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Publisher Claims It Was Defamed By Blogger

Biting back at claims it deceives investors and employs an "investment scammer," publisher Sovereign Offshore filed a defamation lawsuit against a blogger critical of its financial newsletters.

DELRAY BEACH, Fla. (CN) - Biting back at claims it deceives investors and employs an "investment scammer," publisher Sovereign Offshore filed a defamation lawsuit against a blogger critical of its financial newsletters.

In a federal lawsuit filed in the Southern District of Florida, Sovereign Offshore Services and its writer, Paul Mampilly, say Michael Shames falsely accused them of illegal, deceptive practices in their financial research.

Shames posted his less-than-flattering words about Mampilly on his San Diego Consumers Action Network blog in Oct. 2016. He described Mampilly as a "known investment scammer" and criticized a Mampilly-authored newsletter that advised readers to invest in electronic sensor maker STMicroelectronics, the Feb. 13 complaint says.

A few weeks later, Shames posted another blog entry stating that a series of newsletter brands under the Agora publishing network (which distributes Sovereign Offshore's material) "were disreputable and share a bias towards heavy Internet marketing, abusive email practices and preying upon seniors looking for higher returns on their investments," the complaint adds.

The blog entry repeated criticisms articulated by Mother Jones journalist Tim Murphy, who wrote that Agora's founder Bill Bonner had been monetizing "paranoid populism" for years.

Murphy reported that one Agora-held publication, NewMarket Health, sent out a torrent of marketing emails touting a cure for cancer hidden in the Bible's Book of Matthew. Another email flurry allegedly lured in consumers with an ad campaign  warning that the Obama administration was covering up a miracle cure that "vaporizes cancer in six weeks."

Bonner responded to Mother Jones by saying that while the Biblical cure for cancer bit was "maybe ... a little too bold," he and Agora are "extremely reticent to censure our analysts and writers."

"Instead, we encourage them to speak boldly. And let readers decide for themselves."

He went on to say: "Fortunately, our customers don't pay us to be right. And we're certainly not paid to be timid. Instead we're expected only to be diligent and honest, and to explore the unconventional, the often disreputable, and always edgy shades of the idea spectrum. And our customers have the last say. If they don't like what we offer, they don't buy. And if they change their minds they can get their money back."

Though Shames parroted some of Murphy's conclusions, his blog focused on Agora's financial publications. He cited a post on Bonner's Daily Reckoning website, which purportedly teases a Bonner interview by saying: "Your retirements could be destroyed, small businesses will plummet and the dollar will be worthless.”

Shames claimed Mampilly's work is promoted with the same sort of over-the-top taglines. He claimed the Mampilly writeup on STMicroelectronics was teased with lofty pitches like: "The Greatest Innovation In History … 7-Times Bigger Than Computers, Tablets and Smartphones … COMBINED!"and "Early Investors Stand To Reap Tremendous Rewards as Its Growth Surges 8,000%”

The plaintiffs say Shames' criticism rose to the level of defamation. Shames is the sole defendant, and Mother Jones is not mentioned in the pleading.

"Defendant’s claims are categorically false. Mr. Mampilly provides a straightforward, honest service offering his expertise to newsletter subscribers. He gives advice in good faith, and does not stand to profit from subscribers’ investment decisions," the complaint says.

The lawsuit specifically challenges Shames' claims that Mampilly preys on seniors and that a website containing Mampilly's STMicroelectronics writeup fails to include a legally required disclaimer to investors. Shames' statement -- that the missing disclaimer was "a huge red flag, because it’s illegal" -- was false and defamatory on its face, the complaint says.

Sovereign Offshore and Mampilly are seeking monetary damages along with an injunction to prevent Shames from continuing to write the allegedly defamatory critiques about them.

In a Bloomberg profile, Mampilly is described as a seasoned money manager and former financial analyst for Deutsche Asset Management and ING Funds. It goes on to say he was a portfolio manager at Kinetics Asset Management before joining Stansberry Research in 2015 and Sovereign Offshore's publication Sovereign Society in 2016.

STMicroelectronics' share value is up more than 50 percent since Mampilly recommended the stock last fall.

Sovereign Offshore's legal notice on the bottom of its newsletters states that its writers are prohibited from having financial interests in securities they recommend to readers.

"The Sovereign Society, its affiliated entities, employees, and agents must wait 24 hours after an initial trade recommendation published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation," the notice reads.

Court records show that neither Shames nor Sovereign's publishing network are novices at defending their reputation at trial.

Agora, its subsidiary Pirate Investor LLC and financial writer Porter Stansberry once faced a civil fraud case in which the Securities and Exchange Commission alleged Stansberry underhandedly coaxed readers into paying a $1,000 fee to access insider information on a uranium-enrichment company.  A federal court in 2007 ordered Stansberry and Pirate Investor to pay $1.5 million in disgorgement and civil fines for misleading the readers about the details of a conversation between Stansberry and an investment relations representative from the enrichment company.

Agora was cleared of the charges, as the judge found that it was not liable for Stansberry's actions.

Shames for his part was embroiled in a years-long court battle with Utility Consumers Action Network in San Diego, a consumer advocacy group that he is credited with co-founding. A staff attorney accused Shames of taking improper bonuses from the organization, among other misconduct. Amid the litigation, Shames and UCAN split in 2012.

Shames unsuccessfully pursued libel damages against his accusers, according to The San Diego Union Tribune. The Tribune reported that Shames in 2015 prevailed in a UCAN action that sought  to force him to return the bonus money.

Categories / Business, Economy, Media, National

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