How Now, Dow?

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By Rich Smith
December 6, 2004

Investors in Motley Fool Income Investor pick Dow Chemical (NYSE: DOW) had quite an eventful Friday. Over in Europe, Britain's BBC twice broadcast an interview with a purported representative of the chemical company early in the morning (local time). During the interview, a "representative of Dow" (actually one Andy Bichlbaum, an activist from the "Yes Men" group), accepted responsibility on behalf of Dow for a disastrous gas leak in Bhopal, India, 20 years ago, that killed thousands of people and injured thousands more.

The Bhopal disaster actually happened at a factory owned by Union Carbide, a company that Dow Chemical bought out in 2001. Union Carbide, for its part, had denied responsibility for the gas leak, but nonetheless paid the Indian government $470 million in 1989 to settle the claims against it.

As for the BBC story, the news agency was apparently contacted out of the blue by a "Mr. Finisterra," who claimed to speak for Dow Chemical and backed up his claim by referring the BBC to a fake website for Dow that "confirmed" his identity. He requested an interview on the anniversary of the Bhopal disaster (which occurred on December 3, 1984), promising to make a "significant announcement" on the show.

And indeed the announcement was significant (albeit entirely false): that Dow Chemical had decided to take responsibility for Union Carbide's disaster, and would be paying the families of the victims and the survivors of the tragedy $12 billion (about one quarter of Dow's current market capitalization) in compensation for their losses.

If you look at Dow's trading chart for Friday (see it here), you'll see no more than the usual activity. A few cents up, a few cents down over the course of a trading day. That's because by the time Wall Street opened for business, the hoax had already been revealed as such over on the other side of the pond. Hence, U.S. investors were not harmed by it (although in European markets, the company's shares dropped as much as 3% on the news before recovering most of their losses).

The cost could be more significant for Mr. Bichlbaum, however. Legal experts are saying that Mr. Bichlbaum may have bought himself both civil and criminal liability for stock manipulation with his publicity stunt. The fact that he used a fake website to back up his story also raises the possibility of wire fraud charges, as his tactic bears many of the hallmarks of "phishing."

To learn more about more common uses of phishing, read:

 Fool contributor Rich Smith owns no shares in any company mentioned in this article.