Guilty plea in Emulex stock hoax

Jakob, 23, of El Segundo, admitted in court that he issued a fake press release over the Internet in August that sent the stock of the high-tech firm Emulex Corp. tumbling and cost investors nearly $110 million.

The pleas to securities and wire fraud and the cash surrender were the result of an agreement with prosecutors. The judge accepted them and set sentencing for March 26. Jakob faces up to four years in prison and maximum fines and restitution in the millions.

The young man stood with his hands in his suit pockets and answered the judge in a calm, clear voice when asked about each count. His mother, father and sister watched quietly.

He told the judge he was being treated for depression and had sought treatment for problems with anxiety "on several occasions" during 1998 and 1999. The issue foreshadows arguments to justify a more lenient sentence.

"He didn't plan to be a criminal," defense attorney Joel Levine said outside the courtroom. "This was in response to a panic situation by a young man who lacked some maturity and judgment and has a psychological problem."

Levine said Jakob's crime was a serious offense, but questioned whether the case should be used to set an example for others who would manipulate stocks by spreading false information over the Internet.

Prosecutors said afterward that Jakob has expressed remorse and was candid with FBI agents after his arrest in August, a factor that was taken into account when drafting the plea agreement.

After a lengthy description of Jakob's crimes read by one prosecutor, the judge said it reminded him of the movie "Trading Places," starring Eddie Murphy and Dan Aykroyd. Part of the plot involved short selling, the stock trading technique that got Jakob into financial trouble.

In August, Jakob sold 3,000 shares of Emulex stock short. A short sale involves selling borrowed shares of a stock in anticipation that the price will decline. But instead the shares rose in value.

On Aug. 24, Jakob faced a potential loss of $97,000 and a demand from an online brokerage that he deposit $20,000 in his account.

To cover his losses, Jakob crafted a phony press release stating that the chief executive of Emulex Corp. had quit and the company was restating its quarterly earnings from a profit to a loss, he admitted Friday.<