Muddy Waters Sues Google Over Efforts to Get Research

Updated on
  • Suit says unknown people used fake identities in attempt
  • Firm asks court to force Google to hand over information

Carson Block, founder and director of Muddy Waters LLC

Photographer: Michele Limina/Bloomberg

Short seller Carson Block’s firm sued Alphabet Inc.’s Google seeking to learn the names of people who used fake identities trying to gain access to confidential research, including someone who posed as a Wall Street Journal reporter.

Muddy Waters Capital said the attempts to gain information began after it published a series of research reports regarding the French supermarket operator Casino Guichard-Perrachon SA between December 2015 and March 2016, according to a lawsuit filed in New York state court on Wednesday. Muddy Waters said these people communicated through Gmail, and it wants Google to disclose their names, addresses and contact information.

Muddy Waters began its campaign in 2015 and has said Casino is using financial engineering to mask a deterioration of its core retail business and that owner Rallye SA has too much debt -- allegations that Casino has dismissed. Casino’s shares have suffered amid the attack. Standard & Poor’s cut Casino’s debt rating last year.

Muddy Waters is famous for wagering against companies’ shares and being vocal about why. Block often publishes bearish reports or does television interviews about the firms he targets. 

In addition to Casino, the San Francisco-based hedge fund has bet against timber company Sino-Forest Corp. and shorted China Huishan Dairy Holdings Co., saying the latter was worth "close to zero." In June, Block questioned the efficacy of Prothena Corp.’s lead compound, prompting the biotechnology firm’s share to plunge

Reporter Calls

According to the suit, as many as five "John Does" contacted the firm repeatedly via a Gmail account between September 2016 through October of this year, posing as a Wall Street Journal reporter, seeking to know whether Muddy Waters would be releasing any more reports or statements about Casino, as well as information about Block’s speaking schedule and location.

Muddy Waters said its public-relations firm responded more than 10 times to the requests before confirming in February that the messages weren’t coming from a legitimate Wall Street Journal reporter. The John Does continued to contact the firm’s representative, posing as the reporter, and asked to meet with Block in New York earlier this week.

Block met with one of the John Does in the Pierre Hotel on Oct. 30, and confronted him about his identity, according to the suit. The person admitted that he wasn’t a Wall Street Journal reporter and that he had lied because he thought Muddy Waters wouldn’t communicate with him otherwise.

"When Mr. Block asked the individual who he was and whether he had been hired by representatives of Casino, the individual refused to identify himself," Muddy Waters said in the suit. "Following this revelation, the individual quickly left the hotel."

Google didn’t immediately respond to an email seeking comment on the suit. Casino, which isn’t named in the petition, isn’t aware of the lawsuit, spokeswoman Stephanie Abadie said in an email.

"Casino already suffered many calumnious accusations from this company in the past," Abadie said. "We believe these alleged suspicions would just be another attempt to destabilize our group and we vehemently refute and deny any such allegations."

The case is In the matter of the application of Muddy Waters Capital LLC, 159730/2017, New York State Supreme Court, New York County (Manhattan).

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