his gains and was sentenced to 44 months in prison.

2008.10.04 |
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