NEW YORK — Bloomberg LP and Internet Wire Inc. were used as “unwilling dupes” by the creator of a false Emulex Corp. press release and shouldn’t be held financially responsible for investors’ losses, a federal judge ruled.
U.S. District Judge Milton Pollack in Manhattan issued a 15-page opinion Thursday dismissing a complaint filed last year by Emulex (EMLX) shareholder Ronald Hart, who claimed Bloomberg “falsely reported to the investing public” details of the fake release that caused Emulex’s stock to plunge 60% in a matter of minutes.
Former community-college student Mark S. Jakob has pleaded guilty to fabricating the release, which was distributed by Internet Wire, a news-release service, and picked up by Bloomberg and other major news organizations. The release falsely claimed Emulex would restate earnings and other bad news.
Judge Pollack said the plaintiff failed to show that Bloomberg and Internet Wire knew the press release was a hoax and deliberately set out to defraud investors, a claim required in order for the case to proceed.
Instead, “the plaintiff’s complaint reveals that defendants were used as unwitting dupes by Jakob,” he said. “This does not give rise to a securities fraud claim against them.”
The judge dismissed the complaint but gave the plaintiff 20 days to replead the case.
Mr. Hart’s attorney, Jeffrey S. Nobel, said he was still reviewing the judge’s opinion and hadn’t decided what action to take next. “We obviously disagree with the conclusions of the court,” he said. “We certainly believe we properly alleged claims against Bloomberg and Internet Wire.”
The suit sought class-action status on behalf of holders of Emulex stock and options. Federal officials estimate investors lost nearly $110 million as a result of the stock-manipulation scheme.
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