Firm Accuses Former Executive of Defamation on the Internet

Confronting a growing problem companies face in freewheeling Internet message boards, a Chatsworth medical equipment company Wednesday took the unusual step of publicly accusing a former executive of posting defamatory remarks on a popular online financial forum.

Responding to what it called “a particularly virulent strain of . . . anonymous attacks,” Cohr Inc. accused former President Sandy Morford of being behind dozens of postings on a Yahoo Inc. message board frequented by investors and employees of the company.

Morford vehemently denies that he is the source of the messages, which range from detailed critiques of Cohr’s financial performance to allegations of sexual misconduct by company executives.

But whatever the outcome of this squabble, experts say such conflicts are bound to multiply because of the exploding popularity of Internet financial forums, which enable everyone from insiders to investors to disgruntled employees to air gripes without revealing their identities.

“We’re headed for more of these kinds of cases,” said Eugene Volokh, an expert in Internet law at UCLA. “People could always say defamatory things. But cyberspace makes it easier for an average Joe to reach thousands of people than it ever was before.”

Ray List, chief executive of Cohr, said the company decided to issue a news release accusing Morford after an internal investigation that included the subpoena of records from Yahoo, the blockbuster Web site that operates thousands of message boards on publicly traded companies.

“We just felt that there were such material misstatements and horrible things being said that we decided to try to get to the bottom of it,” said List, who joined the struggling company in June. “It can be very damaging when customers are handed this material or pointed to it by competitors.”

The company, which helps hospitals purchase and manage medical equipment, filed a “John Doe” suit in Los Angeles Superior Court in August before executives suspected Morford. An attorney for Cohr said the company has not decided whether that suit will be modified to name Morford, but said “it’s safe to say that’s under active consideration.”

Morford said Cohr is trying to damage the reputation of his new company, Genesis Technology Partners in San Dimas, which he claims has already lured accounts away from his former employer.

He also said Cohr is trying to divert attention from more pressing problems. The company posted a loss of $31 million on sales of $100 million in the fiscal year ended March 31, and this year it was hit with a shareholder lawsuit after admitting accounting irregularities that triggered an investigation by the Securities and Exchange Commission.

“What they’re trying to do is drag me back into their problems,” said Morford, who was dismissed by Cohr’s board of directors in June after spending nearly 20 years at the company. “Was I behind those messages? Absolutely not, and I testified to that in a deposition in mid-October.”

The case is one of a handful that have cropped up in recent years involving companies trying to thwart online critics.

Earlier this year, the Orange County Register newspaper succeeded in shutting down a Web site called Slave4OCR run by a disgruntled employee.

Even for those who haven’t taken legal action, Internet message boards pose a vexing problem. Just last month, a Yahoo board devoted to petroleum giant Atlantic Richfield Co. was awash in rumors of layoffs, exacerbating an already tense atmosphere at the company.

Shares of Cohr closed at $3.06, down 6 cents on Nasdaq.