From the Jun 7 – Jun 13, 2001 issue

News

Profit and Loss

Vultures Circling Amazon.com

by Pat Kearney

Since the online retailer Amazon.com recently announced it would reach operations profitability--finally--anyone and everyone who wants money and/ or a piece of the company is swooping in. In March, the SEC (Securities and Exchange Commission) announced it was investigating Amazon CEO Jeff Bezos for insider trading, and last week, financial analysts suggested that Bezos be ousted. The Puget Sound Business Journal reported two weeks ago that Amazon was the target of possible legal action by a stock organization in New York City called the New York Society of Security Analysts. Finally, this week down at the King County Courthouse, hearings began in a class-action lawsuit filed against the company.

The lawsuit, filed by attorney Dan Drachler of Seattle firm Zwerling, Schachter, and Zwerling in March 2000, claims that Amazon misled the public and the shareholders. The suit, which individual shareholders and big businesses like the National Soft Drink Association have joined, states that Amazon lied in February 2000 when the company claimed it would see cash returns from risky investments in dot-coms like Drugstore.com and Greenlight.com (both of which have since failed). In reality, Amazon never received cash for its investments; instead it received stock, and when tech companies collapsed in the dot-com crash, any long-term hopes of profits were dashed. Amazon's stock price dropped from $84 to $15 in the wake.

"There's nothing wrong with painting a rosy picture of your company," says Drachler. "But you can't hide information and lie to the public." The lawsuit was originally a low-key affair, and even if it succeeded, no one expected to ever see any money from Amazon. However, since Amazon's profit announcement, Drachler's been getting a lot of phone calls and interest from the lawsuit's complainants, who are looking for a payback. Amazon was unavailable for comment.

pat@thestranger.com