Magazine article American Banker

Digital Signatures Shield Companies from Fake-Press-Release Hoaxers

Magazine article American Banker

Digital Signatures Shield Companies from Fake-Press-Release Hoaxers

Article excerpt

The fake press release that sent the stock of Emulex plunging more than 60% in late August unleashed a storm of press coverage expressing shock that such a scam could succeed, given the supposed safeguards on critical financial information.

What's shocking, however, is not that the hoax's success but that such things don't occur more often, given the speed, complexity, and insecurity of our financial information networks.

In fact, Emulex was hardly the only such case. A false press release issued in July touted a supposed buyout offer for AutoNation Inc. The company pronounced it a hoax. In March, Lucent Technologies was the target of a so-called "cybersmear" when a fake earnings warning, designed to look like a PR Newswire release, was posted on a Yahoo message board. Shares of Lucent slid 4% before the company asked Yahoo to remove it.

The speed at which financial news outlets operate makes hoaxes hard to control. Financial Web sites, wire services, and cable TV channels compete to get the news out first. Like the rest of us, journalists trust the information they receive when it purports to come from companies they trust -- even on the Internet, where there is no certainty about the source of what you are reading.

And press releases aren't the only information sources that move markets. Plenty of crucial news also appears on the Web sites of companies and brokerage houses, and even in plain old e-mails. Imagine the havoc if someone made false statements within a report posted on the Web by an analyst or brokerage firm. It could come from a disgruntled ex-employee who wants to make some quick cash, as did the Emulex hoaxer. Or imagine the chaos resulting from an e-mail purporting to come from a CEO, addressed to the financial community and outlining the company's fiscal problems. It may have been drafted by a vice president who hadn't received the CEO's signoff. …

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