Fake news release targets General Mills in possible stock swindle

General Mills Inc. has become the latest victim of a fake press release, this one with the false claim that President Obama had ordered a big investigation of the company after several food product recalls.

The motivation behind the hoax isn't clear, but phony press releases are often linked to attempts to a manipulate a security. And in the age of the Internet, with its quick and easy methods of dissemination, phony press releases appear to be on the rise.

The release went out about 11 p.m. Tuesday with the headline "Obama Orders Full Investigation of General Mills Supply Chain Following Food Recalls." General Mills spokeswoman Kirstie Foster said the release was "entirely false and was retracted almost immediately," well before financial markets opened.

Still, headlines and stories briefly appeared on Dow Jones Newswires, the Wall Street Journal's website and Fox Business News. And though those stories were retracted, automated alerts from services such as Google further spread false headlines, some with links to the hoax release.

"We found the release and removed it within minutes, but even false information can still spread incredibly quickly on the Internet," General Mills spokesman Tom Forsythe said in a press release.

Golden Valley-based General Mills is investigating, "and law enforcement is involved," the company said, but declined to specify further. The company said it will "pursue and prosecute the matter to the fullest extent of the law."

PR Newswire is one of the country's primary news release distributors. In a statement, it said it issued a news release in the United States and the United Kingdom "provided to us from someone purporting to be from General Mills."

In 2006, a false press statement released over PR Newswire said that Innotrac Corp. of Duluth, Ga., had signed a big contract with a German industrial conglomerate. In another hoax, a news release on InternetWire in 2000 claimed that Emulex Corp. would restate earnings and that regulators were investigating its accounting.

Emulex's stock sank more than 50 percent until the company denied the release. The FBI traced the release to an InternetWire employee who profited by more than $225,000 by selling Emulex's stock short.

Stock swindles involving phony press releases are common, said Niels Schauman, a vice dean and veteran securities law professor at William Mitchell College of Law in St. Paul. And there's been a surge in such scams, he said. "It's easier to phony up a press release when it's distributed on the Internet."

Because the phony General Mills release was debunked hours before U.S. stock markets opened, there was no apparent effect on the company's stock. It settled at $38.32, up 16 cents on below-average volume.

Still, that doesn't rule out an attempt at stock manipulation, since stocks and stock options of many big companies are traded around the clock in markets across the world. Asked whether the fake release may have been part of a stock manipulation scheme, Foster said that's part of General Mills' investigation.