Poor-mouthing a business rival is not exactly unheard of, but the Web has made possible a particularly nasty sort of attack--cybersniping. Take the case of Steven Cade, a local school board president and head of privately held La Jolla Club Golf Co. in Vista, Calif. On Feb. 24, Cade posted a two-part apology on Yahoo!, admitting that he had used 27 different pen names to post 163 messages disparaging his much larger rival, Callaway Golf Co. As "craigleifer," he encouraged Callaway shareholders to "get out before the next down tick occurs." As "biggolfretailer," he posed as a store owner who complained that the Callaway company had "lost their ability to design new technology."
Cade is finding out Callaway is no company to fool with. The maker of Big Bertha drivers--with $697.6 million in annual revenues--doesn't mind going to court and regularly chases down companies that make knockoffs of its clubs and golf balls. After subpoenaing Yahoo records, it didn't take Callaway long to discover Cade's real identity. When confronted, Cade apologized on Yahoo, saying he "got caught up in the Internet."
Now Cade, whose $10 million-a-year company makes shortened clubs for kids, says he's recanting his apology. "This is about free speech," he says. "Investment bulletin boards are about using pen names in a confidential environment."
Pressured by Callaway lawyers, Cade says he agreed to his online mea culpa only to avoid lengthy litigation. Cade concedes he owned Callaway shares and even held short positions, but he says he wasn't shorting the stock. And he adds that his remarks couldn't have affected Callaway's stock price. Shares fell from $27 to $12 between April, 1998, and October, 1999, when the badmouthing occurred, but during that time Callaway also reported losses of $26.5 million for 1998.
That doesn't seem to matter much to 79-year-old Ely Callaway, the company's crusty chairman. He has turned the Cade file over to the Securities & Exchange Commission. "He has tried to injure this company," says Callaway. "We take that very seriously." So might the SEC, says Dave Snyder, a securities lawyer with the San Diego office of law firm Pillsbury Madison & Sutro. "There are already restrictions on free speech for inside tips," says Snyder, "and this is a logical extension of that." Cade says he didn't have any inside info. Still, by playing through on the Web, Cade definitely bogeyed.