by John M. Curtis
(310) 204-8700

Copyright January 1, 2001
All Rights Reserved.

nwilling to face the music, Wall Street’s publicity stunts and phony press releases are more common than investors would care to admit. Turning the investment world on its head, 23-year-old junior college dropout turned con artist Mark Simeon Jakob pleaded guilty to federal securities and wire fraud for floating a bogus press release sending Emulex—the Costa Mesa data storage firm—shares plummeting 62% or $2.5 billion and costing investors over $110 million. Raking in more than $241,000, Jakob claimed he was just recouping $97,000 in losses after 'selling short.' Crying the blues, garden variety psychopaths like Jakob deserve far less sympathy than their hapless victims. "Those who would seek to manipulate the market as Mark Jakob did should take heed of the years in federal prison he faces in light of his conduct," said U.S. Atty. Alejandro N. Mayorkas, clearly out of touch with the realities of Wall Street. While Jakob’s inept scheme landed him in the slammer, many other Wall Street propagandists continue to disseminate spurious information sending share prices gyrating.

       When a popular biotech firm announced a spectacular breakthrough in Alzheimer’s disease, its stock prices shot through the roof. Interviewed within hours, the world’s leading brain researcher confirmed that the Biotech’s 'breakthrough' was nothing more than neatly packaged old news, and share prices fell like a rock. Confronted with constant hype, investors don’t have a clue what’s really going on behind the scenes. But far worse than Jakob’s skullduggery is the passive crime of denial that Wall Street’s spin machine looms tall tales, driving share prices into purgatory or heaven’s gate. 'Buy on rumor sell on news' takes on new meaning when press offices disseminate news releases designed to fatten the company’s bottom line. With fund managers moving millions of shares, it takes little news to cause a stampede. When Jakob pulled his shenanigans, it reminded watchful investors how easily markets are buffaloed by strategic news leaks. Like today’s news cycle, things happen so fast and furious that there’s no time to check sources. With investors looking for insider tips, they’re constantly combing the wire services for strategic information.

       Now behind bars, the youthful scam artist coughed up $54,000 and agreed to pay $110 million in restitution, though federal prosecutors doubt that he’s likely to pony up. While U.S. District Judge Dickran Tevrizian set sentencing for March 27, the clever Jakob is only expected to do up to 46 months, more than enough time to multiply his nest egg. What jolted the investment community is not the discovery of another creep but how easily share prices are manipulated with the click of a mouse. With billions already invested in internet security, few people imagined that con artists like Jakob could slip through the cracks. As Jakob proved, manipulating markets is easier than you think. If hacks like Jakob can make hundreds of thousands of dollars, how much cash is raked in by sophisticated manipulators working in publicly traded corporations? Dismissing Jakob as a one-time fluke ignores the unscrupulous tactics used to make the markets move and shake.

       Employed briefly for Internet Wire—a major Web newswire service—Jakob followed the success of other legitimate strategic communications offices, deluging the wires with endless news releases about publicly traded companies. Shaking markets to the foundation, Jakob just watched other company’s shares skyrocket or plummet based on the news. With analyst’s reports copiously flowing from major brokerage houses, Jakob paid close attention. Like an arsonist spraying gasoline with the help of warm Santa Ana winds, investment news burns like wildfires over the Net. Watching share prices closely, Jakob was a quick study. Fabricating his own release, Jakob cleverly inserted that Emulex revised its profits, faced an FTC investigation, and announced the immediate resignation of its CEO. In today’s knee-jerk atmosphere, that’s all it takes sending investors to the exits. Buying on the dip and selling on the rebound, Jakob cashed in $241,000 when Emulex eventually recovered.

       Jakob’s news release had all the right ingredients to accomplish panic selling: Bad earnings’ news, federal investigations, and abrupt management changes. Cooking up some damage control, "In a state of panic, he committed a crime and he’s ready to fess up," said Joel Levine, Jakob’s attorney. Having fleeced investors, the brash Jakob honed his press release with pinpoint precision. Like other strategic communications, how different is Jakob’s new release from thousands of institutional releases flying over news wires? With everyone scrounging for insider tips, scouring the wire services is the best source of new information. Business news wires are no different from their political counterparts generating unfounded rumors. Unlike business, political wires don’t cost investors instant cash by causing frenzied buying and selling. When Jakob crafted his news release, he knew precisely the kind of reaction it would cause. Suggesting that Jakob lost his head and acted impulsively defies common sense. Speaking to the press, "He’s a one-time offender. This isn’t a career stock manipulator," said Jakob’s attorney hoping for a lighter sentence.

       Leaping across the wire services, today’s news cycle is dependent on the constant flow of creative press releases. Defining news—and, yes, reality—press releases are the modern forms or propaganda, disseminating strategic information and manufacturing news events. While some imagine news as spontaneous, insiders know it all crosses the wire services via press releases. Stationed at their word processors, clever propagandists, working inside the stealth offices of publicly traded corporations and government agencies, orchestrate their agendas. It’s not rocket science to know that communication offices manufacture news to manipulate share prices. Like Jakob, they do whatever it takes to protect the bottom line. While it’s easy to dismiss Jakob as an aberration, it’s far safer to accept reality that clever press releases create today’s news. Believing otherwise invites the kind of naivete leading to the next Emulex.

About the Author

John M. Curtis is editor of OnlineColumnist.com and columnist for the Los Angeles Daily Journal. He’s director of a Los Angeles think tank specializing in political consulting and strategic public relations. He’s a seminar trainer, columnist and author of Dodging The Bullet and Operation Charisma.

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