The Wall Street Wag Companies Love To HateMaria Mallory
Dan Dorfman is used to suffering his share of barbs: When you make a living dishing Wall Street dirt, criticism comes with the territory. But death threats? After his Jan. 20 CNBC television report mentioned an alleged Securities & Exchange Commission investigation into Hanover Sterling, a small New York brokerage, one caller advised Dorfman that he needed "police protection." Another, Dorfman says, warned: "If you talk about us again, we're going to kill you." "This," Dorfman says, "was just an unusual day."
It has been that sort of month, though. More and more, the targets of Dorfman's reports are fighting back, denouncing a swashbuckling style they say is heavy on rumor and light on fact-checking. Coca-Cola Co., Caremark International, and others have publicly decried Dorfman's prognostications and challenged his sourcing. Hanover Sterling notes that the SEC investigation is more than a year old and says it has done no wrong. Says Adolph J. Ferro, CEO of Epitope Inc., a small biotech company that is considering suing Dorfman over reports about its AIDS test: "I have no idea where he comes up with the [sources] he comes up with."
LONG REACH. Dorfman, a 63-year-old veteran of the market rumor mill, airs his reports five times a day on CNBC and writes a monthly column for Money magazine. For this, he makes what industry sources estimate at $600,000 a year. CNBC says it stands behind its star. But his TV reports, broadcast to some 500,000 viewers while the markets are open, often move stocks dramatically, producing millions of dollars in gains or losses.
Case in point: a Jan. 13 report that Coca-Cola Co. might be set to launch a hostile $60-a-share bid for Quaker Oats Co., maker of Gatorade. Relaying a rumor he says he had heard three times in two weeks, Dorfman claimed in a CNBC broadcast that the cola giant had received approval for the raid from its largest shareholder, Warren E. Buffett. Coke, Quaker, and Buffett all refused to comment to him.
Coca-Cola stock immediately dropped after the report, on a day when the broader market gained sharply. Coke was not pleased. Abandoning its usual corporate decorum, it responded in a statement with this zinger: "Dan Dorfman does not have a clue."
Ouch. "Why did Coke personalize it?" Dorfman laments. "Because I can move a market? What has that got to do with anything?" Coke won't elaborate. But its attack seemed to bring other critics out of the woodwork. Caremark, for instance, issued a statement on Jan. 17 denying a Dorfman report that it would use proceeds from the sale of its home-infusion business to pay a forthcoming criminal settlement with the federal government. In fact, no settlement has been reached--and in any case, the company has repeatedly said it will use the money to fund other operations.
PIGGYBACK SQUEALS? More complaints followed--not all of them fully credible. Incomnet, a Woodland Hills (Calif.) long-distance service reseller, loudly denied a Jan. 17 Dorfman report that the company was a target of a new SEC investigation of alleged unfair and unethical sales practices. "Categorically false," said Incomnet. But the company is being investigated, and it qualified its response to that effect in two subsequent press releases. Yet CEO Sam D. Schwartz still argues that Dorfman overstated the scope of the inquiry. Dorfman maintains Incomnet's admission proved him right.
In November, Atari Corp. publicly criticized Dorfman's reliance on short-seller Martin D. Sass for a negative story on the company. And Epitope may sue Dorfman for his reports on its new AIDS test. On Mar. 21, 1994, Dorfman said the test stood only a 1% chance of Food & Drug Administration approval. The FDA sent Epitope a letter saying the report was untrue, and on Dec. 23, the product was approved.
Epitope has already settled a suit against A. Karl Kipke, a former Kidder, Peabody & Co. broker, alleging false and misleading statements. Kipke admitted he planted inaccurate stories about Epitope while selling the stock short. He was also a regular source for Dorfman. Says Dorfman: "I can't be sure that everyone I speak to is 1,000% ethical."
Dorfman says he's just an earnest reporter doing his job. "I don't recommend stocks. Don't ask me to be an investment adviser," he rails. But to many viewers, he is just that--and that's what has so many companies so upset.