UK: Online Reputations, Cybersmearing and the Changed World Of The Internet

Last Updated: 23 May 2003
Article by Jonathan P. Armstrong

What is Cybersmearing?

Cybersmearing does what it says on the tin. It is the smearing of an individual or company online. Cybersmearing can take a number of different forms including websites, message boards, e-mail and auctions. We will look at each of these in turn - but it might help first to illustrate the problems at their simplest level with a cybersmearing case from Ireland. Back in May 2001 the Irish courts heard their first cybersmearing case when an Irish businessman, Frances Kenny, was convicted for malicious publication of a defamatory libel under the Irish Defamation Act 1961. Kenny ran a sandwich business in Castlerea, Co Mayo, as did his business rival Maureen Walker.

Kenny posted Walker's details on a website which advertised for escorts and prostitutes, as he believed that she was taking his business. The advert placed was headed "Exclusive Maureen" and included details of the services that Walker would provide including something described as 'water games'. In evidence Walker said that she had received over 100 phone calls in the first 2 days alone - proof positive perhaps that internet advertising can work. The explanation for the calls came to light when one of the callers had not withheld his number - Walker called him back and persuaded him to tell her how he came by her. At this stage the police became involved and Kenny admitted his actions. His offer of 10,000 IRPounds in compensation was rejected by the judge as 'totally inadequate'.

We have seen a number of cases on both sides of the Atlantic which show that this type of practice is not uncommon and we have also seen the catastrophic effect cybersmearing a company can have on its share price. Cybersmearing takes many forms but amongst them are:

Cybersmearing by website

The oldest form of cybersmearing was to set up a website pretending to be that of the company that you wanted to defame. The trend started around 8 years ago but as businesses have become better at protecting their own trading and brand names as domain names cybersmearing by site has become more sophisticated. There are a whole host of motives for cybersmearing but many of the dedicated cybersmearing sites are set up to advance a particular political cause, such as attacking a company for the way in which it allegedly exploits child labour overseas, is providing tools used for war or the way in which it has handled a particular industrial dispute. This type of cybersmearing is not just confined to the technically able - I have seen a site by two truck drivers who were effectively trying to encourage their fellow drivers to work to rule or walk out and the 'evidence' relating to the unofficial industrial dispute was shown on the site. This illustrates another point. It is not just companies that have an internet presence that are vulnerable - in fact the reverse is often true. Because the company concerned did not have a meaningful internet presence it was easy for the drivers' site to get significant prominence on the internet to the extent that in some search engines the site about their industrial dispute ranked more highly than the company's official internet presence.

Cybersmearing by site can take a sinister form as in the case of Craig Cottrell. Cottrell registered 9 common mistypes of the Marks & Spencer domain name including Marks&Spencers.com. He copied the legitimate Marks & Spencer site onto his server but instead of the payment mechanism he told people that there was a software problem with the site and he told them to e-mail their credit card details. When Cottrell's computer was seized there was evidence that over 80 people had done this. After prolonged court proceedings Marks & Spencer were successful in getting a court order to transfer the domain names back to them and in having a prison sentence for contempt of court passed against Cottrell.

Cybersmearing by e-mail

The most well known case in this area is the Intel v. Hamidi case involving an ex-employee sending 6 separate e-mails to up to 35,000 Intel employees after he left. This case is still rumbling on in the US. In August we saw an extreme case of cybersmearing by e-mail in the education sector when a former student with a grudge spread false information that the director of a local education authority was a member of the Ku Klux Klan, that another director was openly homophobic and that the institution's General Counsel and his team were neo-Nazis. The complaints resulted in an investigation lasting almost a year at the end of which all three were cleared. A detailed programme of harassment against some of the institution's officials started soon after. This included:

  • A former employee who changed job was accused of being a member of the Ku Klux Klan, and hate letters signed with his name were sent to the newspapers and churches in his new home town.
  • A bill was sent to the office of one of the lawyers demanding payment for a number of unpleasant medical procedures.
  • E-mail messages were sent to a Jewish group to antagonize them supposedly signed by one of the lawyers and concluding with his home phone number.

The tools for this type of attack are readily available. In some of the cases I have seen the attacks have only needed one member of staff to leave his office with his computer still logged on for use by the cybersmearer to send e-mails as if from him. Clearly this requires no technical knowledge and less than two minutes at the keyboard making it difficult to trace the culprit.

Cybersmearing by a message board

The Varian Associates v. Delfino and Day case involving around 14,000 postings on a hundred different message boards is still going on. In these messages Delfino and Day falsely accused various members of Varian management of being homophobic, discriminating against the pregnant, having sexual liaisons and secretly video taping employees whilst in the bathrooms. Varian estimated that the loss through Delfino and Day's activities was just over Ł530,000.

August 2002 brought us another case - the $699 million claim in Texas concerned an allegation by a rival credit card processor, ZixIt, against Visa over 437 message board postings made by one of Visa's Vice Presidents on a Yahoo! message board relating to ZixIt's stock. The postings dated back to 1999 when ZixIt was trying to raise more funding. The court heard how Visa's VP, Paul Guthrie, 'set out on a mission' to undermine the company challenging ZixIt's own information and urging those who had already bought stock to sell 'before it's too late'.

ZixIt alleged that Visa used Guthrie as its agent in its online campaign and then started an offline campaign against it using other employees. They sued Visa but not Guthrie - Visa argued that Guthrie had not acted as their agent and called him to give evidence on their behalf and said that he had acted alone. ZixIt's Vice President testified that Guthrie's postings contained 592 lies. Visa analyzed the postings and in court argued that of those 20 were true or had been taken out of context. The trial lasted 3 weeks with jury deliberations of 2 ˝ days before the case against Visa was dismissed as the jurors found that Guthrie was not acting in the scope of his employment.

Whatever the result of the case the tale is a sorry one for all three parties. Whilst we do not know whether separate proceedings will now take place against Guthrie, we do know that harmful allegations were made in court about both companies and that each of them will have significant irrecoverable costs.

The case reminds us all that executives in an organisation also need to be told via a company's acceptable use policy that disparaging rivals, or indeed commenting on the organisation's own performance, however well intentioned, will not be tolerated. The latter point was rammed home by another case in February this year with another large action against former employees, this time brought by Minnetonka based credit card company Metris against two former employees, Bryan Williams and Ken Corbin. Metris alleges that Williams and Corbin posted defamatory and misleading messages about it and its former CEO, Ronald Zebeck on internet message boards. The case alleges that the employees used anonymous user names to obscure their identities and give the impression that they were privy to inside information.

Metris claims that as the result of its postings it lost revenue, income, investors, customers and relationships with business prospects. They seek unspecified damages. They also say that the messages were posted to bring Zebeck and Metris into "disrepute with the domestic and international business and investment communities". Metris parted company with CEO Zebeck after the postings. Interestingly Williams is also accused of being a skilled polyglot having supposedly posted messages in English, French, German, Norwegian, Italian and Portuguese.

Cybersmearing via other means

One of the great features of the Enron debacle has been the role that the internet has played. Message boards were full of Enron related information both before and after its collapse. It is undoubtedly the case that part of Enron's climb to the dizzy heights of its share price were due to small investors on message boards significantly over valuing the company and its prospects. It is also true that its fall has been accelerated by message board postings but one of the more interesting aspects of the cybersmearing of Enron has been the role that auction sites like eBay have played in its collapse. Traditionally the disaffected have used message boards and perhaps dedicated websites to hasten a company's demise or simply just to hit its share price so that their former bosses who generally have significant stock options and whose pay is linked to share price will suffer. In Enron however, some employees saw that as well as having their former bosses suffer, they could profit by selling what they knew and what they had accumulated with a news hungry audience online. When I looked at one auction site alone at the time of the Enron collapse there were over 1200 Enron related items for sale including confidential memos, letters, internal Enron procedures and more mundane items such as Enron logoed golf balls with words like "integrity counts" stamped on them. In particular one of the memos that seemed to hasten recategorisation of Enron from a collapse to a scandal seems to have been purchased by a newspaper from one such auction site - some of the material was going for as little as $150, a small price to pay for a worldwide scoop.

In January this year we saw this trend continue in a case brought by Robert Grace, the publisher of a Los Angeles legal newspaper, against the auction site eBay and an eBay user, Tim Neeley. Grace claims that Neeley used the buyer feedback function of eBay to smear him and that Neeley and eBay refused to remove the comments when asked. According to Grace, Neeley's reply was simply "Get a life, dude.'' Grace's action seeks damages of $2.5 million from eBay and $100,000 from Neeley for the harm done to him. This case mirrors the successful actions in the UK brought by the then Northern Ireland First Minister David Trimble against Amazon.

What can be done?

Companies need to take a proper look at their online reputation. Specialist external counsel will often be part of that process. It is an unenviable task for any business to do this on top of the other day to day business tasks. Clever software solutions like our own Brandcomplete can be only part of the answer. We are now seeing cybersmearing of one form or another almost every day. Some of my top tips would be:

  1. Take any incident seriously. From my experience the cybersmearer usually starts with a minor attack which many companies just ignore. For many cybersmearers that's just testing the water - do nothing and the battle will commence. Respond appropriately to the initial attack and you might find the cybersmearer picks on easier prey instead.
  2. You may need to alter the terms and conditions on your own site to tell people what they can and cannot do with content from your site, your images and your trademarks - this might open the door for a criminal prosecution after any attack.
  3. You will need to look at your employment policies as quite often cybersmearing, like security, is an inside job.
  4. You need to review your relationship with third parties, such as design agencies. Some of the more sophisticated cybersmearing attacks have been traced back to agencies and graphic designers who are aggrieved because their claims for payment have been reduced.
  5. You need to make sure that your own internet presence works. If legitimate information about your company dominates the search engine rankings there is less chance of the cybersmearer's sites getting through.

Regrettably many companies have learned from bitter experience that in these challenging times cybersmearing can significantly hit the bottom line. As the volume of stock traded for some companies, particularly technology companies who are traditionally vulnerable to this type of attack, continues to be low then only a few panic trades after an attack can make the share price plummet - we have seen one incident where bad news on an internet site meant a stock price drop of around 8% in an hour. A proper strategy against cybersmearing must be a cornerstone in our strategy to minimise the harm done to our online reputation.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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